Introduction
Patent is a cornerstone of intellectual property law, granting inventors exclusive rights over their inventions in exchange for public disclosure. However, in today’s technology-driven world, a distinct category of patents has become increasingly important: standard essential patents (“SEPs”).
SEPs protect technology that is essential to implementing industry standards. In practical terms, manufacturers cannot produce standard-compliant products without using the patented technology. Modern technologies such as smartphones and streaming platforms depend heavily on interoperability standards. SEP holders can wield significant commercial leverage across entire industries.
What Are Standard Essential Patents?
Many industries rely on technical standards to ensure products from different manufacturers can operate seamlessly together. These standards are developed by standard-setting organisations (“SSOs”). Common examples include 4G, 5G, Wi-Fi and video compression standards.
A patent becomes a standard essential patent when compliance with a technical standard necessarily requires use of the patented technology. In other words, it is technically impossible to implement the standard without infringing the patent. As explained by the English Patents Court in IPCom GmbH & Co. KG (a company incorporated under the laws of the Federal Republic of Germany) v Vodafone Group pie and other companies [2020] EWHC 132 (Pat), a patent is essential “if it is not possible on technical grounds to comply with that standard without infringing the patent”.
Globally, SEP disputes have become a major area of patent litigation, particularly in the telecommunications and consumer electronics sectors. These disputes often involve the tension between patent holders seeking to enforce exclusivity and implementers seeking access to standardised technology on fair terms.
Malaysia is only beginning to confront these issues judicially. In General Video, LLC v AsusTeK Computer Malaysia Sdn Bhd & Anor (”Asustek case”), the Malaysian High Court considered SEP-related arguments for the first time in a reported decision, signalling judicial awareness of the global SEP framework and its potential relevance in Malaysian patent litigation.
As discussed below, the defendants successfully resisted the patent infringement claims, including the plaintiff’s SEP-based arguments. Cheang & Ariff acted for the successful defendants in the matter.
General Video, LLC v AsusTeK Computer Malaysia Sdn Bhd & Anor [2023] MLJU 3124
A. Facts
The plaintiff, General Video LLC, was a US-incorporated non-practising entity (“NPE”) which owned and licensed patents relating to audio-visual data transmission technology. It sued AsusTeK Computer Malaysia Sdn Bhd and its Taiwanese parent company, alleging that ASUS mobile devices infringed three (3) Malaysian patents which allegedly relate to the formatting of audio and visual signals according to the MPEG-2 Transport Stream format.
The plaintiff’s case was that the devices were capable of generating and processing data in the MPEG-2 format during video streaming process and therefore infringed the patents in the suit. The three (3) patents were originally registered under the name of another company called GE Technology Development Inc (”GE Technology”). For two (2) of the patents, they were only assigned to the plaintiff shortly before it filed the legal suit.
B. Findings
The High Court after a full trial, dismissed the action on several grounds.
First, the plaintiff lacked locus standi to sue on one of the patents because the plaintiff is not recorded as the registered patent owner of that patent and the patent is still under the name of GE Technology. The plaintiff alleged that even though it is not the named registered proprietor, it has locus standi to file the suit as there was an assignment agreement between GE Technology and the plaintiff. The Court held that based on sections 38(1) and (2), 58, 59 and 60 of the Patents Act 1983 (”PA”), only the owner of the patent i.e. the registered proprietor can commence infringement proceedings. The only exception is pursuant to section 61 of the PA which is not relevant in the present matter. In order to have the locus standi, any recordal of assignment procedure must be completed and the plaintiff must be recorded as the registered proprietor.
Second, the claim against the Malaysian subsidiary failed because the evidence did not establish that the subsidiary itself committed any infringing acts in Malaysia. The evidence produced to the Court did not link to the Malaysian subsidiary. Further, the Malaysian subsidiary’s nature of business is servicing of computer peripherals and parts. There is no evidence that the Malaysian subsidiary deals with mobile phones in Malaysia.
Third, the plaintiff also failed to prove infringement against the Taiwanese parent company. The Court found significant weaknesses in the plaintiff’s expert evidence, including the failure to identify the essential integers of the patent claims and the failure to prove that the essential integers of the patent claims are present in the mobile devices. The defendant was also successful in challenging the claims chart produced by the plaintiff. The infringement action was therefore dismissed in its entirety.
As the plaintiff had difficulty in proving its case by way of evidence, the plaintiff tried to rely on the SEP argument. The Court did not accept this argument.
C. The SEP Point: The Obligation to Plead Standard Essentiality
Although the infringement claim failed, the judgment is most notable for its treatment of the plaintiff’s SEP argument.
