Taking the PS3s ...

Following the seizure, Sony was forced to disguise
its PlayStations as Dutch cheeses to avoid suspicions

Only a few days ago tytoc collie was able to clear the fog of confusion relating to the action brought in the Netherlands by LG against Sony which resulted in the surprise seizure of a quantity of PlayStations (see earlier posts here and here for background).  This little incident, involving the increasingly controversial topic of border detention measures as well as civil seizure, has attracted the continued interest of many readers and also of this Kat, who is incapable of erasing from his mind the vivid image of Dutch customs officers sitting there, profoundly engrossed in the games they've been playing on the detained devices.

Anyway, we must move from fantasy to fact: the amiable duo of Ruprecht Hermans and Klaas de Vries (Brinkhof) have reported back to the Kats' HQ that they attended a court hearing last Thursday at which, no doubt on account of their presence in the vicinity, the border measures and seizure were immediately lifted. As the pair explain: 

"The civil seizure at Sony’s European distribution centre and the detention at the Dutch border by customs authorities in the Netherlands, both instigated by LG, of in total approximately 300,000 Sony Playstations 3 (PS3s) was lifted last Thursday (10 March) by oral decision of the President of the District Court of The Hague.

On 28 February the same President (then acting as preliminary relief judge of the District Court of Breda) in an ex parte decision had granted LG permission to seize PS3s at Sony’s European distribution centre in Tilburg. LG also, probably simultaneously, filed a request with Dutch customs to detain all incoming PS3s.

LG’s justification for these requests was an alleged infringement by Sony of patents which, according to LG, cover technical solutions prescribed in the BD-ROM Standard developed by the Blu-ray Disc Association (“BDA”) of which both Sony and LG are members. Under the rules of the BDA, parties participating in the setting of the standard owning patents that cover technology prescribed by the standard (so-called “essential” patents) are obliged to offer any party desirous of manufacturing products using the standardised technology a licence under fair, reasonable and non-discriminatory (FRAND) conditions [Merpel mewses: why can't they just be RAND?  Or are there terms that are fair without being reasonable, and vice versa?]. According to LG, Sony had thus far – notwithstanding an offer made by LG - refused to take such a licence. Sony - according to LG - was only willing to do so under the condition that also agreement would be reached for patents regarding other technologies (such as television and cellular phones).

In a judgment on the merits of the District Court of The Hague of 17 March 2010 (Philips/SK Kassetten, See extract on Eplaw blog) it was held that as long as a party does not have a license, there is in principle no ground to allow it to use the patented technology. The court held:
“Allowing the use of patented technology or preventing the enforcement of a patent right on the basis of a mere entitlement to a FRAND-licence, would moreover lead to legal uncertainty. As long as the alleged entitlement is not converted into an actual licence, it is uncertain for both parties if the alleged entitlement is justified, let alone that it is clear what the licence terms will be. There will be frequent cases of such uncertainty, as parties regularly will have different opinions regarding the answer to the question which terms, and especially which royalty rates, are FRAND. Therefore, also in view of legal certainty a system is desirable wherein the right to enforce a patent only strands after a party actually has a licence.”

However, in Philips/SK, SK had only requested a licence under FRAND conditions after Philips had commenced infringement proceedings.

In the preliminary relief proceedings leading to last Thursday’s judgment, Sony argued that it is and has always been willing to take a FRAND licence on LG’s Blu-ray patents (even without reaching agreement on licences for patents regarding other technologies). Sony further described the severe financial impact the detention/seizure had on its business and pointed out that accelerated patent infringement proceedings on the merits were already initiated by LG. In those proceedings a final oral hearing is scheduled for 18 November 2011. According to Sony, in light of the fact that PS3s have already been on the market for four years, LG should await the outcome of those proceedings. Sony argued further that, on the basis of the Bylaws of the BDA, LG should have submitted the dispute to arbitration.

According to LG, Sony refused to take a FRAND licence. LG argued that in this situation the arbitration clause of the Bylaws was inapplicable. LG pointed out that the BDA Bylaws also provide members with the possibility to seek legal relief at a regular Court and also allow the members to seek injunctions. Sony had caused the current litigious situation by initiating proceedings in the US (regarding patents in other fields of technology) after the negotiations were broken off. LG further attempted to downplay the financial consequences of the detention/seizure for Sony’s business.

During the hearing the President gave the impression that he felt the parties were obliged to continue their negotiation. He also appeared unconvinced that arbitration would not be possible.
At the end of the oral hearing the President gave his oral decision. He ordered that the customs detention and seizure were lifted and that the detention measures should be suspended. If LG decides to seize any products of Sony in the future on the basis of the same patents they will have to request an “inter partes” hearing first".

A written judgment containing the grounds for the decision is scheduled for 24 March 2011.

PlayStation addiction here and here
Dutch customs here