A recent judgement of Arnold J in the Patents Court of HTC v. Nokia highlights some of the dangers of modern globalised trade. Nowadays, products may be manufactured in one country, parts supplied by a company based in a second country and the products exported and sold in a third country. When patent protection can vary from country to country, this can pose risks.
In this case, HTC had been selling a smartphone in the UK, including a chip that was purchased from Qualcomm in Taiwan. Nokia alleged that these smartphones infringe one of their patents. HTC disputed the validity of the patent, but this was not accepted by the judge, who also concluded that the HTC phones infringed the patent.
HTC then argued that Nokia had granted them a licence by virtue of an agreement that Nokia had with Qualcomm in the US, which included a covenant by Nokia not to sue Qualcomm for infringement of various patents, including the patent in question. HTC’s argument was partly based on the Exhaustion Doctrine, which is an element of US Federal Patent law. This provides that, in certain circumstances, sale of a patented product by a patent holder exhausts their rights and prevents them from taking action against parties who subsequently obtain the previously sold product.
Once again, Arnold J did not accept HTC’s argument for a number of reasons. Firstly, the judge concluded that Qualcomm’s agreement with Nokia did not give HTC any rights to sell the technology in the UK. Moreover, the fact that the chips were sold in Taiwan and not in the US was deemed important, as the Exhaustion Doctrine could never be applicable if the chips were sold outside the US. As a consequence, the judge found in favour of Nokia.
Although this case has arisen from the so-called “smartphone wars” that have resulted in numerous recent court actions, it demonstrates the problems that can arise in many industries when products are manufactured in one country and exported around the world. Freedom-to-Operate advice can be an important tool in establishing the risks in each country.
For further information on the implications of this case or guidance in this difficult area, please contact Simon Kahn or your usual Boult Wade Tennant adviser.