Court of Appeal reinstates Samsung’s case on non-discrimination and FRAND

On Friday 27 May, the Court of Appeal handed down an important judgment on the interplay between competition law and the licensing of essential patents.

This is part of a landmark patent infringement case where Unwired Planet, a “patent assertion entity” that has acquired from Ericsson certain “standard essential patents” (“SEPS”) used in smartphones and network equipment, has sued Samsung, Google and Huawei for infringing the SEPS (Google has largely settled out).

Ericsson continues to derive licensing income from the patent assertion entity, on an ongoing basis.  Among other things, it is contended that Ericsson is seeking to circumvent its own obligations to license its patents on Fair Reasonable and Non Discriminatory (“FRAND”) terms by using a “privateer”.  Ericsson has been joined to the action.  Samsung and Huawei have raised various competition law defences, under Articles 101 and 102 TFEU.

In the High Court, Birss J. struck out one of Samsung’s Article 101 TFEU defences.  This related to the complaint about the effectiveness of the transfer from Ericsson of its obligation to license essential patents on FRAND terms.  Samsung argued, among other things, that the content of Ericsson’s original “non-discrimination” obligation would be circumvented by Ericsson transferring the patents to the patent assertion entity, without the new entity needing to have regard to Ericsson’s duty of non-discrimination.  The High Court ruled that this contention should be struck out: it was enough for Unwired Planet to make a fresh FRAND declaration of its own.

The Court of Appeal has overruled the High Court on this issue.  It has accepted that Samsung has an arguable case that the arrangement whereby Ericsson transferred the SEPs to Unwired Planet is in breach of Article 101 TFEU and void because of the failure to ensure that Unwired Planet would respect the non-discrimination aspect of Ericsson’s FRAND obligation.  It upheld the Judge on another aspect of the complaint, however, which related to whether the transfer of the patents had given prospective licensees the same enforceable rights to insist on FRAND terms as such persons used to have against Ericsson, when Ericsson owned and licensed the patents directly.

In his judgment, Lord Justice Kitchin (with whom Lord Justice Tomlinson and Sir Timothy Lloyd agreed) recognised that this is a developing area of the law which has received recent attention from the Court of Justice of the EU and the European Commission.  He accepted Samsung’s argument that it has a realistic prospect of persuading the trial judge that it would be anti-competitive for Unwired Planet to be able to charge licence fees which are significantly higher than those which Ericsson itself charged and which would have been discriminatory having regard to Ericsson’s existing licensees had Ericsson sought to charge them directly.  He recognised that these higher licence fees could distort or restrict competition in downstream markets to the detriment of consumers.

Lord Justice Kitchin also accepted the inter-relationship between Samsung’s non-discrimination argument and its other competition law defences, in particular the argument that Ericsson strategically sold part of its portfolio of essential patents to Unwired Planet, while keeping a close ongoing involvement in the monetization of those patents.  He considered that Samsung has an arguable case that Ericsson has sought to circumvent its own FRAND obligation and simultaneously benefit from the increased licence fees.

Samsung’s various competition law arguments will be considered at the 13 week trial, due to commence in October 2016.

Samsung is represented by Jon Turner QC, Meredith Pickford QC, Laura Elizabeth John and James Bourke.

The full judgment is available here.

High Court rules that Asian sales are outside EU competition law and dismisses CRT claims

Iiyama Benelux BV & Ors v Schott AG & Ors

Mr Justice Mann has dismissed claims brought by iiyama in respect of cartels concerning Cathode Ray Tubes (CRTs) and CRT Glass, on the basis that the claims fall outside the territorial scope of EU competition law. The claimants were subsidiaries of iiyama, mostly based in Europe, and alleged that they had purchased completed computer monitors which incorporated CRTs and CRT Glass and which had been subject to cartels. The claims relied on EU competition law, and were initially brought on the basis of two infringement decisions made by the European Commission in relation to CRTs and CRT Glass respectively. However, it later transpired that the CRTs and Glass which were ultimately purchased by the claimants had originally been sold in Asia, and only arrived in Europe through a supply chain with a number of intervening stages.

The Defendants (who were variously parties to the Commission’s decisions relating to CRTs and CRT Glass) applied to have the claims struck out, or for summary judgment, or to have permission to serve out of the jurisdiction set aside, all on the basis that the claim was not properly arguable.

Mann J found that the claim against the Glass Defendants failed because the cartel found by the Commission related only to Europe, and did not cover supplies of CRT Glass in Asia. It was not possible to see how the EU cartel affected sales in Asia, and although the claimant alleged that there might be a worldwide cartel, no such cartel had been found by the Commission, and no such cartel was pleaded.

