[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Intel Corporation v Via Technologies Inc & Ors [2002] EWHC 1159 (Ch) (14 June 2002) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2002/1159.html Cite as: [2002] EWHC 1159 (Ch)

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		June 14, 2002

Mr Justice Lawrence Collins:

I Introduction

1. Intel is a Delaware corporation with its principal office in California. It is the world’s largest designer and manufacturer of microprocessors for use in personal computers (PCs), under such brand names as Celeron, Pentium Pro, Pentium II, Pentium III and Pentium 4. The generic name for the microprocessors originally designed by Intel for use with PCs is the “x86.” Intel also supplies other components including chipsets (whose function will be described below). VIA is a designer and manufacturer of PC components including chipsets, and it also manufactures microprocessors. It is incorporated, and has its principal office, in Taiwan. It was established in 1992, and has about 600 employees.
2. VIA claims that Intel has more than 80% of the worldwide market for x86 microprocessors, and 75% of the market for chipsets compatible with them. Intel has not given its own figures, but it accepts that it has a significant share of worldwide sales of x86 microprocessors. Its most significant competitor in the market for x86 microprocessors is Advanced Micro Devices Inc., which makes the Athlon microprocessor.
3. The frequency of major advances in the performance of computers is well known. In 1998 VIA was licensed by Intel to manufacture and sell chipsets using Intel’s technology for use with Intel’s Celeron and Pentium II processors. In 1999 Intel terminated the 1998 chipset licence agreement and brought proceedings for patent infringement against VIA.
4. In 2000 those proceedings were settled and, as part of the settlement, a revised chipset licence agreement was entered into extending VIA’s licence to Pentium III-compatible products. Shortly afterwards, VIA made a complaint to the European Commission concerning Intel’s allegedly anti-competitive licensing policies, and in particular concerning VIA’s inability under the revised chipset licence agreement to make chipsets compatible with Intel’s new Pentium 4. But the complaint was withdrawn in January 2002, and in May 2002 the Commission announced that it was not pursuing its investigation.
5. These two actions are in different ways related to the introduction by Intel of the Pentium 4 microprocessor. There are also proceedings between the parties pending in the United States (Delaware and Texas), Germany, Taiwan and Hong Kong. The second defendants in the Chipset action, Elitegroup Computer Systems (UK) Ltd, are motherboard manufacturers. The third defendants in the CPU action, Realtime Distribution Ltd, are distributors. In the Chipset action VIA claims for a variety of reasons that it is entitled to manufacture and sell chipsets compatible with the Pentium 4, even though the revised chipset licence agreement does not license VIA to do so. In the CPU action VIA claims that it can make use of Intel’s modern Windows-compatible technology in manufacturing types of microprocessor for which VIA says there is consumer demand, and which, it says, Intel is replacing by the Pentium 4. These applications, which have been ordered to be dealt with separately from the infringement and validity issues, raise some important points of principle on the relationship between patent law and competition law, namely Articles 81 and 82 of the EC Treaty and the corresponding provisions in the Competition Act 1998 (the “1998 Act”), sections 2(1) and 18.

II Microprocessors and chipsets

6. The principal systems level components of a PC are these: first, the microprocessor, or Central Processing Unit (CPU), or “chip”, which controls the operation of the entire computer system, and which executes the arithmetical and logical functions that make up computer programmes; second, “memory” or Random Access Memory (RAM), which stores data on a temporary basis, and to and from which additional data stored in permanent memory (such as a hard disk, floppy disk, CD-Rom etc) or received from outside the computer (such as when the computer is connected to a network, a modem, the Internet etc) are transferred as and when needed by the microprocessor; third, a “chipset” which is a group of microchip components; and fourth, the “motherboard” on which the above components are installed together with related components.
7. Data moves through the computer to the microprocessor along electronic pathways called “buses”. A bus is the data path on the motherboard which connects the microprocessor with attachments such as hard disk drives, CD-ROM drives and graphics adapters. Different types of buses transfer data in a variety of formats and at different speeds. PCs typically include several types of bus. For the microprocessor, the most important bus is called the host bus. This is the pathway over which the microprocessor receives all the instructions and data necessary to execute a programme. Once the microprocessor has processed this data, it will send back along the same pathway the results of its processing. The other end of the host bus is connected to a group of microchip components called the chipset, and which comprise what are called the north bridge and the south bridge. The chipset determines which data from which source has priority use of the host bus, and will convert or “bridge” data received from a variety of bus types to the format used by the host bus.
8. The north bridge chip and the south bridge chip connect the microprocessor to the other devices, and are said to “interface” with them. The north bridge controls access to the host bus, and acts as the arbitrator and bridge between primary sources of data such as RAM and the video graphics sub-system. The north bridge must be designed to operate according to the same procedures as the microprocessor host bus. The north bridge is connected by another bus to the south bridge. The main role of the south bridge is to arbitrate and convert data received over a number of other bus types within the PC.
9. A microprocessor is of no use without a compatible chipset. This means that manufacturers of PCs must buy one chipset for each microprocessor purchased. Computer manufacturers normally (but not necessarily) buy these components from separate manufacturers and combine them with other components into a complete PC.

III The present proceedings

10. The Chipset action arises out of VIA’s manufacture and sale of chipsets compatible with the Pentium 4. The patents in suit relate to a method and apparatus for transmitting signals over a wired-OR bus line and to protocols for buses that perform split/deferred/out-of-order transactions. In essence, the patents relate to the protocols by which the microprocessor communicates with the components with which it is connected. VIA claims that it is entitled to manufacture and sell chipsets compatible with the Pentium 4, even if they would otherwise infringe Intel’s patents, for one or more of the following reasons:

(a) Intel’s proceedings are an unlawful attempt to compel VIA to enter into a licence agreement containing cross-licences and restrictions on scope which are contrary to Article 81(1) of the EC Treaty and/or section 2(1) of the 1998 Act;

(b) Intel’s refusal to grant a patent licence is an abuse of a dominant position contrary to Article 82 of the EC Treaty and/or section 18 of the 1998 Act;

(c) VIA is already licensed under the existing revised chipset licence agreement, because restrictions in that licence which might otherwise prevent VIA from manufacturing chipsets for the Pentium 4 are contrary to Article 81(1) and/or section 2(1).

11. In the CPU action, VIA claims that it is entitled to make its C3 series microprocessors with current Windows-compatible features (including Intel patented technology relating to graphics, switching between operational modes, and address access alignment checking). The C3 series is of the older Socket 370 type, which is the descriptive term for the way certain Intel microprocessors plug into a computer motherboard to make contact with the motherboard’s built in wires or data bus. VIA says that Intel’s refusal to license its technology is abusive for these reasons:

(a) it forms part of a plan to replace Socket 370 type microprocessors with the Pentium 4, notwithstanding a continuing demand for the Socket 370 type, and to force consumers to adopt a new and more expensive technology; and

(b) the rights relate to technology which constitutes an industry standard and competitors cannot otherwise access the x86 microprocessor market.

12. This judgment is given on applications (in accordance with directions given by Jacob J on December 21, 2001) by Intel to have these defences struck out as an abuse of the process, or for summary judgment to be given in its favour on the defence and counterclaim in each action.

IV The 1998 Chipset Licence Agreement

13. On November 24, 1998 Intel and VIA entered into a chipset licence agreement (the “1998 CLA”). The effect of the 1998 CLA was as follows:

(a) VIA was granted a non-exclusive, royalty free, worldwide licence, to manufacture and sell under Intel’s patents what were defined as “VIA Licensed Products” (clause 4.1);

(b) Intel’s patents were in effect defined in clause 2.12 to mean all Intel patents owned or controlled during the term of the 1998 CLA, including applications which had a first effective filing date prior to the expiration of the “Capture Period,” which was five years in the first instance, and (subject to notice of termination by either party) thereafter for successive periods of 5 years (clauses 2.1, 8.2);

(c) “VIA Licensed Products” meant P5 chipsets, VIA Current Pentium II processor chipsets, or VIA Future Pentium II processor chipsets but not those containing features specified in Exhibits A and B, including support for than one microprocessor (clauses 2.4, 2.18(b), 2.21 and Exhibit A);

(d) VIA P5 chipsets were chipsets which were solely capable of connecting to and operating a microprocessor using the Processor Bus for the Intel Pentium processor with MMX technology^[1], and which VIA had introduced or would introduce prior to third anniversary of the agreement (clauses 2.11 and 2.22);

(e) Pentium II processor chipsets were chipsets which were solely capable of connecting to and operating with a microprocessor using the Processor Bus for the Intel Pentium II processor as it existed and was defined by Intel as of the effective date of the agreement, subject to VIA’s right to extend the licence to three different Pentium II processor chipsets for future Pentium II processors (i.e. identical to the existing processors except for error corrections and changes solely for modifications in manufacturing and without any additional or modified features or functions) (clauses 2.19, 2.20, 2.23 and 6.1);

(f) by clause 4.4:

“License to Intel. Subject to the terms and conditions of this Agreement, VIA hereby grants to Intel a non-exclusive, non-transferable, royalty-free, worldwide license, without the right to sublicense, under VIA’s Patents to make, have made, use, and import, and directly or indirectly sell, offer to sell and otherwise dispose of any product.”

(g) as partial consideration of the rights and licences granted under the CLA, VIA was to pay a fixed royalty on the units of chipsets sold by it (clause 7);

(h) the agreement was to be subject to the laws of the United States and of New York, and subject to the exclusive jurisdiction of the State or Federal Courts of California (clauses 10.13 and 10.14).

14. The effect of the 1998 CLA was that VIA was granted a licence in respect of all Intel’s patents, but only in respect of “VIA Licensed Products” as defined, which meant that VIA could make use of them only for the purpose of manufacturing the types of chipset specified by the 1998 CLA.

V United States Federal Trade Commission

15. In 1998 the Federal Trade Commission (the “FTC”) brought an administrative complaint under section 5 of the Federal Trade Commission Act (which prohibits unfair methods of competition) against Intel. VIA relies on this complaint in support of its claim that the cross-licence which Intel seeks from VIA is anti-competitive. The complaint by the FTC was that Intel had entrenched its monopoly power by denying or threatening to deny technical information about Intel microprocessor products to Intel customers who had developed and patented innovations in microprocessor technology (Digital Equipment Corporation, Intergraph Corporation, Compaq Computer Corporation) as a means of coercing those customers into dropping their patent infringement claims against Intel and licensing their innovations to Intel.
16. The complaint was settled in August 1999 by a consent order. The order prohibited Intel from withholding or threatening to withhold advanced technical information for reasons relating to an intellectual property dispute, or from refusing or threatening to refuse to sell to a customer for such reasons. The order was preceded by an analysis to aid public comment, in which the FTC pointed out that the proposed order did not impose any kind of broad “compulsory licensing” regime: so far as it was otherwise lawful “Intel is free to decide in the first instance whether it chooses to provide or not provide information to customers, and whether to provide more information or earlier information to specific customers in furtherance of a joint venture or other legitimate activity. Moreover the Order is limited to the types of information that Intel routinely gives to customers to enable them to use Intel microprocessors, not information that would be used to design or manufacture microprocessors in competition with Intel.”
17. It seems from the papers that the FTC continued its investigation to determine whether Intel had engaged in unfair methods of competition by acting to monopolise or restrict competition in the development or sale of microprocessor or other computer components or related intellectual property. In September 2000 the FTC announced that upon further review, it appeared that no further action was warranted, and accordingly the investigation was closed. It said that this was not to be construed as a determination that no violation of section 5 of the Federal Trade Commission Act had occurred, just as the pendency of the investigation should not be construed as a determination that a violation had occurred.

VI The 1999 proceedings

18. In June 1999 Intel purported to terminate the 1998 CLA on the ground that VIA had been in repudiatory breach of the 1998 CLA by infringing Intel’s P6 technology. Later in 1999 Intel brought proceedings against VIA (and others) in the United States (in the California courts, and it also made a complaint before the United States International Trade Commission), in England and Singapore for infringement of its P6 bus technology by the VIA chipsets and motherboards. The patent in suit in the English proceedings related to arbitration protocols for computer system buses designed for servicing multiple processors and input/output devices.
19. A defence was served on January 21, 2000, which included (inter alia) a defence that VIA’s products had at all material times been produced under licence from Intel or had subsequently been authorised by Intel, at least until June 18, 1999 by the terms of the 1998 CLA. The defence was amended in immaterial respects on April 14, 2000. In May 2000 VIA applied to add a series of defences under European law (and the corresponding provisions in the 1998 Act) by second amendment to the defence and counterclaim.
20. The principal allegations of abuse of dominant position within the meaning of Article 82 of the EC Treaty and/or section 18 of the 1998 Act were these:

(1) Intel was abusing its dominant position by the following means:

(a) until the introduction of the Pentium Pro microprocessor (alleged to be the first processor to use the P6 architecture) Intel operated an open architecture policy, prior to which Intel had used the P5 architecture for which VIA and other suppliers had long been designing and marketing P5 compatible chipsets without any claim of patent infringement or any requirement to pay royalties;

(b) from 1997 Intel replaced its supplies of P5 microprocessors with P6 microprocessors which incorporated patented socket specifications, and began to threaten chipset manufacturers with patent infringement actions if they manufactured chipsets and/or motherboards which were compatible with the P6 microprocessors;

(c) since the patent in suit related to the protocol by which a microprocessor inter-acted with a chipset to concede ownership of the principal data transfer channel (or bus) and since the P6 processors were designed to implement this protocol, the patent sought to cover any chipset which was compatible with the P6 processors;

(d) in seeking to assert the patent against chipset manufacturers Intel was in effect seeking to establish a monopoly in chipsets for use with its P6 microprocessors or to control the market in such chipsets.

(2) Intel was seeking to improperly use its intellectual property rights to extend its degree of dominance in the chipset market in that

(a) the patent in suit related to the protocol by which a microprocessor interacted with a chipset to concede ownership of the principal data transfer channel (or bus);

(b) accordingly the patent sought to cover any chipset which was compatible with Intel’s P6 microprocessors, and in seeking to assert the patent against chipset manufacturers Intel was in effect seeking to establish a monopoly in chipsets for use with its P6 microprocessors.

(3) Intel was improperly asserting its claimed patent rights in that:

(a) the patent in suit purported to teach the reader a protocol by which multiple processors might arbitrate among themselves for ownership of the bus whilst allowing a priority agent (such an input/output device) priority access to the bus when this was required;

(b) this capability was incorporated in all P6 microprocessors, and therefore every chipset had to address that part of the microprocessor which implemented that function regardless of whether or not they were intended for use in multiprocessor systems;

(c) Intel was asserting its claimed patent rights over products which made no use of the protocol but which were compelled by Intel’s design to use features which according to Intel infringed its patent rights.

