This past September the Court of Milan issued an interesting – and so-far unpublished – decision in a patent infringement case involving smartphones and standard-essential patents. The decision is noteworthy as it addressed (albeit briefly) the dynamics of standard-setting and the concept of essentiality, in partial reversal of previous decisions from the same Court and other Italian Courts.

The facts first. The case involved, on the one side, TLC giant HTC and, on the other, IPCom: a German non-practicing entity. Around 2010 IPCom pressed criminal charges against HTC, claiming that a number of HTC smartphones infringed three of its patents (EP 1 236 368, EP 0 913 979 and EP 1 226 692) that had been declared essential to a number of standards (e.g. WDCMA, SAP and UMTS). In response to this, in September 2010, HTC summoned IPCom before the Court of Milan, looking for a declaration of invalidity and non-infringement of said patents. IPCom counterclaimed for infringement, but only for EP 1 226 692 (hereinafter “EP ‘692“).

A (complex and very lengthy) technical investigation phase followed suit, with the appointment of an independent expert. In particular, it was questioned whether HTC smartphones would have directly or indirectly infringed EP ‘692, which was preliminarily deemed valid by the Court-appointed expert.

In assessing infringement, the experts and the Court had to first come at odds with the fact that EP ‘692 had been declared “essential” to ETSI, a prominent standard-setting organisation, for the UMTS standard. And that HTC smartphones were undisputedly compliant to said technical norm.

IPCom contended that since EP ‘692 was formally declared essential to the UMTS standard, every product that proved to be complaint with said standard would automatically infringe its patent.

The Court of Milan, however, viewed things differently.

In the first place, it held that a declaration of essentiality is a “necessarily unilateral” statement, particularly referring to paragraph 3.2 of the ETSI Guide on IPRs, wherein the Institute specifies that it “cannot confirm, or deny, that the patents/patent applications are, in fact, essential, or potentially essential” (for the latest version of the ESTI Guide on IPRs see here). Therefore, the Court affirmed that it had to assess the infringement on a factual and technical basis, implicitly affirming that it could not presumptively do so, on the basis of the patent’s declaration of essentiality alone.

In the second place, the Court of Milan further reviewed the UMTS technical specification at stake, noting that the execution of the activities covered by the patent (relating to the so-called PDCP layer), although regulated in the standard, were only optional for standard-compliant products. To ascertain this, the Court ordered for tests to be carried out on HTC smartphones, simulating both the network operations and the phones’ connection to the providers. As the test revealed that “the phones communicated to the base station that they cannot do” the particular operations mentioned in the patent and that, in any case, “Italian providers don’t ask them to do” said operations, the Court excluded the occurrence of both a direct and an indirect infringement of IPCom’s EP ‘692 patent.

This passage of the decision highlighted a circumstance that is often disregarded in the SEPs discourse: namely that technically-essential patents may be indeed essential, but in relation to portions of the standard that are only optionally implemented in compliant products.

In light of the above, the Court of Milan seems to have stepped away from a previous case law of 2008, where – in line with the technical report drafted by Court-appointed expert – it established infringement of a standard-essential patent by referring only to its essentiality and to the product’s necessary compliance to the standard: a sort of presumptive assessment of the infringement (see Court of Milan, 8 May 2008, Italtel s.p.a. et al. v. Sisvel s.p.a et al.; similar reasoning were put forward – although in preliminary injunction matters – also by Court of Genoa, 8 May 2004, Koniklijke Philips Electronics N.V. v. Computer Support Italcard s.r.l., in Giur. ann. dir. ind. 2006, 4949; Court of Trieste, 23 August 2011, Telefoaktiebolaget L.M. Ericsson v. ONDA Communication s.p.a. ,in Giur. ann. dir. ind. 2013, 5951).

The approach here suggested by the Court of Milan in determining the infringement of SEPs seems to better take into account the inherent technical and legal nuances of the standard setting dynamics, where the possibility of the so-called “over-disclosure” phenomenon — i.e. claiming essentiality for non-essential patents – is considered to be wide spread, and where specific technical features may often be only “optionally” implemented within standard-compliant products.

Giovanni Trabucco

Court of Milan, IP division, decision of 21 September 2016, No. 10288