The Court also found that the claims against both the CRT and Glass defendants fell outside the territorial scope of EU competition law, considering two doctrines of EU law – the implementation doctrine and the qualified effects doctrine. The claimants could not rely on the implementation doctrine, which required that the cartel was implemented in the EU because the relevant sales of Glass and CRTs had been made in Asia. The claimants also could not rely on the qualified effects doctrine – i.e. that the cartel had foreseeable, immediate and substantial effects in the EU – because the supply chain by which they had acquired the products was not immediate.

Tim Ward QC and Rob Williams acted for Schott instructed by Travers Smith LLP. Daniel Beard QC acted for Samsung SDI instructed by Allen & Overy LLP.

The full judgment is available here.

Court of Justice confirms validity of the new Tobacco Products Directive and rejects challenges to e-cigarette provisions and menthol cigarettes ban

Case C-547/14 R (Philip Morris Ltd and others) v Secretary of State for Health

Case C‑477/14 Pillbox 38 (UK) Ltd v Secretary of State for Health

Case C‑358/14 Poland v Parliament and Council

On 4 May 2016, the Court of Justice of the European Union delivered its judgments in three cases concerning the Tobacco Products Directive (Directive 2014/40/EU). The revised Directive was adopted in April 2014 and provides for a wide range of restrictions concerning tobacco packaging, flavouring and e-cigarettes.

In Philip Morris, a preliminary reference from the Administrative Court, the Court held that the Article 24(2) of the Directive permitted Member States to maintain or introduce further requirements in relation to aspects of the packaging of tobacco products which were not harmonised by the Directive and that was consistent with Article 114 TFEU, which was to be regarded as the correct legal base for the Directive.  The Court rejected arguments by the tobacco companies that the Directive was a disguised public health measure.  It held that the EU Legislator was permitted to use the internal market approximation base under Article 114 TFEU whilst, at the same time, ensuring a high level of human health protection.

The Court also considered the legality and proportionality of several packaging restrictions imposed by the Directive. It upheld Article 13(1), which prohibits the display of any element or feature which might promote, or give a misleading impression with regard to, the product, including factual information about the product, its elements or characteristics, whether or not the information concerned is factually accurate. For example, the tobacco manufacturers had complained that this would prevent them referring to taste, smell, any flavourings or the fact that their product had improved biodegradability, organic or low tar or nicotine contents.  The Court held that a high level of health protection requires that consumers should not be encouraged to consume tobacco products by means of information which, although factually accurate, they may interpret as meaning that the risks associated with their habits are reduced or that the products have certain benefits.

The Court also assessed the proportionality of other packaging requirements, including the ban on flavoured tobacco and the requirement that new combined visual and pictorial health warnings should cover at least 65% of the front and back of the packet.  The Court rejected arguments that those requirements were manifestly inappropriate or went go beyond what was necessary to attain the objective of improving the internal market for tobacco and related products, taking as a base a high level of protection of human health, especially for young people. The Court also found that the other questions referred by the Administrative Court had disclosed no factors affecting the validity of certain other parts of the Directive.

In Pillbox 38, another preliminary reference from the Administrative Court, the Court considered whether the various requirements and restrictions imposed by Article 20 of the Directive on the construction, marketing and advertising of e-cigarettes were compatible with EU law. The Court again concluded that the question referred to it by the Administrative Court disclosed no factors affecting the validity of Article 20.

In Poland v Parliament and Council, the Polish government had brought an action to annul the provisions of the Directive which prohibited the use of flavouring in cigarettes, including menthol. The Court dismissed the application.

The judgment in Philip Morris is available here, the judgment in Pillbox 38 is available here, and the judgment in Poland v Parliament and Council is available here.

Ian Rogers QC and Eric Metcalfe appeared on behalf of the United Kingdom in all three cases. Anneli Howard appeared for Joh. Wilh. von Eicken GmbH, one of the tobacco manufacturers joined as an interested party in the Philip Morris case.

The cases have been widely reported in the national and international press, including the Times, the New York Times and the BBC.

High Court rejects challenge by tobacco multinationals to standardised packaging of tobacco

The action brought by British American Tobacco UK Ltd and others v Secretary of State for Health for the annulment of the Standardised Packaging of Tobacco Products Regulations 2015 was dismissed by Mr Justice Green in the High Court on 19 May.

One of the main purposes of standardised packaging is to render cigarette and hand rolling tobacco packaging and presentation less attractive to the eye and to the touch, especially to young people, and thus to reduce the number of young people starting to smoke and to make it easier for existing smokers to quit.  A key central argument by the tobacco companies in the case was that the Regulations, which will come into force on 20 May, are said to deprive the manufacturers of their trade marks on cigarette and hand rolling tobacco packaging.