In the expert report produced by the plaintiff’s expert, the plaintiff attempted to argue that its patents were SEPs to the MPEG-2 Standard. The plaintiff tried to argue that as the accused devices run on Android Operating System 8.0 and above, which is capable of generating audio and visual data in the MPEG-2 TS format; therefore, by operating in compliance with the MPEG-2 Standard, the devices necessarily infringe the patents. The defendant opposed the SEP arguments on the ground that the plaintiff is not entitled to rely on the SEP argument as it was not pleaded and in any event, the plaintiff’s patents do not amount to SEP.
The Court refused to accept the SEP argument because the plaintiff had not expressly pleaded that the patents were SEPs. The Court held that these matters must be specifically pleaded so that the opposing party is aware of the case it must meet.
The plaintiff relied on paragraph 15(i) of the Amended Statement of Claim where it referred to devices generating data formatted according to the “MPEG-2 TS format” will infringe the patents. The Court held that a device that can generate data according to the MPEG-2 TS format (a technical format for storing and transporting data) for synchronisation is not the same as contending the patents are SEP. “MPEG-2 TS format” is different from the MPEG-2 Standard (the normative rules governing how that format must be operated). A mere reference to the “MPEG-2 TS format” in the plaintiff’s pleadings was insufficient to amount to a pleading that the patents were essential to the MPEG-2 Standard.
In considering this issue, the Court recognised that SEP claims involve distinct legal principles and elements to be proved which differ from ordinary patent infringement claims. The Court had made reference to English SEP cases including IPCom GmbH & Co. KG (a company incorporated under the laws of the Federal Republic of Germany) v Vodafone Group pie and other companies [2020] EWHC 132 (Pat).
The FRAND Commitment: Balancing Rights and Access
SEPs create an inherent tension. Standards are intended for widespread industry adoption, yet SEP holders possess patents that every compliant manufacturer may need to use. Without safeguards, SEP holders could demand excessive royalties or threaten injunctions against entire product lines.
To address this, SSOs generally require SEP holders to license their patents on Fair, Reasonable and Non-Discriminatory (“FRAND”) terms. FRAND seeks to balance the competing interests of SEP holders and implementers. It protects implementers against “patent hold-up”, where SEP holders demand excessive licensing terms after a standard becomes widely adopted, while also protecting SEP holders against “patent hold-out”, where implementers delay or avoid taking licences altogether.
FRAND principles have also been recognised in Malaysia. In 2019, the Malaysia Competition Commission (“MyCC”) issued guidelines addressing competition law issues relating to intellectual property rights and SEPs under the Competition Act 2010.
Global Framework: How Courts Have Approached SEPs
One of the most influential SEP decisions globally is Huawei Technologies Co. Ltd v ZTE Corp. and ZTE Deutschland GmbH (Case No. C-170/13), decided by the Court of Justice of the European Union in 2015. The Court held that a SEP holder who has given a FRAND undertaking may still seek an injunction, provided it first follows certain procedural steps, including notifying the implementer of the infringement and making a FRAND-compliant licence offer. The implementer must also engage in negotiations in good faith.
The Huawei v ZTE framework has since become a major reference point in SEP disputes worldwide, particularly in relation to injunctions and FRAND negotiations.
In Malaysia, SEP litigation remains relatively undeveloped but is expected to grow alongside the region’s expanding technology and manufacturing sectors.
SEPs Under Malaysian Law
Malaysia’s patent framework under the Patents Act 1983 contains no provisions specifically dealing with SEPs or FRAND licensing obligations. Malaysian courts have also yet to determine substantive FRAND issues, such as FRAND royalty rates or the circumstances in which SEP injunctions should be granted.
Against this backdrop, the Asustek case is significant as the first reported Malaysian decision to expressly recognise SEP in Malaysia.
Key Takeaways and Practical Significance
The Asustek case provides several important lessons for patent litigation in Malaysia:
- patent assignments must be registered before infringement proceedings can commence;
- plaintiff must identify the correct defendant and adduce evidence linking to the defendant to the alleged infringing acts;
- expert evidence in patent cases is crucial; and
- SEP claims must be pleaded expressly and with sufficient material particulars.
Most importantly, the decision signals that Malaysian courts are aware of and receptive to SEP concepts, even though Malaysia’s substantive SEP and FRAND jurisprudence remains at an early stage of development.
Conclusion
As Malaysia’s technology and telecommunications sectors continue to expand, SEP disputes are likely to become increasingly common.
The case therefore serves as the starting point for future SEP and FRAND litigation in Malaysia.
This Legislative Update is contributed by the Contact Partner and Associate listed below.
Cindy Goh Joo Seong
Cindy’s practice areas include corporate and commercial litigation, intellectual property, and tax matters. Cindy also specialises in all aspects of non-contentious IP matters concerning trade mark, patent, copyright, registered design, confidential information, enforcement work, licensing and franchise.
