“Paris Court of Appeal Overturns Previous Ruling on Cost Allocation in Philips-TCL Patent Dispute”
In a recent ruling, the Paris Court of Appeal has overturned a previous judgment regarding cost allocation, in a case involving Dutch electronics group Philips and Chinese company TCL. The crux of the matter was whether Article 700 of the French Code of Civil Procedure or Article 18.2 of the ETSI Rules of Procedure should be applied to the assumption of costs. The Judicial Court of Paris had based its 2020 decision on the former, but the Court of Appeal has now found that the contractual obligation under the ETSI Rules of Procedure should serve as a guideline. However, the second-instance court dismissed ETSI’s claims on the grounds that they were not sufficiently substantiated.
The dispute began when Philips sued TCL in the UK for infringing two standard essential patents. Philips’ main objective was for the UK High Court to determine a global FRAND licence rate for its entire UMTS and LTE patent portfolio. TCL, however, contested the UK court’s jurisdiction, arguing that the court in Paris should have jurisdiction as ETSI is based near Antibes, in the south of France. Consequently, TCL filed a suit against Philips and ETSI at the Judicial Court of Paris in early 2019. This marked the first time ETSI faced litigation from one of its members in Europe.
TCL called on ETSI, as the standard provider, to ensure that Philips adheres to its commitment to license on the basis of FRAND. ETSI, however, invoked its neutrality and requested that the court exclude it from the procedure. The court ordered Philips to pay ETSI €20,000 under Article 700 of the French Code of Civil Procedure, while determining the extent of ETSI’s involvement was to be part of the main hearing in June 2020. However, due to the pandemic, this did not take place.
By the end of 2020, Philips and TCL reached an agreement, with ETSI not involved in the negotiations. In early 2021, TCL withdrew its original claim, leading Philips to withdraw its appeal against the order regarding jurisdiction. Following this, the Judicial Court of Paris ordered TCL to pay ETSI the sum of €20,000 under Article 18.2 of the ETSI Rules of Procedure, as well as Article 700 of the French Code of Civil Procedure.
In the withdrawn appeal case, the Paris Court of Appeal ruled that Philips and TCL would bear the costs they had incurred. It also ordered Philips to pay ETSI the costs it had incurred due to the appeal, as well as €20,000. ETSI, considering that the awarded sum paid by Philips and TCL did not total the costs incurred due to TCL’s original lawsuit, maintained its claims for an order against TCL to pay it the sum of €125,703.82 pursuant to Article 18.2 of ETSI’s Rules of Procedure.
However, the Paris Court of Appeal dismissed ETSI’s claim, considering that instead of Article 700 of the French Code of Civil Procedure, it should apply Article 18.2 of the Rules of Procedure. The court found that ETSI had not sufficiently justified the reasonable and appropriate costs within the range of Article 18.2. The judges concluded that the amount claimed by ETSI lacked sufficient data and was unreproducible.
In a similar dispute between Philips and Xiaomi, this problem did not arise. ETSI is currently involved in a dispute between Philips and Thales which remains pending.
In the battle between Philips and TCL, both parties have relied on their advisors since the start of the original dispute. IP boutique Schertenleib is primarily renowned for representing clients from the pharmaceutical sector. In advising TCL, it is the first time that the team has represented a telecommunications company in a high-profile SEP case. Cyrille Amar has advised ETSI for years, but the original case launched by TCL was the first time he had litigated for the standards body. He also represents ETSI in other litigation, for example in Philips against Xiaomi and against Thales.