(4) Intel abused its dominant position by imposing on VIA in the 1998 CLA contractual terms with an anti-competitive object or effect:

(a) the flat royalty payment of £3 per chipset in clause 7.1;

(b) the terms in exhibit A which listed functions and features which VIA was prohibited from including in its products, including support for more than one processor, support for version 2.1 of the industry open standard PCI Local Bus Specification with a data path of greater than 32 bits; and graphics performance exceeding certain arbitrary benchmark figures;

(c) exhibit B, which listed certain features and functions which VIA was not permitted to incorporate into its chipset products until an Intel product containing such feature or function had been on the market for at least 6 months, including support for direct RDRAM, support for multiple channel RDRAM, chipsets containing more than 4 megabytes of memory used for storage and/or display of graphical data, support for system bus speeds greater than 100mhz and support for any advanced graphics port interface later than version 1.0.

(5) Intel was abusing its dominant position by distorting competition in the RAM (or memory) market:

(a) Intel had forced VIA to enter into the 1998 CLA;

(b) the 1998 CLA sought to prevent VIA from providing products which supported a system bus speed of greater than 100mhz until such time as such products had been made available by Intel for at least six months;

(c) the consequence was that VIA was prevented from offering competing memory technology to the public.

21. In addition, the terms of the 1998 CLA which were alleged to be an abuse of a dominant position were also said to be contrary to Article 81 and/or section 2(1).
22. The object or effect of Intel’s conduct was said to prevent customers from having access to VIA’s chipsets even though they were better and cheaper than the comparable products offered by Intel, and Intel’s conduct enabled it to charge unfair prices.
23. The licence was said to have been wrongfully terminated because Intel purported to terminate it relying on terms which were contrary to Article 81 and/or section 2(1).

VII Settlement Agreement

24. A hearing had been fixed for July 11, 2000 on the application for permission to make the amendments, but there was a settlement of the global litigation on June 30, 2000, and as part of the settlement a revised CLA (“the Revised CLA”) was substituted for the 1998 CLA, extending the scope of the licence to chipsets for the P6 bus.
25. The Settlement Agreement was expressed in its preamble as intended “to resolve some of the claims in the pending litigations” between Intel and VIA; it was to be enforceable in accordance with its terms, and was said to be intended solely as a compromise of disputed claims, and was not to be construed as an admission of the validity of any claims.
26. VIA was to pay Intel $15 million and a possible additional amount determined pursuant to arbitration for the licence rights granted in the Revised CLA. Each of the parties released each other from any claims for infringement of patents (in the case of VIA, by its P5 and P6 chipsets) to the extent that such infringement would have been licensed under the Revised CLA as if the Revised CLA had been in existence at the time of the infringing activity.
27. The Settlement Agreement recited Intel’s position in the California proceedings that VIA’s licence of Intel products had been terminated by VIA’s breach, but that Intel’s licence of VIA’s patents remained in effect and that Intel was entitled to a licence of any VIA patents owned or controlled at any time prior to November 24, 2003; and it recited VIA’s position that it disputed Intel’s allegations, and that Intel had repudiated the 1998 CLA, and that even if VIA had been in breach, Intel was not entitled to any VIA patent licence obtained after June 23, 1999 because Intel terminated the 1998 CLA as of that date. The parties agreed to submit their positions on their respective allegations of breach of the 1998 CLA to arbitration, and within 5 days of the issue of the arbitrator’s decision the parties were to complete and execute a final version of the Revised CLA. The questions to be answered by the arbitrator were (a) whether VIA had materially breached the 1998 CLA; (b) whether Intel was entitled to a licence under all patents owned or controlled up to November 23, 2003 despite Intel’s termination; (c) whether Intel materially breached the 1998 CLA.
28. Clause 5 and Schedule B provided for the dismissal or discontinuance of the claims and counterclaims covered by the agreement: the English, Californian and Singaporean claims, and also Intel’s complaint of patent infringement in the United States International Trade Commission. It contained the following provisions relating to the allegations of anti-competitive conduct:

“(c)VIA further agrees that it will not bring any antitrust, monopolization, or competition claims (other than Walker Process, Handgards, or other claims specific to the patents at issue rather than general conduct) against Intel in response to any patent case involving only chipsets that connect with the P5 or P6 bus (for so long as VIA’s license under Amendment No.1 to the License Agreement remains in effect).

(d) VIA further agrees that it will not bring any antitrust, monopolization, or competition claims (other than Walker Process, Handgards, or other claims specific to the patents at issue rather than general conduct) against Intel in the pending California Action so long as Intel’s only patent claims are against chipsets compatible with any processor based on the AMD K7 microarchitecture (currently marketed under the brand names Athlon and Duron), provided that the number of Intel patents alleged to be infringed in that case does not exceed four (4), simultaneously. (For example, if there are 4 Intel patents alleged to be infringed by VIA in the action, but Intel withdraws one patent, it may add another as a substitute such that the total number of Intel patents does not exceed 4. VIA will not object to Intel’s amendment of the California Action to add additional Intel patents so long as the total number of Intel patents does not exceed 4, and Intel moves for such amendments within 60 days of the date of this Settlement Agreement.)

(e) The foregoing dismissals and agreement not to bring such claims in such actions are without prejudice to VIA’s assertion of such claims in the event that Intel asserts any claims against any other VIA product.”

29. The claims and counterclaims in the 1999 action were discontinued by consent, and the consent order provided:

“Notwithstanding the discontinuance of the claim and counterclaim in this action and the provision of CPR 38.7, the parties have leave to commence proceedings that arise out of facts which are the same or substantially the same as those relating to the discontinued claim and counterclaim.”

30. The effect of the arbitration was that the arbitrator decided that Intel, but not VIA, had broken the 1998 CLA, with the result that each was to get a licence for the other’s patents affecting P5 and P6 chipsets with no restrictions and VIA was to pay $15 million and royalties.

VIII The Revised CLA

31. The amendments to the 1998 CLA agreed by the Settlement Agreement were set out in a schedule, and the Revised CLA was executed in that form pursuant to clause 6 of the Settlement Agreement. But the amendments consequent upon the arbitration award have not been incorporated into a signed, or even draft, agreement. It is, however, common ground that the Revised CLA must be read as if those amendments had been made. For the purposes of these applications the practical point is that the Revised CLA in the form it should take after the arbitration does not contain a cross-licence of all of VIA’s patents to Intel.
32. The Revised CLA, as scheduled, had the same structure as the 1998 CLA. It licensed VIA to use all Intel’s patents owned in the Capture Period (which meant until the earlier of November 23, 2003 or the last day of the quarter in which Intel’s shipments of P6 microprocessors had dropped below 5 million units for two successive quarters) to manufacture VIA P5 Chipsets and VIA P6 Chipsets (clauses 4.1 and 2.21), provided that they contained certain mandatory features and did not contain the feature of support for more than two processors (clauses 2.4, 2.18(b) and Exhibit A).
33. As before, a VIA P5 Chipset meant a chipset which was solely capable of connecting to and operating with a microprocessor using the Processor Bus for the Intel Pentium Processor with MMX Technology (clause 2.11), and which VIA introduced before the third anniversary of the agreement (clause 2.22). A P6 Chipset was a Chipset which was capable of connecting to and operating with a microprocessor based on the P6 microarchitecture (including Celeron, Pentium II and Pentium III processors) and which used the Processor Bus for any Intel microprocessor based on the P6 microarchitecture core, as defined by Intel, and was not capable of connecting with any microprocessor not based on that core (clause 2.13).
34. The effect is that VIA may only make and sell chipsets which are

(a) solely capable of operating with microprocessors using the bus for the processor with MMX technology: clause 2.11 (this is the same as in the 1998 CLA);

(b) capable only of operating with microprocessors based on the P6 micro-architecture core as at a specified date (and not any improved version): clause 2.13 as amended; and

(c) incapable of supporting more than two microprocessors: clause 2.4 and exhibit A.

35. Consequently, VIA is licensed to make use of Intel’s patents in order to manufacture chipsets compatible with the Pentium Pro, Celeron, Pentium and Pentium III microprocessors, but cannot use the same technology in order to manufacture chipsets compatible with the Pentium 4.

IX Complaint to the European Commission

36. After the settlement of the litigation, VIA says that it announced that it would supply chipsets to support the next generation of Intel microprocessors, the Pentium 4. Intel told VIA that it was entirely a matter for Intel as to whether, and to whom, it would license the Pentium 4 technology. On September 12, 2000 VIA made a complaint to the European Commission against Intel under Articles 81 and 82. The complaint was accompanied by an application for interim measures which was suspended, and then renewed in July 2001.
37. The essence of the 111 page complaint was that the restrictions in the 1998 CLA and the Revised CLA were contrary to Article 81(1) and, together with Intel’s refusal to license, part of a pattern of abuse of a dominant position under Article 82.
38. VIA claimed that the terms of the 1998 CLA and the Revised CLA were evidence of Intel’s intent to control the production and technical development of chipsets, and in particular those compatible with its P6 microarchitecture and the forthcoming Pentium 4. It alleged that since Intel introduced the Pentium Pro manufacturers of chipsets had to design them to work with Intel’s revised bus architecture, over which it claimed proprietary rights. In particular, VIA said, Intel licensed only named existing models and excluded future improvements and amended models, it excluded versions including additional or different features or functions, and controlled and limited the production of improved chipsets to only three models, thus preventing the development and launch of any models improved for use with processors such as the Pentium III, and limited the few improved chipsets to “trailing edge” technology by controlling the launch of chipsets containing certain technical features so as to give a six month advantage to Intel’s manufacturing group.
39. VIA complained that the 1998 CLA licensed only specific products complying with a number of onerous and restrictive preconditions as to their design, which had to contain certain mandatory features and had to exclude certain features; the Revised CLA retained the market division of the 1998 CLA, even though some of the restrictions in the 1998 CLA had been removed; it was not a licence which granted rights within a relevant product market, and arbitrarily limited those chipsets which VIA could manufacture. In particular the complaint was that it denied VIA the ability to supply products compatible with improved Pentium products and from supporting non-Intel microprocessors; and that the limitations would prevent VIA from manufacturing chipsets to support Pentium 4 if Intel had proprietary rights in the revised bus microarchitecture. Intel had stated that chipset manufacturers wishing to support Pentium 4 would require a further licence to enable them to do so.
40. Essentially the same point was relied on in relation to the complaint of abuse: Intel’s strategy of deciding whether, when, to whom and on what terms it would license the Pentium 4 technology meant that at the point the new processor models were launched, and for the foreseeable future, Intel would be sole provider of compatible chipsets. That was said to amount to the use of a dominant position in one market to control competition in a related market.
41. In replies to questions by the Commission, Intel gave details of its Pentium 4-compatible chipset licensees on March 12, 2001, and responded to questions by the Commission on its licensing policy.
42. In its original complaint VIA sought an order to amend the Revised CLA to remove any restrictions on the licensee’s use of Intel patents within the field of chipsets, and to define the licensed products to mean “... a single, integrated product consisting of one (1) or more integrated circuits that are developed, designed, marketed or sold to interface directly to a microprocessor using a Processor Bus, w[h]ere such product provides, at a minimum, support for and an interface to system memory for such microprocessor ...”
43. In its application for interim measures of July 9, 2001 VIA accepted that a simple removal of the restrictions might grant an unlimited licence to VIA under Intel’s patents across all product markets, and sought an amendment to the Revised CLA so as to define VIA Licensed Products as “any Chipset sold by VIA that is designed to operate and interface with any Intel microprocessor.” VIA said it was prepared to provide substantial value in return (as it had done in the past and under the Revised CLA) by cross-licensing Intel with its technology, paying very substantial royalties, and supporting Intel microprocessors. Interim measures were justified because Intel’s conduct was causing serious and irreparable damage to VIA, and was affecting competition so significantly that its continuation was intolerable to the public interest. No action had been taken on the application for interim measures by the time VIA withdrew its complaint in January 2002.
44. In its response to the original complaint Intel said that the dispute was a purely private commercial dispute which had been litigated thoroughly in the English courts; that VIA had raised the same points in the 1999 proceedings; and that the matter should be reviewed by a national court if and when further action between the parties in a Member State court took place. If specific provisions of the Revised CLA were prohibited and void it was for the relevant national courts to decide the consequences, because they were best placed to address any issues relating to the terms of the licence agreements. On December 21, 2001 Mr Paul Lasok QC, for VIA, drew Jacob J’s attention to Intel’s position and told him that the Commission was considering terminating the proceedings because the issues were before the English court. Jacob J remarked that VIA was trying to have it both ways in wanting the matter to proceed both in Brussels and in the English court, and that VIA had not dropped its complaint to the European Commission.
45. On January 14, 2002 Messrs Bristows wrote to the Commission on behalf of VIA stating that the national judge (i.e. Jacob J) “also suggested that VIA could drop its complaint, in order to resolve the potential conflict between the national court and the Commission”. They went on as follows:

“In view of the comments of the Judge in the preliminary hearing, when he suggested that VIA could resolve the jurisdictional difficulty by withdrawing its Complaint, and given the time constraints imposed by the Judge, which mean that we must be able to present a definitive position before the end of February to allow him to decide how best to proceed, VIA has decided formally to withdraw its Complaint against Intel as filed on 12 September 2000, together with all supplementary filings.

For the avoidance of doubt, VIA regards its Complaint as well founded in law and in fact. VIA has taken this step to preserve its defences in the national court proceedings and to enable it to pursue its claim against Intel in those proceedings in a timely fashion. VIA remains of the view that there are very real market problems arising from Intel’s behaviour.”

46. I have to say that I do not see anything in the transcript of the case management conference of December 21, 2001 (p. 11) which justifies VIA’s statements that Jacob J had given his weight to a suggestion that VIA should withdraw its complaint to the European Commission.
47. There were press reports at the beginning of February 2002 in the New York Times and through the Associated Press that the Commission was about to drop its investigation of Intel. It was reported that a person close to the investigation said that the intention was to close the inquiry, because after careful analysis of the complaints, the Commission had decided that the accusations were unfounded. USA Today reported on February 4 that in New York, a spokesman for the Competition Commissioner, Sr Mario Monti, said the investigation was considered dropped, because “We believe the complaints were not founded, and a decision has been made to drop the investigation.” On May 3, 2002 the Commission write to Intel, and after referring to the withdrawal by VIA of its complaint, said: “Subsequently, the Commission has decided not to pursue its investigation in this matter.”