The main complainants were the four tobacco multinationals. They claimed that the Regulations infringed a large number of provisions of EU and international law, including Article 1 of the First Protocol to the ECHR (on the right to property), the provisions on the free movement of goods within the EU, the Community Trade Mark Regulation and TRIPS. A range of arguments concerning the interpretation of the Revised Tobacco Products Directive and proportionality were also pursued by various manufacturers of tipping paper (the part of the paper which encloses the cigarette filter).

Mr Justice Green rejected each argument advanced by the claimants in a judgment of nearly 400 pages.  This judgment, which is one of the first in the world on standardised packaging measures, is likely to be highly influential in many jurisdictions. A number of countries have stated their intention to adopt standardised packaging measures similar to those in the UK.

Action on Smoking and Health (ASH), the tobacco control NGO, intervened in support of the Secretary of State for Health.

The judgment may be found here.

Ian Rogers QC, Julianne Kerr Morrison and Nikolaus Grubeck appeared on behalf of the Secretary of State for Health.

Peter Oliver and Ligia Osepciu appeared on behalf of ASH.

CMA takes decision in bathroom fittings case

The CMA today announced that it has taken a decision finding an infringement of Chapter I of the Competition Act 1998 by Ultra Finishing Limited, a leading supplier of bathroom fittings.  A penalty of £786,668 has been imposed (reduced from £1,032,502 to reflect the compliance programme and early settlement).  The infringement concerned the advertising and setting of prices for online sales.  The CMA had earlier announced the settlement agreement in this case.

In its press release the CMA explains that it has awarded a further 5% discount to Ultra for setting up a compliance programme.  The programme “includes a clear commitment to competition law compliance by the Ultra Board, including an external statement to that effect, which has been published on Ultra’s website. The company will also roll out tailored compliance training for all employees, and has put in place a detailed procedure to identify, assess and mitigate competition law risks. Ultra will review the compliance programme on an annual basis and submit a report on its compliance activities to the CMA each year for the next three years.”  This is a useful indication of the type of compliance programme that the CMA is likely to regard as appropriate in other cases where a discount is sought for setting up such a programme.

The CMA also states that it has issued warnings to other suppliers in the sector for similar practices, and warns that it is prepared to issue further infringement decisions and warnings in future.  In particular, it warns retailers (who were not subjected to any finding of infringement in this case) that they, too, may be fined in future cases of resale price maintenance, and draws attention to its leniency programme.  The CMA’s message is clear: if you are a retailer who pressurises your supplier to “crack down” on online discounting by your competitors, or if you are yourself subjected to such a crackdown, you should go to the CMA – or else you are at risk of being fined.

George Peretz QC advised Ultra Finishing Limited throughout the CMA’s investigation.


CMA agrees settlement with manufacturer of bathroom fittings

On 26 April, the Competition and Markets Authority (“CMA”) announced that Ultra Finishing Limited (“UFL”), a leading manufacturer of bathroom fittings, had agreed to pay a fine of £826,000 under the CMA’s settlement procedures (including a discount conditional on implementing a satisfactory compliance system).  The CMA’s press release is here.

The infringement of the competition rules at issue concerned measures taken by UFL in relation to the pricing of its products on the websites of its online distributors.

The CMA’s press release makes it clear that the CMA is currently focusing on restrictions, such as resale price maintenance and restrictions on advertising discounted prices, that limit the extent of online competition, particularly in consumer products.

George Peretz QC has been advising UFL throughout the investigation.

Greenpeace publishes Monckton legal opinion warning that French government subsidies of Hinkley C would constitute state aid

Monckton barristers Jon Turner QC, Ben Rayment and Julian Gregory have provided an Opinion for Greenpeace and Ecotricity which could have implications for the Government’s plan to build a new nuclear power plant at Hinkley Point.

Hinkley Point C is the first of a new generation of nuclear reactors intended to be built by EDF in the UK.  The UK government has already agreed to provide significant state support for the project by, among other things, guaranteeing a strike price for the electricity produced for a period of 35 years.  That support was classified as state aid and was only authorised by the EU Commission following an investigation after being scaled back (a decision which is in any event under challenge before the European Courts).

The 85% French state-owned EDF has now said that without further state support from the French Government it will not participate in the project.   In their Opinion, the Monckton barristers consider the various packages of financial support reportedly under consideration.  They have advised that any further French state support for Hinkley would likely constitute state aid and would therefore need to be notified to and investigated by the EU Commission.  The Commission would need to take into account its likely impact of the state support on competition in the energy market and other forms of generation, including renewables.

