Jurisdictional Conflicts in Global FRAND Cases and the EU’s WTO Complaint against China for Alleged Violation of TRIPs

Anti-suit injunctions (“ASI”) issued by Chinese courts, which prevent parties of proceedings concerning standard-essential patents (“SEPs”) from bringing proceedings against each other in different countries, have made the “jurisdiction of the court” a controversial issue.

As is known, in the case of SEPs, the first issue that confronts the patent holder and the company implementing the SEP is whether a licence has been requested, offered and/or granted on Fair, Reasonable and Non- Discriminatory terms (“FRAND”) and how the licence fee should be determined. The court tasked with resolving such a dispute limited to the country in which it is located and the patents applicable in that country is often dealing with multinational companies with worldwide operations and a worldwide interest in the determination of FRAND terms and the licence fee. In such cases, the common view of the courts in Europe and the United States of America (USA) is that, since FRAND disputes are essentially contractual disputes, a global rate for the entire patent portfolio licensed under the contract can be determined by a single court.

In fact, in 2017, in the Unwired Planet v Huawei case, the UK Supreme Court held that it had jurisdiction to determine the terms of a global FRAND license agreement between the parties, covering not only the SEP holder’s UK patents but also foreign patents valid in other countries covered by FRAND commitments. Similar decisions continue to be issued by US courts.

In such disputes, while a dispute regarding the license under FRAND terms is pending before a court in one country, the patent holder may file an infringement action in another country claiming infringement of the same patents, and while the parties have not yet resolved the license fee on FRAND terms, a preliminary injunction grounding on patent infringement may be granted by a court in another country. Thus, the notion that the court of a particular country determines the terms of a license that will be globally applicable to the parties has led to ASIs which prevents the patent owner from filing an action in foreign countries or enforcing the preliminary injunctions granted by foreign courts in favour of the patent holder.

The first ASI decision concerning the determination of a licence fee on FRAND terms was rendered by the US District Court for the State of Washington in the Microsoft v Motorola case. In the case, Microsoft alleged that Motorola breached its commitment to offer Microsoft a licence on FRAND terms. While this case was pending, Motorola filed a patent infringement action against Microsoft in Germany. The German court upheld the patent infringement claim and enjoined Microsoft from selling the infringing products in Germany. In response to the decision, Microsoft applied to the US court just prior to enforcement of the judgement and sought an ASI decision to prevent Motorola from enforcing the decision. The US court ruled a decision to prevent Motorola from filing an action that would prevent it from enforcing the court decision obtained against Microsoft in Germany for patent infringement. The issue to be considered here is thus: ASI decisions of an “in personam” judgement bind the parties, not the courts. In the above example, the US court has issued an injunction that binds Motorola and has the power to impose sanctions on it within the authorisation and jurisdiction of the USA in case of non-compliance.

ASI’s, which was frequently used by European and US courts until recently, was also applied by Chinese courts in 2020 and caused a great controversy.

In the patent infringement lawsuit brought by Conversant against Huawei and ZTE before the German courts, the German court found that Huawei and ZTE had infringed Conversant's SEPs and issued preliminary injunctions to remove the infringing products from the German market. In the meantime, however, Huawei and ZTE applied to the Supreme People's Court of China to prevent Coversant from enforcing injunctions obtained and succeeded in obtaining a judgementpreventing Conversant from filing a lawsuit against Huawei and ZTE regarding its SEPs and from enforcing the injunctions.

Following this decision of preliminary injunction, Chinese courts continued to issue preliminary injunctions “to prevent litigation” within the scope of the Xiaomi v InterDigital, Oppo v Sharp and Samsung v Ericsson case files, preventing SEP holders from filing actions in foreign countries or enforcing preliminary injunction decisions issued by foreign courts. Following these developments, the European Union (EU) sent an official request for information to China, about the injunctions granted by Chinese Courts in the Xiaomi v InterDigital, ZTE v Conversant, OPPO v Sharp v Samsung v Ericsson cases and the legal basis for blocking the implementation of court decisions rendered in Europe, pursuant to Article 63.3 of the TRIPS Agreement, which regulates the obligation of member states to provide information in response to the written request of another member country that believes that a court decision or administrative decision in the field of intellectual and industrial property rights or a bilateral agreement affects its rights under TRIPs.