X Licences for Pentium 4-compatible Chipsets

48. At the end of 2000 and the beginning of 2001 Intel granted licences to these companies for the manufacture and sale of Pentium 4-compatible chipsets: ATI Technologies Inc (Canada); Silicon Integrated Systems Inc (Taiwan); Acer Labs Inc (Taiwan). In addition Intel accepts that Pentium 4-compatible chipsets may be made under earlier licences granted to S3 Inc (California) and Reliance Computer Corp. (California: a subsidiary of Fujitsu Ltd., Japan).
49. In November 2000 Intel approached VIA with a view to discussing a Pentium 4-compatible chipset licence, and in January 2001 Intel produced a draft licence agreement (the “draft CLA”) for discussion.
50. The relevant terms of the draft CLA are these:

(a) the licensed product is any VIA P4 Chipset (clauses 4.1(a) and 2.6);

(b) a P4 Chipset is a product consisting of one or more integrated circuits at least one of which connects directly to an Intel microprocessor through the P4 Bus, and provides a data path as specified (clause 2.4);

(c) P4 Bus is the external microprocessor bus implemented on the first Pentium 4 Processor generally commercially released for sale by Intel, including voltage level changes but “P4 Bus expressly excludes any changes or modifications to this bus…including without limitation changes to any bus signalling protocol or clock speeds” (clause 2.3);

(d) the licensee grants a non-exclusive royalty-free worldwide licence under all the licensee’s patents owned or controlled at any time prior to the fifth anniversary of the agreement (clauses 2.1, 2.5 and 4.4);

(e) the licensee is to pay a royalty of $4 on each unit sold (clause 6.1 and Exhibit A).

51. Consequently the draft CLA follows the pattern of the 1998 CLA and the Revised CLA in licensing Intel’s patents only for specified products, and it contains a cross-licence provision in substantially similar form to that in the 1998 CLA. There were negotiations in mid-2001, but they did not result in an agreement and subsequently these proceedings were commenced after VIA manufactured chipsets compatible with the Pentium 4.

XI Euro-defences in the Chipset action

52. In this section I set out VIA’s allegations in the Chipset action. First, it is said that the bringing of these proceedings by Intel is an abuse by Intel of the exercise of intellectual property rights and/or Intel is estopped or otherwise precluded from obtaining the relief sought in these proceedings because: (a) Intel is prepared to grant a licence to VIA in respect of the patents in suit only on terms that would create an infringement of Article 81(1) and/or section 2(1); and (b) these proceedings form part of an unlawful attempt by Intel to compel VIA to enter into a licence agreement that would infringe Article 81(1) and/or section 2(1).
53. The main matters relied on in relation to the first defence are these. Intel has an 80% share of the microprocessor market. It has the power to behave to an appreciable extent independently of its competitors, its customers, and ultimately of consumers, and has a dominant position in the supply of x86 microprocessors. In or about 1996, Intel introduced its Pentium Pro model. It changed the microprocessor architecture by using new sockets and otherwise altering the “bus” through which the microprocessor inter-operated with the chipset. Intel asserted intellectual property rights over the new sockets and the “closed” bus architecture. Since that time, Intel has asserted that any independent chipset manufacturer (such as VIA) must have a licence from Intel in order to make, use or sell chipsets for use with Intel’s x86 microprocessors.
54. There is a separate product market in the supply of chipsets for use with Intel’s x86 microprocessors. Intel had in the year 2000 75% of that market itself. In the light of Intel’s high share of the market for the supply of chipsets compatible with its x86 microprocessors, it possesses a dominant position on that market. That dominant position is crucially buttressed by its control over the award of patent licences to third parties.
55. In November 2000, Intel launched the Pentium 4. Intel took steps to effect the replacement of the Pentium III and other current models with its new model in the market as the mainstream x86 microprocessor. In particular, Intel is reported to have announced in September 2001 that it would accept no further orders from customers for the Pentium III after December 7, 2001, and Intel’s reported business projections from July 2001 indicated that, by October 2001, the Pentium 4 was expected already to account for around 45 per cent of its sales of x86 microprocessors.
56. Intel has asserted that VIA may not make, use or sell any chipset designed to inter-operate with the Pentium 4 without first obtaining a further licence. VIA considers that the Revised CLA already gives it the right to make, use and sell such chipsets, since the provisions purporting to restrict the varieties of Intel’s microprocessors for which VIA may make, use and sell compatible chipsets are prohibited, but with a view to avoiding further dispute, and because of commercial necessity, VIA investigated the terms on which Intel would be prepared to grant it a patent licence relating to chipsets intended to inter-operate with the Pentium 4.
57. On January 10, 2001 Intel supplied VIA with the draft CLA, which would license VIA to manufacture chipsets compatible with some additional models of Intel’s microprocessors (particularly certain models of the Pentium 4). The effect of clause 4.4 of the draft is that in return for permitting VIA to make, use and sell chipsets that would inter-operate with the Pentium 4, Intel demanded a general, royalty-free, cross-licence from VIA extending to all VIA’s patent rights, and enabling Intel to make unrestricted commercial use of them.
58. This provision, if accepted, would appreciably distort competition within the common market and/or within the United Kingdom:

(a) If Intel were able, free of charge, to adopt and include within its own x86 microprocessor products all and any patented innovations by VIA, Intel would be able to improve its competitive position vis-à-vis VIA and other manufacturers of x86 microprocessor products, at no cost to itself, because of its free access to VIA’s innovations, and/or this would reduce or cancel the incentive for VIA to continue investing in research and development and that would distort competition by stifling innovation;

(b) In consequence, VIA’s ability (i) to continue to offer valuable differentiated x86 microprocessor products in competition with Intel, and (ii) to improve its competitive position in the x86 microprocessor market, would be prevented or restricted. VIA relies on the fact the FTC has previously charged Intel with following an abusive course of conduct of denying other trading partners technical information relating to its microprocessor products, as a means of coercing those trading partners into licensing their innovations to Intel;

(c) The proposed agreement containing the provision, if accepted, would, actually or potentially, appreciably affect trade between member states of the European Union and within the United Kingdom: the competitive disadvantage that would be placed upon VIA would lead to a fall in the demand for its x86 microprocessors by customers in the United Kingdom and in other member states, including from distributors located in different member states, and an increase in the demand for Intel’s x86 microprocessors at the expense of VIA; and VIA would be at risk of being driven from the x86 microprocessor market, thereby affecting the structure of competition between suppliers in the market.

59. The effect of what VIA describes as the market division term, i.e. the limits imposed by clauses 1.3, 2.3 and 2.4, would appreciably distort competition in the common market and/or within the United Kingdom:

(a) The obligation on VIA to supply chipsets only for use with certain models of microprocessor and not any different or supposedly improved models and/or microprocessor buses of the original Pentium 4 specification would amount to a restriction imposed by one competitor upon another to supply only trailing-edge, low value products to the market, thus dividing the market by reserving the remaining part of the market for Intel (and for those – if any - permitted by Intel to compete in the remaining part of the market);

(b) The obligation on VIA is not a field of use/application restriction but a restriction imposed within a particular field of use/application (namely, the working of the patents in suit in connection with the manufacture and sale of chipsets compatible with Intel’s x86 microprocessors, alternatively, all chipsets for use in PCs); nor is it a restriction limiting the working of the patents in suit to a given product market (because it limits the working of the patents within a product market, namely, the market for chipsets that are compatible with Intel’s x86 microprocessors);

(c) The ability and incentive of VIA to develop technologically more advanced chipsets for use with Intel’s current models of x86 microprocessors would be diminished or eliminated;

(d) Consumers would thereby be likely to be denied the benefits of more rapid and varied technological developments that would enhance the performance and functionality of PCs incorporating Intel’s microprocessors.

60. The proposed agreement containing the market division term, if accepted, would, actually or potentially, appreciably affect trade between member states and within the United Kingdom:

(a) If and when Intel introduces a new model of x86 microprocessor, even if that requires no substantive modifications to VIA’s chipsets, VIA will be prevented from making, using or selling chipsets for use with the modified product;

(b) The competitive disadvantage that would thereby be placed upon VIA would lead to a fall in the demand for its chipsets by motherboard manufacturers and computer manufacturers in the United Kingdom and in other member states, including from distributors located in different member states, and an increase in the demand for Intel’s chipsets at the expense of VIA;

(c) VIA would be at risk of being driven from the market for the supply of chipsets for use with Intel’s x86 microprocessors, thereby affecting the structure of competition between suppliers in the market.

61. Despite subsequent discussions, Intel has insisted that these provisions must form part of any patent licence granting rights to VIA in relation to the supply of chipsets for the Pentium 4. The draft CLA containing these provisions, if accepted, would appreciably restrict and distort competition within the common market and/or within the United Kingdom.
62. Second, it is said that the refusal to grant a patent licence to VIA either at all or on lawful and/or reasonable terms is an abuse of a dominant position contrary to Article 82 and/or section 18, and Intel is not entitled to the relief sought by it in these proceedings. As a result of exceptional circumstances, Intel’s refusal to grant a licence to VIA in respect of the patents in suit either at all or on lawful and/or reasonable terms is an abuse by it of a dominant position contrary to Article 82 and/or section 18(1).
63. In support of this defence, VIA relies on these matters. Intel has a dominant position on the x86 microprocessor market and on the chipset market. If, which is denied, the defendants have infringed any of the patents in suit, then the patents relate to technology which constitutes an “industry standard” for the chipset market, in that it is impossible for other undertakings to enter or compete at all with Intel on that market unless they can make use of the technology in question.
64. By refusing to grant VIA a licence relating to the patents in suit either at all or on lawful and/or on reasonable terms, and by bringing these proceedings, Intel is abusing its dominant position on the microprocessor and chipset markets by using its intellectual property rights relating to x86 microprocessor technologies as a means of:

(a) preventing the emergence of new types of chipset compatible with Intel’s x86 microprocessors, including new products with more advanced capabilities than any of the existing products on the market, by way of example: (i) VIA was the first undertaking to develop, and to be able to launch commercially, a chipset capable of allowing the Pentium 4 operate with high-speed Double Data Rate SDRAM memory, some 6 months ahead of Intel; (ii) VIA was the first undertaking to develop, and to be able to launch commercially, an integrated graphics chipset capable of use with the Pentium 4; (iii) VIA will be the first undertaking able to launch on the market (in January 2002) a further improved chipset for the Pentium 4, supporting the next system memory standard, DDR 333; (iv) VIA will be the first undertaking able to produce a chipset for the Pentium 4 that supports the new ATA 133 bus for high-speed disk drive data transfer;

(b) partitioning the market for the supply of chipsets compatible with its x86 microprocessors, by confining third parties in the position of VIA to producing and selling only trailing edge products with specified capabilities at any given time; and

(c) thereby prejudicing consumers and users, by preventing the development by third parties in the position of VIA of new products having improved capabilities and different functionality and/or lower prices from those supplied by Intel.

65. Intel abused its dominant position in the market for x86 microprocessors in or about 1996 by abandoning the “open architecture” of its x86 microprocessors. The result was a limiting of the market for chipsets by the creation of a separate product market in the supply of chipsets for use with Intel’s x86 microprocessors, thereby extending Intel’s dominant position from the market for x86 microprocessors into the neighbouring market for the supply of chipsets and limiting competition in that market which, prior to about 1996, was a broader market characterised by vigorous competition between numerous independent suppliers both as to price and as to innovation.
66. By refusing to grant VIA a licence to use the patents in suit to produce chipsets compatible with the Pentium 4, either at all or on lawful and/or on reasonable terms, and by bringing these proceedings, Intel is continuing the abuse of that dominant position, thereby continuing to exclude competition for the supply of chipsets; and thereby also prejudicing consumers and users by: (i) preventing the development by third parties in the position of VIA of chipsets with improved capabilities and different functionality and/or lower prices from those supplied by Intel; (ii) increasing costs, because chipset manufacturers (other than Intel) can no longer manufacture and supply chipsets that are capable of being used in connection with both Intel’s x86 microprocessors and x86 microprocessors made by other persons, and such other manufacturers of x86 microprocessors must either themselves manufacture or secure in other ways the manufacture of chipsets that are capable of use with their microprocessors; and (iii) limiting choice because motherboard manufacturers must use only those chipsets that are specifically designed for use with a particular brand of x86 microprocessor.
67. When Intel introduced the Pentium 4 in November 2000, it did not license third parties to produce compatible chipsets at that time, and it supplied the market alone. The chipsets supplied by Intel operated only with a form of system memory, Rambus Direct RAM, which was expensive compared to a competing available form of system memory, DDR (Double Data Rate) SDRAM^[2], and was not well received by OEMs. Intel has announced that it will introduce a DDR SDRAM capable Pentium 4 chipset, albeit over 12 months after the launch of the Pentium 4 processor and some 6 months after VIA had such a product ready for market. VIA’s product (the Apollo P4X266, which is one of the products at issue in these proceedings) could have satisfied demand well before Intel did so, but has been prevented from doing so successfully owing to Intel’s restrictive licensing policy, its assertion that VIA is not licensed, and the bringing of these proceedings.
68. VIA accepts that whilst the holder of an intellectual property right, including an undertaking in a dominant position, is normally entitled to refuse to license others, there are exceptional circumstances applicable, namely the matters referred to above, and the fact that Intel’s intellectual property rights are said to relate to technology that is needed in order for other undertakings to compete at all on the neighbouring market for the supply of compatible chipsets. By refusing to license other undertakings either at all or on lawful or reasonable terms, Intel is (a) eliminating the previously active competition on that market, and (b) limiting technological development on that market to the disadvantage of consumers. Such lawful and/or reasonable terms would include the granting of licences to make, use and sell chipsets compatible with Intel’s current models of x86 microprocessors as developed from time to time, subject to the payment of reasonable royalties.
69. Intel has not shown that such refusal is objectively justified either by reference to the activity of supplying x86 microprocessors or by reference to that of supplying compatible chipsets. Further and in any event, in relation to the cross-licence provision, Intel is abusing its dominant position on the x86 microprocessor market by seeking to use its intellectual property rights in a manner the object or effect of which is to eliminate a competitor on that market.
70. The third defence is that the restrictions on the varieties of Intel-compatible chipset which VIA may make, use or sell under the terms of the Revised CLA are contrary to Article 81(1) and/or section 2(1). Consequently, the restriction is void or unenforceable pursuant to Article 81(2) and/or section 2(4). In the absence of the unlawful restriction, VIA is licensed under the Revised CLA in respect of the products in suit.
71. In particular, VIA may only make and sell chipsets that are: (a) solely capable of operating with microprocessors using the processor bus (as defined) for the Intel Pentium processor with MMX technology (clause 2.11); or (b) capable only of operating with microprocessors based on the P6 microarchitecture core as defined by Intel as at a specified date (and not any improved version) (clause 2.13); and which are, in any event (c) incapable of supporting more than two microprocessors (an “Excluded Feature” under exhibit A to the agreement).
72. The effect of the restriction is that: (a) the product market (chipsets compatible with Intel’s x86 microprocessors, alternatively chipsets for use in PCs) is partitioned between suppliers; and (b) VIA is constrained to make use of technology said by Intel to fall within the scope of the patents in suit within an isolated segment of a technical field of application. It is averred that the patents in suit relate to precisely the same technology as is already made use of by VIA in respect of the production of earlier models of chipsets (as to which it is common ground that VIA is licensed). The restriction appreciably restricts and distorts competition within the common market contrary to Article 81(1) and/or appreciably restricts and distorts competition within the United Kingdom contrary to section 2(1). For all practical purposes, VIA is constrained to supplying trailing edge products to the market, while Intel reserves to itself the ability to market any improved products and/or products with different capabilities.
73. The effect of the Revised CLA is that VIA may only make and sell chipsets that are:

(a) solely capable of operating with microprocessors using the processor bus (as defined) for the Intel Pentium processor with MMX technology (clause 2.11); or

(b) capable only of operating with microprocessors based on the P6 microarchitecture core as defined by Intel as at a specified date (and not any improved version) (clause 2.13); and which are, in any event

(c) incapable of supporting more than two microprocessors (an “Excluded Feature” under exhibit A to the agreement).