The Opinion, published today, has been covered in the media on both sides of the Channel, including
Sky News
Financial Times
The Guardian
Les Echoes

Jon Turner QC, Ben Rayment and Julian Gregory were instructed by Harrison Grant on behalf of Greenpeace and Ecotricity.

Supreme Court sets boundaries of EU discrimination law for freedom of movement

In R(Nouazli) v Secretary of State for the Home Office [2016] UKSC 16, the Supreme Court has rejected a challenge to powers which enable persons exercising free movement rights to be detained, pending a decision whether to remove them from the United Kingdom.  Tim Ward QC acted for the Secretary of State.  The case contains an important statement of principle as to the scope of EU discrimination law.

Regulation 24(1) of the Immigration (European Economic Area) Regulations 2006 permits the detention of person exercising EU free movement rights, if there are reasonable grounds to suspect he is a person who may be removed on (inter alia) public policy grounds. The Appellant was an Algerian national who had formerly been married to a French national, and accordingly enjoyed a right of residence in the UK as an EU family member. He argued that Regulation 24(1) gave rise to discrimination, as no equivalent “pre-detention” power existed in the UK immigration regime which applied to those who were not exercising EU law rights.  The Supreme Court rejected this argument, holding that third country nationals are not an appropriate comparator for testing discrimination in EU law: such “discrimination” is simply a function of the limited scope of the EU legal order.  Nor was such discrimination contrary to the Charter of Fundamental Rights.

The judgment is accordingly of considerable importance in defining the scope of application of EU discrimination law.

The full judgment is available on the Supreme Court’s website (here).

BIS successfully defends challenge to Construction Levy

Brendan McGurk was part of the team that successfully defended the Department of Business, Innovation and Skills against a challenge to the lawfulness of a new method by which an industrial training levy is to be calculated and imposed  on the construction industry. The construction levy is imposed on construction employers to raise funds for the training of both the employed and the self-employed workforce in the construction industry. In order to meet concerns within the industry that the basis upon which levy was to be collected on payments made to the self-employed workforce had become too complicated, the Construction Industry Training Board adopted HMRC’s Construction Industry Scheme as the means by which levy would be calculated on payments made to independent contractors. Hudson Contracts Services Limited, an industry-leading labour agency (albeit providing PAYE and payroll services only), sought to contend that the new basis upon which levy is to be calculated and imposed was ultra vires the Industrial Training Act 1982. The three grounds of challenge pursued by Hudson were each dismissed by Kerr J in a judgment that is available here. The case is one of a number of tax judicial reviews on which Brendan is currently acting.

To view the full judgment, please click here.

Key element of Ealing’s housing allocations policy held discriminatory and unlawful

The High Court has held that a scheme by which a London council ringfenced 20% of available lettings for working households and ‘model tenants’ was discriminatory and unlawful. Steve Broach acted for the claimants in this case, R (H and others) v Ealing LBC [2016] EWHC 841 (Admin).

The claimants were two families (referred to in the judgment as H and others) who together had the ‘protected characteristics’ of disability, age and gender under the Equality Act 2010. As a result of their circumstances the claimants were unable to meet the work requirement of the scheme introduced by the London Borough of Ealing. They also could not be ‘model tenants’ as this only applied to council tenants.

HHJ Waksman QC allowed the challenge to the scheme on all grounds, being that:

  1. The scheme unlawfully discriminated against women, disabled and elderly persons contrary to sections 19 and 29 of the Equality Act 2010 and unlawfully discriminated against women, disabled and elderly persons and children of single parent carers contrary to Article 14 ECHR (read with Article 8 ECHR) in relation to the working household provisions.
  2. The Scheme unlawfully discriminated against tenants who do not hold council tenancies contrary to Article 14 ECHR (read with Article 8 ECHR) in relation to the model tenant provisions.
  3. In adopting and maintaining the Scheme, the Defendant was in breach of its public sector equality duty under section 149 of the Equality Act 2010.
  4. In adopting and maintaining the Scheme, the Defendant was in breach of the obligations in respect of the welfare of children imposed by section 11 of the Children Act 2004.

The Judge quashed the scheme, meaning that at least until a replacement scheme is put in place Ealing will not be able to ringfence any properties for these groups. As a result the claimants and other families in their position will be able to bid for all available properties in each bidding round.

The judgment has important implications for all councils with housing responsibilities, particularly London councils who have to manage very high demand for social housing in the face of a very limited supply.

Steve Broach is instructed for the claimants by Hopkin Murray Beskine solicitors.

To read the judgment please click here.