ETSI loses costs appeal following TCL and Philips dispute

When Philips and TCL fought over standard essential patents, standard-setting organisation ETSI was caught up in the dispute. While the main conflict has been settled, ETSI has been trying to retrieve its costs. In rejecting the claim, the Paris Court of Appeal is setting a precedent for future SEP disputes in France. 

A Paris Court of Appeal ruling has overturned a first-instance court judgment regarding cost allocation. The decisive question was whether Article 700 of the French Code of Civil Procedure, or Article 18.2 of the ETSI Rules of Procedure, applies to the assumption of costs.

While the Judicial Court of Paris had based its 2020 decision on the former, the Court of Appeal has now found that the contractual obligation under the ETSI Rules of Procedure applies as a guideline instead. Nevertheless, the second-instance court dismissed ETSI’s claims on the grounds that they were not sufficiently substantiated.

From the UK to France

The conflict began when Dutch electronics group Philips sued Chinese company 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.

However, TCL contested the UK court’s jurisdiction. The Chinese company argued that, because ETSI is based near Antibes, in the south of France, the court in Paris should have jurisdiction. Therefore, in response to Philips’ claim in the UK, TCL filed a suit against the Dutch group as well as against ETSI at the Judicial Court of Paris in early 2019.

It was the first time ETSI has faced litigation from one of its members in Europe. As one of three major standards organisations in Europe, it creates standards for information and communication technologies.

Rules of Procedure at the core

TCL called on ETSI, as the standard provider, to ensure that Philips adheres to its commitment to license on the basis of FRAND. The Chinese company referred to the ETSI Rules of Procedure under which the standard may impose sanctions on a member that does not comply with the rules set out.

ETSI, on the other hand, invoked its neutrality and requested that the court exclude it from the procedure. As an independent and non-partisan organisation, ETSI argued, it does not interfere in legal disputes between its members. According to ETSI, the organisation merely creates the contractual framework for the standard.

Postponed due to pandemic

At the same time, Philips responded to TCL’s lawsuit in France with a jurisdictional challenge before the Judicial Court of Paris. In a decision of February 2020, the judge dismissed all of Philips’ motions and claimed jurisdiction in the FRAND issue (case ID: RG 19/02085).

Regarding ETSI’s role in the patent dispute, the judge considered that in principle there was a sufficient connection between TCL’s claims against ETSI on the one hand, and those against Philips on the other. 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.

Parties bearing costs

At the end of 2020, Philips and TCL reached an agreement, although ETSI was not involved in the negotiations. In early 2021, TCL withdrew its original claim, and thus Philips withdrew its appeal against the order regarding jurisdiction. Following the withdrawal of the original claim, 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. At the same time, it ordered Philips to pay ETSI the costs it had incurred due to the appeal, as well as €20,000.

ETSI maintains order claim

That left ETSI with the costs incurred in the original action launched by TCL. Therefore, the standardisation body, 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.

According to these, if a member “has initiated a legal proceeding against the Institute and the Institute reasonably incurs costs in appropriately defending against such action, then unless the member finally prevails against the Institute in such action, the member will reimburse the Institute for all such costs.”

This includes “any reasonable costs and expenses of the Institute incurred in connection with the claim or dispute brought by that member” and includes fees and expenditures of ETSI’s lawyers, costs of investigation or discovery (including expert fees), and internal costs of the institute.

Lack of data

In its decision before Christmas, the Paris Court of Appeal dismissed ETSI’s claim. The judges considered that instead of Article 700 of the French Code of Civil Procedure, it should apply Article 18.2 of the Rules of Procedure. The latter establishes the principle of full reimbursement of costs incurred by ETSI.

However, according to the court, the standardisation body had not sufficiently justified the reasonable and appropriate costs within the range of Article 18.2 (case ID: RG 22/05063).

According to the judges, neither TCL nor Philips had requested any judgment against ETSI, other than an injunction to cooperate in the licensing requested against Philips. They therefore came to the conclusion 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. Christian Loyau, general counsel of ETSI, told JUVE Patent, “In the dispute between Philips and Xiaomi, after the settlement, the members fulfilled their obligation towards ETSI under Article 18.2 of our Rules of Procedure.”

ETSI is currently involved in a dispute between Philips and Thales which remains pending.