74. The effect of the restriction is that: the product market (chipsets compatible with Intel’s x86 microprocessors, or chipsets for use in PCs) is partitioned between suppliers; and VIA is constrained to make use of technology said by Intel to fall within the scope of the patents in suit within an isolated segment of a technical field of application. VIA claims that the patents in suit relate to precisely the same technology as is already made use of by VIA in respect of the production of earlier models of chipsets (as to which it is common ground that VIA is licensed).
75. The restriction appreciably restricts and distorts competition within the common market and/or within the United Kingdom: VIA, which is the second most important supplier of chipsets in the relevant market, is restricted as to the capabilities of the chipsets that it may supply to purchasers worldwide (motherboard manufacturers and OEMs) for use with Intel’s x86 compatible microprocessors within PCs; for all practical purposes, VIA is constrained to supplying trailing edge products to the market, while Intel reserves to itself the ability to market any improved products and/or products with different capabilities; the varieties and capabilities of the PCs ultimately marketed to consumers worldwide are reduced.

XII Euro-defences in the CPU Action

76. In this section I set out in full VIA’s allegations in the CPU action. There are two relevant defences relied upon. The first is that Intel’s refusal to license VIA in respect of the patents in suit is abusive because it forms part of a plan to withdraw from the market certain products for which there is a continuing market demand, and to force consumers and users instead to adopt a new and more expensive technology which many consumers neither want nor need.
77. The allegation is that the object or effect of Intel’s enforcement of its intellectual property rights in these proceedings is to contribute to the ultimate elimination from the market of certain products for which there is a continuing market demand, namely microprocessors which have the Socket 370 feature. Many microprocessors for use in PCs that are currently on the market, including both products made by Intel and by VIA, have that feature.
78. There is a significant consumer demand for the ability to upgrade and/or replace the microprocessors mounted on a PC motherboard, and motherboards are commonly designed to allow this to be done. In particular, the Socket 370 uses a “Zero Insertion Force” (“ZIF”) socket. The ZIF socket contains a lever that opens and closes simply, securing the microprocessor in place. It is designed to make upgrading or replacement of the microprocessor easy, including by an ordinary PC owner. At present, consumers whose PCs have Socket 370 microprocessors and compatible motherboards can improve the performance capability of their PCs easily and inexpensively, by removing the old microprocessor and plugging a superior Socket 370 microprocessor into the motherboard.
79. Intel’s Socket 370 microprocessors include many of its Celeron range and also the Pentium III. VIA’s Socket 370 microprocessors include the products at issue in these proceedings, namely the Via C3.
80. The Pentium 4 does not use the Socket 370 arrangement. The motherboards and other PC components that are designed for use with the Pentium 4 are different from, and more expensive than, Socket 370-compatible motherboards. Consumers whose PCs have Socket 370 microprocessors and who want improved processing performance are unable to mount a Pentium 4 on the motherboard in place of the existing microprocessor.
81. VIA says that Intel intends to establish the Pentium 4 in the market place as the mainstream x86 microprocessor.
82. Intel has refused to grant VIA a licence relating to the patents in suit either at all or on lawful and/or on reasonable terms. By doing so and/or by bringing these proceedings, Intel is abusing its dominant position on the market for x86 processors:

(a) The object or effect of Intel’s enforcement of its intellectual property rights in these proceedings is to contribute to the ultimate elimination from the market of certain products for which there is a continuing market demand, namely Socket 370 microprocessors;

(b) The result of the removal of Socket 370 microprocessors from the market, and the establishment of the Pentium 4 as the new mainstream microprocessor, will be that consumers will no longer be able, easily and inexpensively, to upgrade their PCs by purchasing a new microprocessor to plug into their existing motherboard, or otherwise to replace their existing microprocessor. Instead, many consumers who would otherwise have done so will in practice need to purchase an entire new Pentium 4 PC, or at least a new motherboard, which may also contain features and functionalities that they neither want nor need;

(c) Further, because the components for Pentium 4 PCs (such as the motherboard) are typically more expensive than the same components for Socket 370 PCs, the consumer prices of leading-edge PCs will be higher than would have been the case if VIA and other suppliers remained free to supply leading-edge Socket 370 microprocessors to the market.

83. The second defence is that Intel’s refusal to license its patent rights in these proceedings is abusive because those rights relate to technology constituting an industry standard and competitors cannot otherwise access the x86 microprocessor market, and because the exercise of those rights unjustifiably prevents the marketing by VIA of a unique product.
84. Because of the great importance to consumers of the ability to run the Windows operating system and software application programmes designed for Windows, OEMs demand that the microprocessors that they install in new PCs should be fully compatible with the current versions of the Windows operating system.
85. The patents relate to technologies that all microprocessors running Windows operating software rely upon: (a) MMX technology, which is an addition to the x86 instruction set designed to enable the microprocessor to deal with graphics processing and other “multimedia” functions; (b) an invention relating to the way of switching between operational modes of the microprocessor ; (c) an invention for controlling the checking of number misalignment.
86. Consequently, the patents in suit relate to industry standards. It is impossible for competitors of Intel to access the market for x86 microprocessors at all without making use of the relevant inventions. Further, one of the products at issue in these proceedings, the Via C3 E-series, is marketed by VIA in an enhanced ball grid array (“EBGA”) format. This is a new format, whereby the microprocessor is designed to be soldered directly onto the motherboard. No other supplier of microprocessors offers this format for PCs. It substantially reduces the cost of the motherboard, and, ultimately, the cost of the PC to the consumer. Accordingly, if Intel refuses to license VIA in respect of the patents in suit on lawful and reasonable terms, this will prevent the marketing of a unique and valuable product.
87. VIA accepts that, whilst the holder of an intellectual property right is generally entitled to refuse to license others in respect of the right in question, these matters constitute exceptional circumstances. Intel’s refusal to grant a licence to VIA to use the patents in suit on lawful and reasonable terms both eliminates competition in respect of a substantial part of the product market and prevents the emergence of a valuable new product. There is no justification for this conduct. This is an abuse of Intel’s dominant position on the x86 processor market, contrary to Article 82 and section 18. The abuse may affect trade within the common market and within the United Kingdom, as the patterns of trade in x86 microprocessors, motherboards and PCs will be affected by Intel’s behaviour.

XIII Nature of the applications

88. In each of the actions Intel has applied to strike out the competition law defence and counterclaim on the ground that (as pleaded in its draft reply and defence to counterclaim) raising the competition issues is an abuse of the process of the court, because those issues were and/or should have been raised in the 1999 proceedings and in the complaint to the European Commission. In support of that application, Intel applied for an order that VIA should provide further information about its communications with the Commission, but in the course of the hearing I refused that application on the ground that it was premature and would not assist determination of the issue.
89. In both actions Intel also seeks summary judgment under CPR, Pt 24, on the competition law issues on the basis that VIA has no real prospect of successfully defending the claims in relation to those issues and no real prospect of succeeding on its competition law counterclaims, i.e. no realistic as opposed to a fanciful prospect of success (Swain v. Hillman [2001] 1 All ER 91, 92).
90. Because, for the reasons given below, I do not consider that the application to strike out the proceedings can be fully dealt with at this stage, I will consider the application for summary judgment first. For this purpose “Euro-defences” are not in a special category, and indeed I accept (as I did in Heathrow Airport Ltd v. Forte (UK) Ltd [1998] EuLR 98, 105) that the expression must not be treated as a pejorative term. But I also accept that the ease with which a defence based on Article 81 or 82 may be generated on the basis of vague or imprecise allegations makes it necessary to scrutinise them with some care in order to avoid defences with no merit at all going to a lengthy trial with expert economic evidence: HMSO v. Automobile Association [2001] ECC 272, at 279. I would add that, although the burden of proof on the party asserting conduct to be unlawful under Articles 81 and 82 may be the normal civil standard, the penal consequences of those provisions re-enforce the need for careful scrutiny.
91. I also accept that where questions relating to infringement of Articles 81 and 82 raise, as they often do, complex questions of mixed fact and law, they will not be suitable for summary determination: Jobserve Ltd v. Network Multimedia Television Ltd [2001] EWCA 2021. On these applications for summary judgment I will be concerned mainly whether the defences and counterclaims raise, as a matter of law or sufficiency of pleading, triable issues in the relevant respects. Questions such as whether Intel has a dominant position and other matters of fact which I shall identify cannot be the subject of determination on these applications.

XIV Articles 81 and 82 and the 1998 Act

92. I set out the familiar terms of Article 81(1),(2):

“1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development, or investments;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.”

and of Article 82:

“Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States.

Such abuse may, in particular, consist in:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(b) limiting production, markets or technical development to the prejudice of consumers;

(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.”

93. Articles 81 and 82 were, of course, formerly Articles 85 and 86, but I refer throughout to the new article numbers, although that will entail some anachronisms. Sections 2(1) and 2(4) of the 1998 Act are in substance equivalent to Article 81(1) and (2), and section 18 is substantially equivalent to Article 82, apart from the references to trade and competition in the United Kingdom as opposed to the common market. In applying the 1998 Act the court must act with a view to securing that there is no inconsistency with the principles of Community law as laid down by the European Court, and must have regard to any relevant decision or statement of the European Commission: section 60(2), (3).

XV Principal issues

93. The principal issues relate to the following questions, the first four of which concern mainly the Chipset action. First, the circumstances in which the bringing of proceedings for patent infringement may be barred, and in particular whether they may be barred if their object is to compel the defendant to enter into a licence agreement on terms which may infringe Article 81 and/or section 2(1). Second, whether the terms of the Revised CLA and the draft CLA arguably infringe Article 81 and /or section 2(1), in the case of the draft CLA by requiring VIA to cross-license all of its patents, and, in the case of both the Revised CLA and the draft CLA, by limiting the licence to chipsets compatible with particular identified Intel microprocessors. Third, whether that limitation can be severed so as to make the licence unlimited. Fourth, whether it makes a difference to the determination of the lawfulness of the limitation in the Revised CLA that it was entered into pursuant to a settlement of worldwide litigation. Fifth, and this is common to the Chipset and CPU actions, the circumstances in which the refusal of a licence may amount to an abuse of a dominant position under Article 82 and/or section 18.

XVI Special status of patent rights

94. There is an obvious tension between the legal (and lawful) monopolies which patent rights confer (and which are designed to encourage investment of effort and money in research and development) and the rules designed to regulate and promote competition. Economic development is promoted by the policies which are the basis of both patent law and competition law. In Intergraph Corp v. Intel Corp., 195 F 3d 1346, 1362 (Fed Cir 1999) the Court of Appeals for the Federal Circuit put it in this way: “The patent and antitrust laws are complementary, the patent system serving to encourage invention and the bringing of new products to market by adjusting investment-based risk, and the antitrust laws serving to foster industrial competition.” So in Case C-7/97 Oscar Bronner GmbH v. Media Print GmbH [1998] ECR I-7791, 7812, Advocate General Jacobs said that where exclusive rights were granted for a limited period, that in itself involved a balancing of the interest in free competition with that of providing an incentive for research and development and for creativity.
95. Consequently, in general what is sometimes described as the “specific subject matter” of the intellectual property right entitles the owner to exclude others from making use of it without permission, even if the effect is to exclude them from the market: see, e.g. Philips Electronics NV v. Ingman Ltd [1998] 2 CMLR 839, 853; Sandvik AB v. KR Pfiffner (UK) Ltd [1999] EuLR 755, 787; HMSO v. Automobile Association [2001] ECC 272, 278.
96. It follows that, except where national law allows for a compulsory licence, normally the holder of an intellectual property right is entitled to refuse others to make use of its rights. So in Case 238/87 AB Volvo v. Erik Veng (UK) Ltd [1988] ECR 6211 the European Court ruled that the refusal by the proprietor of a registered design relating to car body panels to grant to third parties, even in return for reasonable royalties, a licence for the supply of parts incorporating the design could not in itself be regarded as an abuse of a dominant position. The European Court emphasised “that the right of the proprietor of a protected design to prevent third parties from manufacturing or selling or importing, without his consent, products incorporating the design constitutes the very subject-matter of his exclusive right” (at 6235). In an opinion which was substantially adopted by the Court, Advocate General Mischo referred to Case 19/84 Pharmon v Hoechst [1985] ECR 2281, 2298, where it was said that “the substance of a patent right lies essentially in according the inventor an exclusive right of first placing the product on the market so as to allow him to obtain the reward for his creative effort,” and he noted (at 6228) that compulsory licences were only granted in exceptional cases, such as non-exploitation of the patent, the protection of public health or national defence requirements. The refusal to grant a licence was the straightforward exercise of the right associated with the registered design. I deal below with possible exceptions to these broad statements of principle.

XVII May the bringing of infringement proceedings be barred by competition law?

