The Court of Appeal has issued its ruling in Adaptive Spectrum and Signal Alignment Inc v British Telecommunications plc [2023] EWCA Civ 451. The case concerned a contract between Adaptive Spectrum and Signal Alignment Inc (ASSIA) and British Telecommunications plc (BT) to settle several international patent disputes concerning home broadband internet connection technology. Amongst other things the settlement terms involved each side granting a patent licence to the other. Here, the issue was about the scope of the licence granted by ASSIA to BT and whether a BT service called VULA was licensed or not. ASSIA contended that VULA was not licensed within the relevant terms, whereas BT argued that it was.
ASSIA holds several patents in the field of digital subscriber line (DSL) technology, which enables copper wires originally used for voice telephony to deliver broadband internet access. ASSIA offers licences of its DSL technology various service providers such as Sky and Talk Talk. BUT owns most of the copper telephone wires in the UK and sells access to them to service providers, along with other services. VULA is a type of data connection which service providers have increasingly opted for. This has reduced the take up of line management technology from ASSIA.
There was previously litigation between ASSIA and BT regarding patent infringement and they entered into a licence agreement and settlement agreement in 2015. The agreements included cross-licences for one party to the other in respect of each party’s relevant patents within a certain, party specific, field of use.
In August 2019, ASSIA became concerned that Sky might be infringing its patents by providing a broadband service to Sky’s customers. The services were in face providing using BT VULA lines, with Sky providing a modem to those customers. Sky’s response was that it was “retailing BT Openreach’s wholesale network” and that it understood BT had licenced all relevant patents from ASSIA. Sky directed ASSIA to BT.
ASSIA subsequently commenced the proceedings. It sought a declaration about the scope of the licence, and that the licence agreement did not grant BT the right to provide services within ASSIA’s patent rights on behalf of any service providers to that service provider’s retail customers, where the service provider supplied a modem to the retail customer.
At first instance the judge found that BT was not providing an internet connection service. It was providing the VULA service to the service provider and not the end user. Therefore the service being provided by BT was not being provided to the customer “on behalf of” the service provider and the settlement agreement did not carve that service out of the patent licence and ASSIA’s claim failed.
The judge also held that considerations of business common sense and the relevant context supported BT’s case. A purpose of this contract was to settle patent disputes. It is also not in dispute that both parties knew when they entered the agreement that BT was offering its VULA service to service providers, and that in such cases service providers were generally providing modems to end users.
ASSIA appealed, arguing that the judge had wrongly construed the relevant clause from the perspective of an uninformed end user, in place of the informed reasonable reader. ASSIA also argued that the conclusion that the VULA service was not provided to end users was wrong; and that the judgment considered and applied consideration of commercial common sense in the absence of any ambiguity in the wording of the clause.
The Court of Appeal unanimously dismissed the appeal, holding that VULA is licensed under the patent licence. The commercial purpose of the contract as a settlement of patent litigation, the fact that one of the actions expressly cited in the recitals was a patent dispute about VULA, and business common sense, all strongly favoured an interpretation which does not carve the known VULA service outside the scope of the licence.