97. In the Chipset action, VIA claims, in Competition law defence 1, that the proceedings are an abuse by Intel of the exercise of intellectual property rights, and/or Intel is estopped or precluded from obtaining relief because it is prepared to grant a licence to VIA only on terms which would infringe Article 81(1) and/or section 2(1) and the proceedings form part of an attempt to compel VIA to enter into such a licence agreement. In answer to an argument by Mr Nicholas Green QC for Intel that this appears to raise questions only under Article 81 and section 2(1), and not questions of abuse of a dominant position under Article 82 and/or section 18, Mr Paul Lasok QC for VIA has relied on a reference in paragraph 45 in Competition law defence 2 (refusal to license) to the bringing of proceedings being an abuse of a dominant position to justify an argument that the bringing of proceedings is also pleaded as an abuse of a dominant position.
98. It is plain that Competition law defence 1 in the Chipset action is based squarely on the decision of the Court of Appeal in British Leyland Motor Corp Ltd v. TI Silencers Ltd [1981] 2 CMLR 75 which, VIA says, is authority for a principle that the court will not enforce a person’s right where that would create, or help to create, a breach of Community law. VIA’s argument is that Intel is prepared to license VIA but only on terms which infringe Article 81(1), with the consequence that VIA has the choice of accepting the terms or exiting the market. As a result VIA has a defence based on the apprehended illegality.
99. Before I deal with that case, there are at least two other circumstances in which the bringing of proceeding may in itself be in breach of competition law. First, it is at least arguable that if two undertakings agree to commence proceedings against a third undertaking for infringement of intellectual property rights that may involve an agreement between undertakings in contravention of Article 81: see Glaxo Group Ltd v. Dowelhurst Ltd [2000] EuLR 493.
100. Second, it may be an abuse of a dominant position for a dominant undertaking to bring proceedings mala fide for the main purpose of harassing an actual or potential competitor: Case T-11/96 ITT Promedia NV v. Commission [1998] ECR II-2937. ITT Promedia was an application for the annulment of a Commission decision rejecting a complaint by the applicant, a subsidiary of ITT World Directories, that Belgacom SA had initiated vexatious litigation against it before the Belgian courts. ITT accepted the Commission’s view that legal proceedings could only be an abuse if two conditions were fulfilled, namely that the action could not reasonably be considered as an attempt to establish the rights of the undertaking concerned and could therefore only serve to harass the opposite party and, second, it was conceived in the framework of a plan whose goal was to eliminate competition. Because ITT did not challenge the application in the case of the two criteria, the Court regarded its role as to establish whether the Commission correctly applied the criteria and there was no need for it to rule on the correctness of the criteria chosen by the Commission. But the Court did say that the ability to assert rights through the courts and the judicial control which that entailed constituted the expression of a general principle of law which underlay the constitutional traditions common to the Member States and which was also laid down in the European Convention on Human Rights. It went on (at 2961):

“As access to the Court is a fundamental right and a general principle ensuring the rule of law, it is only in wholly exceptional circumstances that the fact that legal proceedings are brought is capable of constituting an abuse of a dominant position within the meaning of Article [82] of the Treaty.”

101. Although, as I have said, VIA claims that it has pleaded that the bringing of these proceedings is an abuse of a dominant position and denies the validity of the patents, it is not suggested that the proceedings are brought solely to harass VIA or conceived as part of a plan to eliminate competition. There is therefore no basis for a separate claim that the bringing of the proceedings is in itself an abuse. Neuberger J reached a similar conclusion in Sandvik AB v. KR Pfiffner (UK) Ltd [1999] EuLR 755, 807-808.
102. Third, it has been held that the holder of copyright in an industrial design may not sue an infringer who desperately needed a licence for his business purposes and was willing to pay a reasonable royalty for the privilege, but was unwilling to accept or assist or acquiesce in any breach of Community law. In British Leyland Motor Corp Ltd v. TI Silencers Ltd [1981] 2 CMLR 75 British Leyland claimed that it was the owner of copyright in drawings relating to the exhaust assemblies of cars manufactured by it. The allegation was that TI Silencers had infringed the copyright by reproducing British Leyland drawings in manufacturing copies of the drawings in a material three dimensional form. British Leyland had a policy of seeking to restrain infringement of its copyright unless the infringer entered into a licence agreement on terms acceptable to British Leyland, under which the manufacturer agreed to pay a royalty not only on those British Leyland components and parts but also on articles of certain other categories, including articles where the copyright was owned by a third party and where there was no copyright protection at all.
103. The facts assumed for the purposes of the appeal included the following: British Leyland, TI Silencers and other manufacturers competed against one another to supply replacement parts, and it would be difficult, if not impossible, for TI Silencers and other United Kingdom manufacturers to carry on their business if they were restrained by injunction from manufacturing components and parts in respect of which British Leyland owned copyright. No other Member State extended copyright protection of the kind asserted by British Leyland. A manufacturer who had to pay a royalty to British Leyland was under a competitive disadvantage in relation to British Leyland and also in relation to manufacturers in other Member States who by the laws of those Member States were not bound to obtain licences from British Leyland or to pay royalties to British Leyland. The main argument and holding was on what was then Articles 30 and 34 (now Articles 28 and 29), and it was held to be arguable that there was a quantitative restriction on imports. It was also argued that the licence agreement which British Leyland were attempting to extract, together with its threats of, and institution of proceedings, were in breach of Article 81 and 82.
104. Templeman LJ said (at 78-79):

“But if English legislation, though not invalid, is used or abused by British Leyland in a way and by means of activities which themselves create a breach of the Treaty of Rome, then British Leyland may not be able to obtain all the relief to which they would otherwise be entitled.

If, for example, it was proved in evidence that the owners of English copyright were only prepared to grant a licence on terms which created, or helped to create, a breach of Community law, this court, I apprehend, would not grant an injunction against an infringer who desperately needed a licence for his business purposes and was willing to pay a reasonable royalty for the privilege, but was unwilling to accept or assist or acquiesce in any breach of Community law. The court could award damages in lieu of an injunction based on a reasonable royalty, or the court could accept an undertaking by the defendant to pay a reasonable royalty to be assessed if not agreed. The court would strive to prevent any breach of Community law while, at the same time, preserving for the copyright owner the benefit of and the right to make, in the learned judge’s words, ‘the ordinary use of their copyright.’ But I do not accept that the court would lend countenance to an argument that the ordinary use of copyright included a use which enabled the owner of the copyright to flout European Community law.”

105. This statement has been taken to be a reference both to the arguments on quantitative restrictions and anti-competitive behaviour, although the structure of the judgment suggests that Templeman LJ had the former primarily in mind. The decision has been applied in subsequent cases, but in each of them there was an agreement in existence which was, or was alleged to be, in breach of Article 81, either between the claimant and the defendant, or between the claimant and a third party. In Holleran v. Daniel Thwaites plc [1989] 2 CMLR 917, which was not an intellectual property case, it was held that the tenants of tied houses were entitled to an interim injunction restraining the landlord from enforcing or giving effect to the notices to quit for breach of the restrictions: the court had power to prevent a person from abusing his rights, whether conferred upon him by statute or contract, in order to create a breach of Community law.
106. In Philips Electronics NV v. Ingman Ltd [1998] 2 CMLR 839 Philips and Sony had entered into a patent pooling agreement. Under the agreement between Philips and Sony the patents for CD technology would be pooled and enforced by Philips alone, and it was agreed that the patents would be licensed by Philips alone to all comers on standard terms agreed between Philips and Sony. Ingman was involved in the manufacture of compact discs but refused the standard patent licence agreement offered by Philips, and as a result Philips commenced infringement proceedings. It was held to be arguable that the infringement proceedings had been brought to force prospective licensees to accept the standard licence (at pp. 870, 873), and that if the licences infringed Article 81 (because the royalties were excessive or discriminatory), it was at least arguable that a court would decline to grant relief to Philips for patent infringement (p. 873). In addition it was clearly arguable that the action was being brought as part of the implementation of the Philips/Sony agreement.
107. One aspect of Sandvik AB v. KR Pfiffner (UK) Ltd [1999] EuLR 755 dealt with a hypothesis that an existing patent licence, by excluding certain products, was an impermissible disguised customer restriction. It seems to have been argued (although this does not appear directly from the judgment) that the effect of British Leyland was that this meant there was a defence to an infringement action. It was held that the limited grant was not a customer restriction. Neuberger J said (at 788) that British Leyland, Holleran and Philips Electronics were cases in which (citing Holleran) there was a nexus between the exercise of the right and the alleged illegality, and that in each of the cases the holder of the intellectual property right was seeking to put pressure on a person to agree arguably illegal terms for the licence. In Sandvik the patentee was merely exercising its right to refuse to grant a licence.
108. Those cases where there was not an agreement between the claimant and the alleged infringer are based on the theory that the object of the action was to force the infringer to enter into a licence which was in breach of Article 81. Otherwise TI Silencers and others would not have been able to supply spare parts for British Leyland cars and Ingman would not have been able to make compact discs.
109. An unaccepted offer of an agreement which, if accepted, might infringe Article 81 is not in itself an infringement. In Case T-41/96 Bayer AG v. Commission [2001] 4 CMLR 4 the European Court of First Instance held that a unilateral act cannot be in contravention of Article 81. In order to lessen the impact of parallel imports into the United Kingdom Bayer ceased fulfilling increasingly large orders for a drug placed by wholesalers in France and Spain with its subsidiaries in those countries. The Commission decided that this constituted an export ban imposed by the subsidiaries and amounted to an agreement in breach of Article 81. The Court of First Instance held that the action of the subsidiaries did not amount to a ban and was unilateral in nature as opposed to an agreement with the wholesalers in France and Spain.
110. The Court emphasised that the case law showed that where a decision on the part of a manufacturer constituted unilateral conduct, that decision escaped the prohibition in Article 81. It was clear that apparently unilateral conduct on the part of a manufacturer, adopted in the context of the contractual arrangements which he maintained with his dealers, could not be treated as an agreement between undertakings within the meaning of Article 81 in the absence of express or implied acquiescence by the other parties in the attitude adopted by the manufacturer.
111. Mr Nicholas Green QC for Intel suggested that the decision in British Leyland could not stand with that in Bayer. Bayer decides no more than that a unilateral measure (in that case, refusal to supply in order to prevent wholesalers exporting the products) will not amount to an agreement or concerted practice unless the unilateral character is merely apparent because it has the express or implied participation or acquiescence (p. 145, paras 71-72) of the other party. On the facts the Commission had not established the concurrence of the wholesalers in the attempt to prevent parallel exports to the United Kingdom. The mere fact that they accepted lower levels of supplies did not amount to acquiescence in the policy. Intel accepts that an agreement which is contrary to Article 81(1) but which is forced on a co-contractor, is within Article 81(1), at least in the absence of factors, such as duress, which would vitiate the agreement. I do not consider that British Leyland decides expressly or implicitly, contrary to Bayer, that an unaccepted offer is contrary to Article 81(1).
112. Nevertheless the legal rationale of British Leyland is not easy to isolate. It seems to follow from VIA’s argument that it means that wherever the holder of an intellectual property right offers a licence on terms which offend Article 81, and the offeree is faced with accepting the terms or not carrying on the business in relation to articles which are the subject of the right, then the offeree cannot be sued for infringement if he offers a reasonable royalty. But in my judgment, there are two reasons why this cannot be right. First, it would be contrary to common sense, and wholly disproportionate, for every unaccepted offer of a licence, which (if accepted) would have infringed Article 81, to result in an offeree who wished to manufacture the goods in question being entitled to infringe on payment of a reasonable royalty. Secondly, if the offer were accepted, and the unlawful restrictions were accepted, those restrictions would be null and void under Article 81(2), and it is likely that they would not be severable (see below, section XXI) with the result that there would, once again, be no licence. It is odd that the offeree is to be treated so much more favourably if he rejects the offer and then infringes.
113. Consequently I do not consider that British Leyland necessarily leads to the result in all cases that the offeree automatically obtains a licence on its own terms if a patent holder proposes a licence which contains terms which offend against Article 81(1) and which the offeree rejects. The case had the following special features: first, the intellectual property right was special to United Kingdom law; second, the defendants would not have been able to carry on their business at all unless they could make body panels for British Leyland cars and therefore desperately needed a licence; third, Templeman LJ emphasised that it was arguable that the use of a copyright monopoly granted in respect of one article did not justify the copyright owner insisting, as a condition of granting a licence, on a royalty applicable to articles over which no copyright existed, and he concluded that on the assumed facts “it does not seem to me that that what British Leyland are attempting to do can accurately be described as the normal use of copyright” (at 89); fourth, as Neuberger J said in Sandvik (at 788) British Leyland was seeking to put pressure on the body panel manufacturers to agree arguably illegal terms.
114. I doubt if British Leyland goes any further than holding that infringement proceedings may not be brought where the holder of the intellectual property right is abusing that right in order to force terms unrelated to that right (such as the royalties in that case and in Philips) on a trader who desperately needs the licence in order to trade. I do not consider that the decision could apply in every case in which a manufacturer wishes to gain access to the technology of the holder of a patent who is willing to grant a licence but only on terms which arguably infringe Article 81(1). If I am right, and even if the alleged restrictions were in contravention of Article 81(1), VIA would not be able to bring itself within what Templeman LJ said. First, all that VIA is really saying in the Chipset action is that if it does not obtain a licence it will be unable to manufacture chipsets for the Pentium 4. It may have a strong wish to compete with Intel and its licensees in selling chipsets for the Pentium 4, but its evidence on the economic effect of it not being able to manufacture and sell such chipsets (in relation to which I made a confidentiality order) falls far short of an allegation that it desperately needs a licence to allow it to trade. Second, although VIA pleads that Intel insists on these terms, VIA does not suggest that Intel is putting any pressure on it to agree the terms. But I need not make a final decision on the rationale and scope of British Leyland if the alleged restrictions are not arguably contrary to Article 81(1), and I will therefore go on to consider that question.

XVIII The cross-licence

115. The validity of the cross-licence is relevant only to the British Leyland defence in relation to the draft CLA. The similar cross-licence in the Revised CLA falls to be amended to be limited to P5 and P6 technology following the arbitration.
116. I was not informed of the date when the arbitration award was rendered. VIA’s complaint to the Commission in September 2000 annexed the Revised CLA (Annex 2), and did not make any mention of the cross-licence. In its application for interim measures of July 9, 2001, VIA indicated that if it achieved an amendment of the Revised CLA to remove the limitations, it was “willing to provide substantial value in return (as it has done in the past, and continues to do so under the Revised CLA) by: cross-licensing Intel with its technology…” The context indicates that it is referring to the wide form of cross-licence.
117. But in its submission to the European Commission of August 30, 2001 (which was produced only after a draft of this judgment was handed down) it complained (apparently for the first time) about what is described as the asymmetric cross-licence in the Revised CLA.
118. The term in the draft CLA under which VIA would grant a cross-licence is as follows:

“4.4 License to Intel. Subject to the terms and conditions of this Agreement, Company hereby grants to Intel a non-exclusive, non-transferable, royalty-free, worldwide license, without the right to sublicense, under Company’s Patents to make, have made, use, and import, and directly or indirectly sell, offer to sell and otherwise dispose of products made by or for Intel.”

The definition of Patents in clause 2.5 would mean that Intel’s licensee would be granting a licence of all patents owned or controlled in the Capture Period (initially five years) including applications which had a first effective filing date within that period.

119. It is, of course, possible for a cross-licensing provision to fall foul of Article 81 by, for example, or limiting or controlling production or sharing markets. Both parties relied on Commission Regulation (EC) 240/96 on the application of what is now Article 81(3) to certain categories of technology transfer agreements (the Technology Transfer Regulation or “TTR”). The TTR applies primarily to patent licences which contain terms (such as exclusivity and territorial restrictions: Article 1) which are not contained in the patent licences in this case.
120. But it contains a “white list” of terms which are said in any event to be generally not restrictive of competition whether or not the agreement contains the restrictions in Article 1: Article 2(2). These include an obligation on the licensee to grant to the licensor a licence in respect of his own improvements, provided that the licence is not exclusive (so that the licensee can use his own improvements) and that the licensor undertakes to grant an exclusive or non-exclusive licence of his own improvements to the licensee: Article 2(1)(4). This is because obligations on the licensee to make improvements available to the licensor do not generally restrict competition if the licensee is entitled by the contract to share in future experience and inventions made by the licensor (recital 20).
121. But the exemptions do not apply if one party is restricted from competing within the common market with the other party, with undertakings connected with the other party or with other undertakings in respect of research and development, production, use or distribution of competing products; or where the parties were already competing manufacturers before the grant of the licence and one of them is restricted, within the same technical field of use or within the same product market, as to the customers he may serve, in particular by being prohibited from supplying certain classes of user, employing certain forms of distribution or, with the aim of sharing customers, using certain types of packaging: Article 3(2), (4).
122. The regulation does not exempt agreements under which one party grants the other a patent licence and in exchange the other party grants the first party a patent licence, where the parties are competitors in relation to the products covered by the agreements: Article 5(1)(3). But it does apply if there are reciprocal licences, provided the parties are not subject to any territorial restriction within the common market with regard to the manufacture, use or putting on the market of the licensed products or to the use of the licensed technologies: Article 5(2)(2).
123. Accordingly, the Commission has indicated that a reciprocal licence is not anti-competitive, at least if it is non-exclusive and the licensor undertakes to grant an exclusive or non-exclusive licence of his own improvements to the licensee; and that cross-licensing between competitors may be unlawful, but not if they are not subject to any territorial restrictions or restrictions with regard to the use of the licensed technologies.
124. Consequently a cross-licence is not per se anti-competitive. Whether an agreement, which is not on its face obviously anti-competitive, has an anti-competitive effect must depend on the actual conditions in which it would function, including the economic context, the products covered by the agreement and the structure of the market, including actual and potential competition: e.g. Joined Cases T-374/94 etc. European Night Services Ltd v. Commission [1998] ECR II- 3141.
125. VIA’s pleading is that if Intel were able, free of charge, to adopt and include within its own x86 microprocessor products all and any patented innovations by VIA, Intel would be able to improve its competitive position vis-à-vis VIA and other manufacturers of x86 microprocessor products, at no cost to itself, because of its free access to VIA’s innovations, and/or this would reduce or cancel the incentive for VIA to continue investing in research and development and that would distort competition by stifling innovation. In consequence, VIA’s ability (i) to continue to offer valuable differentiated x86 microprocessor products in competition with Intel, and (ii) to improve its competitive position in the x86 microprocessor market, would be prevented or restricted. The competitive disadvantage that would be placed upon VIA would lead to a fall in the demand for its x86 microprocessors by customers in the United Kingdom and in other member states, including from distributors located in different member states, and an increase in the demand for Intel’s x86 microprocessors at the expense of VIA; and VIA would be at risk of being driven from the x86 microprocessor market, thereby affecting the structure of competition between suppliers in the market.
126. Intel’s answer is that it is demonstrably false that the cross-licence would be free of charge, since it is part of the consideration for the acquisition of a licence of Intel’s patents which are worth tens of millions of dollars. VIA now says that the vice which is identified is the asymmetry in the cross-licence, because it covers all VIA’s patents, without limitation as to use, whereas the licence of the Intel patents is limited to the Pentium 4. I have little doubt that the pleading is essentially directed at the point that the cross-licence is “free of charge” but I will give VIA the benefit of any possible doubt on this point.
127. As I have mentioned, VIA relies on the fact the FTC has previously charged Intel with following an abusive course of conduct of denying other trading partners technical information relating to its microprocessor products, as a means of coercing those trading partners into licensing their innovations to Intel. I do not consider that this allegation has any relevance. But it is noteworthy that in its application to the European Commission for interim measures, VIA said (para. 3.2) that the FTC investigation was irrelevant both to its complaint and to the application for interim measures because it concerned different anti-competitive behaviour and was not concerned with chipsets.
128. Intel says that there is no asymmetry because the patents which it is licensing are far more valuable than VIA’s patents. This is not a matter which could be dealt with on a summary determination.
129. But VIA’s pleading of the vice of the cross-licence is so devoid of specificity that it falls plainly within that category of Euro-defences which is so vague and imprecise that it does not really amount to a serious allegation at all. The starting point is that a cross-licence in the circumstances of this case is not per se anti-competitive. The fact that VIA’s licence to Intel would not be restricted in the same way as Intel’s licence to VIA does not in itself make it anti-competitive. Nor does the mere fact that VIA is innovative, and is one of the only 3 significant suppliers of x86 microprocessors, raise a triable issue that Intel’s acquisition of its technology would be anti-competitive. VIA’s pleading is purely formulaic, since every licensor could say that granting a licence reduces or cancels its incentive to continue investment and research, and that it may therefore lose its innovative edge and thereby its position in the market. This is pure unparticularised assertion or argument. If it had any commercial substance, facts would have been pleaded to support it. In my judgment there is no triable issue on the validity of the cross-licence in the draft CLA.

XIX Limited grant or market division?

130. VIA claims that the limitations in the Revised CLA to “VIA Licensed Products” and the draft CLA to “Company Licensed Products” are in breach of Article 81, because their effect is (or, in the case of the draft CLA, would be) to limit VIA to the manufacture and sale of chipsets which are compatible only with certain models of Intel microprocessor. The effect, VIA says, is a restriction imposed by one competitor upon another to supply only trailing-edge, low value products to the market, thus dividing the market by reserving the remaining part of the market for Intel (and for those – if any - permitted by Intel to compete in the remaining part of the market).
131. VIA claims that its ability and incentive to develop technologically more advanced chipsets for use with Intel’s current models would be diminished or eliminated. Consumers would thereby be likely to be denied the benefits of more rapid and varied technological developments that would enhance the performance and functionality of PCs incorporating Intel’s microprocessors. If and when Intel introduces a new model, even if that requires no substantive modifications to VIA’s chipsets, VIA will be prevented from making, using or selling chipsets for use with the modified product. The competitive disadvantage that would thereby be placed upon VIA would lead to a fall in the demand for its chipsets by motherboard manufacturers and OEMs and an increase in the demand for Intel’s chipsets at the expense of VIA. VIA would be at risk of being driven from the market for the supply of chipsets for use with Intel’s microprocessors, thereby affecting the structure of competition between suppliers in the market.
132. This point is relevant both as regards the British Leyland defence (Chipset action, Competition law defence 1) and the defence that because of invalidity of the scope of the Revised CLA it is now an unlimited licence (Chipset action, Competition law defence 3).
133. Intel’s answer is simple. It has the patents and is entitled to license them on any terms it wishes, and it has chosen to license the patents only for the purpose of licensees being able to make chipsets for its current microprocessors. This is not a restriction but a limited grant, which it is entitled to make. It says that this is consistent with the approach of the Commission in its decisions and in the TTR. One example on which it relies is the power of the holder of the patent to license the patent for a limited period only: Recital 20 and Article 2(1)(3), TTR.
134. One of the obligations which is said in the TTR generally not to be restrictive of competition is “An obligation on the licensee to restrict his exploitation of the licensed technology to one or more technical fields of application covered by the licensed technology or to one or more product markets” (Article 2(1)(8)). This is because the licensor is entitled to transfer the technology only for a limited purpose (recital 22, referring to Art 2(1)(8).
135. In Case 193/83 Windsurfing International Inc v. Commission [1985] ECR 611 (Fourth Chamber) Windsurfing had German patents for rigs to be placed on sailboards (to which the patents did not apply). Windsurfing’s policy was to ensure that sailboards and rigs were sold together by its licensees, and that sailboards were not supplied separately by persons who were not its licensees. The licence agreements contained obligations to exploit the patents only for the manufacture of sailboards which had been approved by Windsurfing; not to supply rigs separately and without the boards; and to pay royalties based on the price of complete sailboard. Independent manufacturers of boards who enquired of licensees about the supply of rigs were turned down, and Windsurfing warned licensees that their agreements would be terminated if they were to supply rigs separately except where needed as replacement parts.
136. The first of the clauses relevant for present purposes was an obligation on the licensees to exploit the patents only for the manufacture of sailboards using boards which had been given prior approval by Windsurfing. Windsurfing said that the provision was designed to ensure that the rigs were not used with boards of inferior quality, so that (among other reasons) its liability under Californian products liability law might be minimised; and to prevent passing off and unfair competition under German law between licensees. The primary holding of the European Court was that it agreed with the Commission that the controls which Windsurfing sought to impose did not come within the specific subject matter of the patent because they did not relate to a product covered by the patent.
137. The second of the clauses related to the obligation on the licensees to sell the components covered by the German patent, and therefore in particular the rigs, only in conjunction with boards approved by the licensor or, in other words, as complete sailboards. That was held to be restrictive of competition because the patent was confined to the rig, and the obligation was not indispensable to the exploitation of the patent. The third clause related to the obligation on the licensees to pay royalties on sales of components calculated on the basis of the net selling price of the product. It was held that the method of calculation was restrictive of competition.
138. This is not strictly a case of a limited grant, but of separate restrictive obligations, but the real point is that the object of the restrictions agreed between Windsurfing and the licensees was to prevent competition by third parties by requiring the licensees not to sell rigs to third parties. It was therefore a customer restriction, and not a restriction on what could be manufactured. The licensees had a licence to manufacture and sell the rigs, but not to sailboard manufacturers. But VIA relies on the fact that the view of the Commission was that “restrictions on the field of use of the products may be acceptable but only if they relate to different products belonging to different markets” (p. 654). VIA says that the obligation on VIA is not a field of use/application restriction but a restriction imposed within a particular field of use/application (namely, the working of the patents in suit in connection with the manufacture and sale of chipsets compatible with Intel’s x86 microprocessors, alternatively, all chipsets for use in PCs); and it is not a restriction limiting the working of the patents in suit to a given product market (because it limits the working of the patents within a product market, namely, the market for chipsets which are compatible with Intel’s x86 microprocessors). The Commission’s view was not endorsed by the European Court.
139. Re the Agreement between DDD Ltd and Delta Chemie [1989] 4 CMLR 535 was an application for negative clearance/exemption of an exclusive distribution agreement for the sale of products for the removal of stains from fabrics, and the transfer to the distributor of know-how for the manufacture and sale of the products. The Commission decided that the prohibition on the licensee on using the formulae and processes for uses other than the manufacture of the licensed products was not restrictive because it constituted the corollary to the acknowledged right of the licensor to dispose freely of his know-how and, as a result, to limit its use by third parties solely to the manufacture of the licensed products. I was also referred to a summary of a 1997 complaint against Microsoft in which an assignee of a Microsoft licensee complained that it was limited to obsolete technology, because the contract required the parties to design the microprocessors on the basis of Microsoft’s original version and to make it compatible with programmes developed before 1987. The Commission took the view in its statement of objections that contractual clauses of that nature were anticompetitive because they restricted the ability of a competitor to innovate. In response Microsoft agreed to release the complainant from the obligations, and the complaint was withdrawn: European Commission, 27^th Report on Competition Policy, 1998, p. 37.
140. In Sandvik AB v. KR Pfiffner (UK) Ltd [1999] EuLR 755, 791 Neuberger J decided that Windsurfing did not support the licensee’s argument that limiting the licence to particular products was necessarily in breach of Article 81. He held that Windsurfing was a case in which the restrictions were not regarded as relating to the “specific subject matter” of the patent, i.e. the offending provisions were collateral to the nature of the rights which should be accorded to the patentee. There might be a difference in principle between a restriction which arose from a patentee’s right to refuse a licence under his patent at all, and a restriction which arose from the terms upon which a patentee chose to grant a licence under his patent, even when the term in question was a mere limitation. Although he was sceptical about the licensee’s argument that there was a disguised customer restriction, Neuberger J decided that the issues whether there were customer restrictions and territorial restrictions should go to trial.
141. Here there is no limitation which is collateral to the nature of the rights. All that Intel is doing in the Revised CLA and the draft CLA is to license VIA for the purpose of making particular identified products. Any limited grant could be described as a customer restriction if what is meant by customer restriction is an inability to sell to those who want to buy a product. But what customer restriction means in this context is the inability to sell a product lawfully manufactured to a person who wants to buy it. That was the point of the restrictions in Windsurfing. The licensor was endeavouring to ensure that customers could not buy the rigs separately. I am satisfied that VIA has no real prospect of showing that the limited grant is restrictive of competition under Article 81(1) or section 2(1).

XX Allegedly unlawful restrictions contained in settlement of court proceedings

142. Intel says that, even if the restriction as to use in the Revised CLA is arguably contrary to Article 81(1) and/or section 2(1), it should not now be so stigmatised because the Revised CLA was entered into to implement the Settlement Agreement which put an end to the 1999 proceedings (and the associated litigation). The proposed defence and counterclaim in the 1999 proceedings squarely raised the issue of the legality of the limitation in the 1998 CLA, and the proceedings were discontinued by a consent order.
143. Intel relies on the decision of the Court of Appeal in WWF-Worldwide Fund for Nature v. World Wrestling Federation Entertainment Inc, February 27, 2002 [2002] EWCA Civ 196 (C.A.). In this case a dispute as to the use of the initials WWF in various trade mark registries round the world and in the Swiss courts was settled in 1994 by an agreement restricting the use by the World Wrestling Federation of the initials in return for the withdrawal of legal actions by the Worldwide Fund. The World Wrestling Federation claimed that the settlement agreement was in restraint of trade at common law and contrary to Article 81(1). The Court of Appeal held (at para 48):

“... where the claimant has been party to a settlement of a genuine dispute, designed to define the boundaries of his trading rights as against the defendant, he is entitled to expect that to be enforced. It is not for him to prove that it is reasonable. The presumption is that the restraints, having been agreed between the two parties most involved, represent a reasonable division of their interests. It is for the Defendant, seeking to avoid the agreement, to show that there is something which justifies such a course, because the dispute was ‘contrived’…..or because there was no reasonable basis for the rights claimed……or because it is otherwise contrary to the public interest, for example, going beyond the legitimate purpose of seeking to ‘avoid confusion or conflict’ between the parties.”

144. The Court of Appeal concentrated in its decision on the restraint of trade aspect rather than the Article 81 aspect, although it did refer to Case 35/83 BAT v. Commission [1985] ECR 363 where it had been held that an agreement was not a settlement of a genuine dispute, and was based on a contrived conflict. But that was not said in the context of an issue concerning the binding nature of a settlement of court proceedings, and the Court of Appeal does not appear to have been referred to Case 65/86 Bayer AG v. Süllhöfer [1988] ECR 5248, where the European Court said that “…Article [81(1)] makes no distinction between agreements whose purpose is to put an end to litigation and those concluded with other aims in mind. It should also be noted that this assessment of such a settlement is without prejudice to the question whether, and to what extent, a judicial settlement reached before a national court which constitutes a judicial act may be invalid for breach of Community competition rules.” I should add that in civil law countries there is a distinction between a judicial settlement and what in England would be regarded as a consent order.
145. The difference between the decisions is really only one of emphasis. The shifting of the onus of proving reasonableness in restraint of trade at common law has no counterpart under Article 81. For present purposes, I would simply say that at trial the onus would be on the party alleging invalidity to show a convincing case that the agreement is contrary to Article 81 if it resulted from a bona fide settlement of court proceedings raising issues of competition law. But I do not think that it would make a difference in the context of the present summary judgment proceedings that the agreement resulted from a settlement if otherwise there was a triable issue that the restriction was invalid. But I have already concluded that there is no such issue.

XXI Effect of invalidity and severance

146. VIA claims that if the limitation in the Revised CLA is invalid, the effect would be that that limitation would be severed with the consequence that it would be entitled to work the patents for all Intel microprocessors, including the Pentium 4. But I am satisfied both on the authorities and as a matter of simple common sense that, even if the limitation in the Revised CLA were null and void, VIA would not thereby obtain an unlimited licence. Article 81(2) provides that agreements prohibited by Article 81(1) “shall be automatically void”. The consequences of invalidity of part of an agreement for the continuing effect of other provisions of the agreement are a matter for national law: Case 56/65 Société Technique Minière [1966] ECR 235. Although the Revised CLA is governed by New York law, that law has not been pleaded, and therefore the appropriate principles to be applied are those of English contract law. They have recently been comprehensively reviewed in the context of European competition law in the Byrne case (Inntrepreneur Beer Supply Co Ltd v. Byrne), one of the decisions reported as Courage Ltd v. Crehan [1999] ECC 455, where the Court of Appeal considered the effect in English law of invalidity under Article 81.
147. The Court of Appeal referred (at paras 157 et seq) to the various tests which have been applied, without expressing a concluded view on which was the most decisive: whether the invalid restraint formed the whole or substantially the whole consideration for the promise (Bennett v Bennett [1952] 1 KB 249, 261); whether the contract would be so changed in its character as not to be the sort of contract that the parties intended to enter at all (Chemidus Wavin Ltd v Soc. pour la Transformation [1978] 3 CMLR 514); whether what was unenforceable was part of the main purpose and substance, or whether the deletion altered entirely the scope and intention of the agreement or, on the contrary, left the rest of the agreement a reasonable arrangement between the parties (Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd. [1975] AC 561); whether it would disappoint the main purposes of one of the parties (Inntrepreneur Estates (GL) Ltd v Boyes [1993] 2 EGLR 112); and whether the agreement was in substance an agreement for an invalid restraint (Marshall v. NM Financial Management Ltd [1997] 1 WLR 1527, 1532).
148. In my judgment whichever test is applied, the removal of the allegedly offending limitation could not result in the rest of the Revised CLA surviving. It is plain from the history of the relations between Intel and VIA that the removal of the restriction would make the contract one into which the parties had not intended to enter, and that its deletion would alter entirely its scope and intention, and disappoint one of its main purposes. This is especially so where the royalties are subject to a reducing cap (clause 7.1) which is plainly based on a declining demand, and would make no sense if the licence were to apply to post-Pentium III microprocessors.

XXII Refusal to license as an abuse of dominant position and the Magill case

149. As indicated above, in Case 238/87 AB Volvo v. Erik Veng (UK) Ltd [1988] ECR 6211 the European Court ruled that the refusal by the proprietor of a registered design in respect of body panels to grant to third parties, even in return for reasonable royalties, a licence for the supply of parts incorporating the design could not in itself be regarded as an abuse of a dominant position under Article 82. The right of the proprietor of a protected design to prevent third parties from manufacturing or selling or importing, without his consent, products incorporating the design constituted the very subject-matter of the exclusive right. The Court followed the opinion of Advocate General Mischo who (at 6228) had said that the refusal to grant a licence was the straightforward exercise of the right associated with the registered design.
150. But the European Court indicated (at 6235: also Case 53/87 CICRA v. Renault [1988] ECR 6039, 6073, decided on the same day) that the exercise of an exclusive right by the proprietor of a registered design might be prohibited by Article 82 if it involved, on the part of an undertaking holding a dominant position, certain abusive conduct such as the arbitrary refusal to supply spare parts to independent repairers, the fixing of prices for spare parts at an unfair level or a decision no longer to produce spare parts for a particular model even though many cars of that model were still in circulation, provided that such conduct was liable to affect trade between Member States. Advocate General Mischo’s opinion was that in such cases the competent national authority, or the Commission, could impose a compulsory licence if it thought that that was the best way of bringing the abuse to an end.
151. In 1995 the European Court decided the Magill case: Joined Cases C-241/91P and C-242/91P Radio Telefis Eireann v. Commission [1995] ECR I-743. In this case the European Court, affirming the decision of the Court of First Instance, upheld a decision by the Commission that broadcasting companies had abused their dominant position by obtaining injunctions on the basis of their copyright in their television schedules to prevent Magill TV Guide from publishing a comprehensive weekly television guide. The Commission ordered the broadcasting companies to put an end to their breach of Article 82 by supplying third parties on request with their television schedules and permitting reproduction of the listings.
152. The European Court said (at 822) that the arguments of the copyright owners “wrongly presuppose that where the conduct of an undertaking in a dominant position consists of the exercise of a right classified by national law as ‘copyright’, such conduct can never be reviewed in relation to Article [82] of the Treaty.” It went on (at 823):

“Admittedly, in the absence of Community standardisation or harmonisation of laws, determination of the conditions and procedures for granting protection of an intellectual property right is a matter for national rules. Further, the exclusive right of reproduction forms part of the author’s rights, so that refusal to grant a licence, even if it is the act of an undertaking holding a dominant position, cannot in itself constitute abuse of a dominant position (judgment in Case 238/87 Volvo …). However, it is also clear from that judgment … that the exercise of an exclusive right by the proprietor may, in exceptional circumstances, involve abusive conduct.”

153. In that case the conduct objected to was the reliance by the broadcasting companies on copyright so as to prevent Magill or any other undertaking having the same intention from publishing on a weekly basis information, together with commentaries and pictures obtained independently. The broadcasting companies gave viewers wishing to obtain information on the choice of programmes for the week ahead no choice but to buy the weekly guides for each station and draw from each of them the information they needed to make comparisons.
154. The court emphasised the following matters. First, the refusal to provide basic information by relying on national copyright provisions prevented the appearance of a new product, a comprehensive weekly guide to television programmes, which the broadcasting companies did not offer and for which there was a potential consumer demand, and such refusal constituted an abuse under heading (b) of Article 82. Second, there was no justification for the refusal either in the activity of television broadcasting or in that of publishing television magazines. Third, the broadcasting companies by their conduct reserved to themselves the secondary market of weekly television guides by excluding all competition on that market, since they denied access to the basic information which was the raw material indispensable for the compilation of such a guide. The European Court concluded that “in the light of all those circumstances” the Court of First Instance did not err in law in holding that the conduct was an abuse of a dominant position.
155. In Case T-504/93 Tiercé Ladbroke v. Commission [1997] ECR II-923 companies holding the rights to televised pictures and sound commentaries in French horse races, and holding the exclusive rights to market the televised pictures in Germany and Austria, refused to license Belgian bookmakers (a Belgian subsidiary of the Ladbroke Group) to retransmit the pictures and commentaries in their Belgian betting shops. The Court of First Instance held that this was not an abuse of a dominant position because there was no discrimination (since no other company was licensed in Belgium) and no partitioning of markets. The refusal to supply could not fall within Article 82 unless it concerned a product which was either essential for the exercise of the activity in question, in that there was no real or potential substitute,^[3] or was a new product whose introduction might be prevented, despite specific, constant and regular potential demand on the part of consumers. It rejected the argument of Ladbroke that the relevant market was the transmission of sound and pictures of French races, as opposed to sound and pictures of British races. In Magill the refusal to grant a licence prevented the applicant from entering the market in television guides: but Ladbroke was present in, and had the largest share of the main betting market on which the product in question, sound and pictures, was offered to consumers.
156. Case C-7/97 Oscar Bronner GmbH v. Media Print GmbH [1998] ECR I-7791 was a reference on the question whether the refusal by a newspaper group holding a substantial share of the market in daily newspapers to allow the publisher of a competing newspaper access to its home delivery network, or to do so only if it purchased certain additional services, constituted an abuse of a dominant position. The European Court (Sixth Chamber) ruled that the refusal by a press undertaking, which holds a very large share of the daily newspaper market and operates the only home delivery service, to allow the publisher of a rival newspaper to have access to that scheme did not constitute an abuse of a dominant position even though the rival publisher, by reason of its small circulation was unable either alone or with other publishers to set up and operate its own home delivery scheme.
157. This was not an intellectual property case, and the smaller newspaper group, Bronner, was relying on the “essential facilities” doctrine, which was described by Advocate General Jacobs as being to the effect that a company which has a dominant position in the provision of facilities which are essential for the supply of goods or services on another market abuses its dominant position where, without objective justification, it refuses access to those facilities. It had its origins in United States anti-trust law, where a company is using monopoly power on one market to achieve dominance of another by anti-competitive means or where a refusal to deal is intended to eliminate competition and create a monopoly. The US essential facilities doctrine had developed to require a company with a monopoly power to contract with a competitor where five conditions were met. First, an essential facility was controlled by a monopolist, i.e. where access to it was indispensable in order to compete on the market with the company which controlled it (e.g. railroad bridges; local telecommunication networks; electricity networks). Secondly, a competitor was unable practically or reasonably to duplicate the essential facility. Thirdly, the use of the facility was denied to a competitor, including the refusal to contract on reasonable terms. Fourth, it was feasible for the facility to be provided. Fifth, there was no legitimate business reason for refusing access to the facility.
158. After referring to the basic principle in Volvo v. Veng that the holder of an intellectual property right could refuse to license, he said that Magill could be explained by the special circumstances of that case which swung the balance in favour of an obligation to license: first, the existing products were inadequate, and the exercise of the copyright therefore prevented a much needed new product from coming onto the market; secondly, the provision of copyright protection was difficult to justify in terms of rewarding or providing an incentive for creative effort; third, the exercise of the copyright provided a permanent barrier to the entry of the new product on the market.
159. The European Court noted that in Joined Cases 6/73 and 7/73 Commercial Solvents v. Commission [1974] ECR 223 and Case 311/84 CBEM v. CLT [1985] ECR 3261 it had been held that the refusal by an undertaking holding a dominant position to supply an undertaking with which it was in competition in a neighbouring market with raw materials and services respectively, which were indispensable to carrying on the business of the rival, constituted an abuse. That was because the conduct in question was likely to eliminate all competition on the part of that undertaking. Secondly, the Court noted that in Magill it had been held that refusal by the owner of an intellectual property right to grant a licence could not in itself constitute an abuse but that the exercise of an exclusive right by the proprietor might, in exceptional circumstances, involve an abuse.
160. It then indicated the exceptional circumstances found in Magill and went on (at paragraph 41, p. 7831)

“Therefore, even if that case-law on the exercise of an intellectual property right were applicable to the exercise of any property right whatever, it would still be necessary, for the Magill judgment to be effectively relied upon in order to plead the existence of an abuse within the meaning of Article [82] of the Treaty in a situation such as that which forms the subject-matter of the first question, not only that the refusal of the service comprised in home delivery be likely to eliminate all competition in the daily newspaper market on the part of the person requesting the service and that such refusal be incapable of being objectively justified, but also that the service in itself be indispensable to carrying on that person’s business, inasmuch as there is no actual or potential substitute in existence for that home-delivery scheme.”

161. The final relevant case in the European Court is the IMS case: Case T-184/01R IMS Health Inc v Commission, October 26, 2001 (Order of President of Court of First Instance); affirmed Case C-481/01P(R) NDC Health Corp v. IMS Health Inc and Commission, April 11, 2002 (Order of President of the European Court). In this case the Commission had adopted an interim measures decision requiring IMS to grant a copyright licence in these circumstances. IMS was the world’s leading provider of information solutions to the pharmaceutical and health care industries. It provided a regional sales data service in Germany which was based on a sophisticated “brick structure”, in which IMS claimed copyright and which was a geographical model for analysis of data relating to the sale and prescribing of pharmaceutical products. It brought copyright proceedings in Germany on the basis that competitors founded by some of its former senior personnel were marketing services based on its brick structure, which, it alleged, were infringement of copyright. National Data Corporation (NDC), a competitor of IMS, acquired one of the German companies and requested a licence to use the brick structure in return for a licence fee. NDC brought proceedings in Germany for a declaration that IMS was not entitled to require it not use structures based on the brick structure, and IMS obtained an interim injunction prohibiting the use by NDC of the structure. NDC lodged a complaint with the Commission alleging that the refusal by IMS to license it to use the brick structure constituted an infringement of Article 82 and requested the Commission to adopt interim measures.
162. The Commission found that the refusal by IMS of access to the brick structure was likely to eliminate all competition, since without it was not possible to compete on the relevant market, on the basis that there was no likelihood of its competitors creating an alternative structure to the brick structure and on the absence of any justification for the refusal to license its competitors. Accordingly it ordered interim measures requiring IMS to license its competitors.
163. IMS then sought an interim order from the Court of First Instance suspending implementation of the decision pending its application to annul the Commission decision. The President of the Court of First Instance made an order suspending the Commission decision on the basis that IMS had established the existence of serious doubts as to the correctness of the legal analysis underlying the Commission’s conclusion (para 75).
164. The President initially recalled that Article 295 of the EC Treaty provided that the Treaty did not prejudice the rules governing the system of property ownership. After referring to Volvo v. Veng and Magill, he said that refusal to grant a licence could constitute abuse of a dominant position in exceptional circumstances, and that Magill confirmed the existence of three sets of exceptional circumstances: first, there was a distinct market for the provision of comprehensive weekly television guides separate from that for the weekly guides already produced by each of the appellants; second, there was no justification for the refusal of licences; third, the conduct of the broadcasters had the effect of reserving to themselves the secondary market. In IMS the contested decision of the Commission appeared to turn upon a non-cumulative interpretation of the conditions regarded as constituting exceptional circumstances in Magill.
165. The President said that the Commission's analysis would appear to have been that the prevention, by means of a refusal to license an intellectual property right, of the emergence of new competitors willing to offer, at most, new variations of the same services and on the same market as the dominant undertaking might amount to an abuse where those competitors cannot otherwise access the market in question because the protected work constitutes a de facto industry standard. The Commission’s provisional conclusion that the prevention of the emergence of a new product or service for which there was potential consumer demand was not an indispensable part of the notion of exceptional circumstances developed by the court in Magill constituted, at first sight, an extensive interpretation of that notion.
166. The President concluded that there was at the very least a serious dispute regarding the correctness of the legal conclusion underpinning the contested decision. Accordingly IMS had clearly established a prima facie case justifying the interim relief. In affirming the decision, the order of the President of the European Court confirmed that “it is clear from the Court’s case-law that the exercise of intellectual property rights may be subjected to restrictions imposed under Article 82 EC only in exceptional circumstances. Consequently, the contested order is not vitiated by an error of law in taking account of the strength of the prima facie case put forward by IMS, and particularly in attaching importance to the consequences of the contested decision for IMS’s copyright rights” (paras 64-65, citing Volvo v. Veng and Magill).
167. In England, Magill has been relied upon, but without success. In Philips Electronics NV v. Ingman Ltd [1998] 2 CMLR 839 and in HMSO v. Automobile Association [2001] ECC 272, Article 82 claims based on Magill were struck out by Laddie J on the basis that Magill was an exceptional case which required exceptional facts to be properly pleaded, which they were not. So also in Sandvik AB v. KR Pfiffner (UK) Ltd [1999] EuLR 755, 799-800 Neuberger J struck out a Magill plea because no special facts were pleaded which were sufficient to bring the case within Magill.
168. In Philips Electronics NV v. Ingman Ltd [1998] 2 CMLR 839, 864-865, Laddie J suggested that it did not follow that Magill, which concerned a sub-species of copyright, could be applied by analogy to a patent case. It is also worth noting that the United States essential facilities doctrine has not been applied to patents. In Intergraph Corp. v. Intel Corp., 195 F 3d 1346 (Fed Cir 1999) the Court of Appeals for the Federal Circuit said that the essential facilities doctrine “is not an invitation to demand access to the property or privileges of another, on pain of antitrust penalties and compulsion” (at 1357); and that “the antitrust laws do not negate the patentee’s right to exclude others from patent property” (at 1362), and cited a decision of the Court of Appeals for the Ninth Circuit (Image Technical Services Inc v. Eastman Kodak Co., 125 F 3d 1195 (9^th Cir 1997) in which it had been said (at 1216) that there was “no reported case in which a court had imposed antitrust liability for a unilateral refusal to sell or license a patent or copyright.”
169. The position can be summarised in this way. Magill itself is the only case in which it has been found that a refusal to grant a licence of intellectual property rights was an abuse. None of the cases in the European Court concerns patent rights, and the general policy that the holder of an intellectual property right is free to refuse to grant licences is stronger in the case of patents because of the need to encourage investment and innovation by rewarding the inventor with a largely unrestricted monopoly. The cases involve registered designs (Volvo v. Veng; CICRA v. Renault) and various species of copyright (Magill; IMS; Tiercé). Bronner is a decision on essential facilities, but it throws light on the Magill exceptional circumstances requirement.
170. The starting point is that the proprietor of an intellectual property right has the right to refuse to license: Volvo v. Veng; Magill; IMS. But the refusal to license might be an abuse if (among other circumstances) a manufacturer decided no longer to produce spare parts for a model which was still in wide circulation: Volvo v. Veng. So also might it be if (at least in the case of copyright) reliance on the right prevented the appearance of a new product, which was not offered by the holder of the right and for which there was consumer demand, there was no justification for the refusal to license, and the holder of the right reserved to itself the market in the product by denying access to the material which was indispensable to the creation of the product (or the carrying on of the business of the person denied the facility: Bronner): Magill; Tiercé Ladbroke; Bronner; IMS. But in every case from Magill the Court has emphasised that the refusal to license would be abusive conduct only “in exceptional circumstances.”
171. It seems from the IMS case that the Commission has begun to take the view that the Magill conditions are not cumulative, with the result that Magill is not limited to the emergence of a new product for which there is consumer demand, i.e. a refusal to license copyright could be an abuse if the refusal were likely to eliminate competition, could not be objectively justified, and the ability to use the copyright material was indispensable to carrying on business. It is not surprising that the President of the Court of First Instance concluded that there was at the very least a serious dispute regarding the correctness of this approach.
172. The clear message of the decisions of the European Court is that the conditions are cumulative. Even if the view of the Commission is that they are not cumulative, there is nothing in the Commission decisions to make it seriously arguable that (whatever may be the position in relation to copyright of the kind in Magill, which was in reality information) a patent holder may not refuse a licence, simply on the ground that competition will otherwise be eliminated because its competitors would need to make use of the invention. That would wholly undermine the purpose of patent protection, and could not in itself amount to an exceptional circumstance.

Application of the principles in the Chipset action

173. But in this case VIA cannot even suggest that competition will be eliminated. In the Chipset action, VIA says that it was the first undertaking to develop, and to be able to launch commercially, a chipset capable of allowing the Pentium 4 to operate with high-speed Double Data Rate (DDR) SDRAM memory, some 6 months ahead of Intel. Second, it says that it was the first undertaking to develop, and to be able to launch commercially, an integrated graphics chipset capable of use with the Pentium 4. Intel says its licensees have produced chipsets with these features. But neither company, according to VIA, provides a product with each of the features provided by VIA’s product, an integrated graphics chipset (provided by SiS) and support for the high speed disk drive (provided by Ali). Third, VIA says that it was the first undertaking to launch a further improved chipset for the Pentium 4, supporting the next system memory standard, DDR 333. Intel says that SiS and Ali have done the same, but VIA says that the products of SiS and Ali are not produced in accordance with upcoming standards. Fourth, VIA says that it will be the first undertaking able to produce a chipset for the Pentium 4 which supports the new ATA 133 bus for high-speed disk drive data transfer.
174. Intel says that these are not new types, but simply VIA’s version of chipsets available from other manufacturers. Intel says that it has licensed other companies to make certain types of chipsets compatible with the Pentium 4, including Silicon Integrated Systems Corp; Acer Labs Inc; ATI Technologies Inc: S3 Inc; Reliance Computer Corp. Intel’s evidence is that, although VIA alleges that Intel is abusing its dominant position to prevent the emergence of new types of chipsets compatible with them, and then gives four examples of such new types of chipset, VIA admits that it has developed, and in the case of the first two already marketed, an example of each such type of chipset. Even if the manufacture and marketing of such chipsets by VIA were to be enjoined, chipsets of each of these types have already been developed and marketed by Intel and/or its licensees.
175. VIA in short says that it has unique products and that Intel would not have entered the DDR market but for VIA. Intel is attempting to reserve for itself a secondary market by excluding all competition on that market, by denying access to what is in effect the raw material which is indispensable for the production of new products. To the extent that the rival contentions raise factual issues, they are plainly not fit for summary determination.
176. But I do not consider, even if Magill applies to its full extent to patents, or even if the Commission were right in IMS to apply the Magill criteria non-cumulatively, and even if the Commission were right to extend Magill from new products to variations on existing products, that VIA has made factual allegations which could bring the case within Magill. There is no doubt that there are other competitors in the market, and all that VIA can say is that it is more innovative. It is not claiming that it is prevented from introducing a new product, or a variation on an existing product. The most it says is that it can produce better versions more quickly than Intel’s licensees. To give VIA the remedy which VIA seeks in these circumstances would result in a new form of compulsory licensing, and there is nothing in the case-law of the European Court to justify, or even suggest such a step.
177. It is clear not only from Magill and Bronner, but also from the Commission’s decision in IMS (as recorded by the President of the Court of First Instance at para. 26), that one of the essential elements in the exceptional circumstances requirement is the elimination of all competition in the relevant market. Here the allegedly dominant undertaking has granted licences and is not the only player in the market. It is not sufficient for VIA to say that Intel and its licensees are less innovative than VIA for it to overcome this hurdle.

Application of principles in the CPU action

178. In the CPU action, VIA claims, first, that there is a significant consumer demand for the ability to upgrade and/or replace the microprocessors mounted on a PC motherboard, and motherboards are commonly designed to allow this to be done. At present, consumers whose PCs have Socket 370 microprocessors and compatible motherboards can improve the performance capability of their PCs easily and inexpensively, by removing the old microprocessor and plugging a superior Socket 370 microprocessor into the motherboard.
179. It claims that the object or effect of Intel’s enforcement of its intellectual property rights is to contribute to the ultimate elimination from the market of certain products for which there is a continuing market demand, namely Socket 370 microprocessors; the result will be that consumers will no longer be able, easily and inexpensively, to upgrade their PCs by purchasing a new microprocessor to plug into their existing motherboard. Because the components for Pentium 4 PCs (such as the motherboard) are typically more expensive than the same components for Socket 370 PCs, the consumer prices of leading-edge PCs will be higher than would have been the case if VIA and other suppliers remained free to supply leading-edge Socket 370 microprocessors to the market.
180. The second defence is that Intel’s refusal to license its patent rights in these proceedings is abusive because those rights relate to technology constituting an industry standard and competitors cannot otherwise access the x86 microprocessor market, and because the exercise of those rights unjustifiably prevents the marketing by VIA of a unique product. Because of the great importance to consumers of the ability to run the Windows operating system and software application programmes designed for Windows, computer manufacturers demand that the microprocessors that they install in new PCs should be fully compatible with the current versions of the Windows operating system.
181. VIA pleads that the patents relate to technologies that all microprocessors running Windows operating software need to make use of. Windows-compatible software is written to rely on the presence of the features to which the patents in suit relate: (1) MMX technology, which improves performance in graphics processing and other multimedia functions; (2) an invention relating to the way of switching between operational modes of the microprocessor; and (3) an invention for controlling the checking of number misalignment (in VIA’s formulation) or for providing and controlling alignment checking of address accesses (in Intel’s formulation). Consequently, the patents in suit relate to industry standards. It is impossible for competitors of Intel to access the market for x86 microprocessors at all without making use of the relevant inventions. Further, one of the products at issue in these proceedings, the Via C3 E-series, is marketed by VIA in an enhanced ball grid array (“EBGA”) format. This is a new format, whereby the microprocessor is designed to be soldered directly onto the motherboard. No other supplier of microprocessors offers this format for PCs. It substantially reduces the cost of the motherboard, and, ultimately, the cost of the PC to the consumer. Accordingly, if Intel refuses to license VIA in respect of the patents in suit on lawful and reasonable terms, this will prevent the marketing of a unique and valuable product.
182. The first defence is based on the statement in Volvo v. Veng that a manufacturer may be guilty of an abuse of a dominant position by taking a decision no longer to produce spare parts for a particular model even though many cars of that model were still in circulation, provided that such conduct was liable to affect trade between Member States. The second defence is, like the corresponding defence in the Chipset action, based on Magill as extended by the Commission in IMS.
183. In my judgment neither of these defences is supportable on the pleaded facts. The defence pleads only that the Socket 370 products will be phased out in the future, and it does not plead that Intel is refusing to supply a demand, or even that it will refuse to do so. This does not make out even the beginnings of a case on abuse of a dominant position for the purposes of the first defence nor, even on the most expansive reading of the Commission’s views, and even if they applied to patents, a case within the extended Magill principle. All VIA is saying is that it wants to market Socket 370 microprocessors using Intel’s technology.

XXIII Abuse of process

184. In view of my conclusions on the applications for summary judgment, I need not decide the abuse of process applications, but I will shortly indicate what would have been my conclusions on that aspect. The principle in Johnson v Gore Wood & Co [2001] 2 WLR 72, 90 is that whether the failure to raise a matter in earlier proceedings is an abuse depends on a broad merits-based judgment which takes account of the public and private interests involved, and all the facts of the case, focusing attention on whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. It applies equally (if not more) where the earlier action resulted in a compromise.
185. I doubt if the abuse of process principle can apply to regulatory proceedings, but even if it did, what happened in this case is that both sides were playing tactical games. Intel said that the dispute was a purely private commercial dispute and the matter should be reviewed by a national court if and when further action between the parties in a Member State court took place, because a national court was best placed to address any issues relating to the terms of the licence agreements. When VIA saw that things were not going well for it in the Commission, it took up what it said was a suggestion by Jacob J to withdraw the complaint and press on with the English action: paragraphs 45-46 above. The Commission took no decision, and decided not to pursue its investigation. I do not consider that there is any basis for an abuse of process argument in these circumstances. Even if the doctrine applies to Commission proceedings they did not result in a settlement or a decision.
186. There is more substance in the plea in so far as it relates to the 1999 proceedings. Most of the allegations in the Chipset action (but not, except for some overlapping legal issues, the allegations in the CPU action) were or could have been raised in the 1999 proceedings. But there is a substantial argument on the effect of the Settlement Agreement, and whether its terms (and that of the English consent order) allow the competition issues to be re-opened in relation to the Pentium 4. That is a question of construction, and the factual matrix or background to the settlement, and in particular the nature of the allegations in the various proceedings, might be relevant. But the case presented to me at the oral argument did not have in evidence the particulars of claim in the 1999 action, nor any details of the technology, nor even a copy of the 1998 CLA which was in issue. These were only supplied after I asked for them following the hearing. Part of the argument for Intel on the effect of that agreement was originally predicated on a statement (which had to be withdrawn) that there was more than one set of proceedings in California. In these circumstances I would have heard argument as to whether a preliminary issue should be ordered to be tried on the abuse of process point in relation to the 1999 proceedings, including the issue on the construction of the Settlement Agreement.

XXIV Conclusion

187. I will therefore give summary judgment for Intel on the competition law aspects of the defence and counterclaim in each of the actions on the following principal grounds. First, in the Chipset action, I am satisfied that, whatever the scope of the British Leyland decision, VIA has no real prospect of showing that the alleged restrictions in the draft CLA are contrary to Article 81(1); secondly, that VIA will not be able to show that the limitation in the Revised CLA is contrary to Article 81(1), but that, even if it were, it could not be severed so as to give VIA an unlimited licence; thirdly, that VIA will not be able to show that the Magill principle allows it to be treated as a licensee. In the CPU action, I am satisfied that, whatever the scope of the decisions of the European Court relied upon, VIA has not pleaded a case which would satisfy even the widest reading of them.