Anti-suit injunction

China wakes up in global SEP litigation

The anti-suit injunction dispute between Ericsson and Samsung over a global SEP licence is escalating still further. Anti-suit injunctions are also seeing a huge increase in Germany. Patent experts warn of a global trade war in SEP issues between China and the West. They are anticipating a political solution. But this is a long way off.

29 January 2021 by Mathieu Klos

Anti-suit injunction As the trend for anti-suit injunctions picks up speed in SEP litigation, China's courts are beginning to make their power in determining global FRAND rates known ©Cedar/ADOBE STOCK

“Where will it end?”, asked an observer of the global licensing dispute between Ericsson and Samsung over 4G and 5G patents. First anti-suit injunctions – and then on Christmas Eve, a Chinese anti-anti-anti-suit injunction against Ericsson.

On that day, the Wuhan Intermediate Court of China set a new standard in global SEP litigation. According to JUVE Patent’s information, it was a fourfold anti-suit injunction.

Anti-suit injunctions to end 2020

On 25 December 2020, the pace at which global patent courts are prohibiting each other from setting FRAND licence rates, or prohibiting the parties from enforcing patent injunctions, reached a new high. Since then, a heated debate about anti-suit injunctions (ASIs) in patent disputes has raged.

So, what happened on Christmas Day? On Samsung’s request, the Wuhan Intermediate Court of China issued an ASI (case ID: (2020) E 01 Zhi Min Chu 743). The Chinese court established its jurisdiction to set a global FRAND rate in the licensing dispute between Ericsson and Samsung. It also prohibited the Swedish mobile phone company from enforcing an injunction against Samsung under its 4G and 5G patents. Furthermore, Ericsson may not have a FRAND licence set by any other court.

The Wuhan ASI is already extensive. But the Chinese judges went one step further by prohibiting Ericsson from seeking an order elsewhere to restrict Samsung from enforcing the ASI from Wuhan. The Chinese judges ordered an ASI and an AAASI (anti-anti-anti-suit injunction) in one fell swoop.

One German patent judge says, “In doing so, the judges in Wuhan developed the antidote to the AASIs recently issued by German or US courts”. This development is very worrying, with Western patent experts speaking of the events in Wuhan leading to a “dangerous escalation.”

Ignoring the antidote

If Ericsson ignores the order from Wuhan, it faces an unusually hefty fine in China.

On 7 December, Samsung had applied to the Wuhan Court to set a global licence rate for Ericsson’s SEPs. Four days later, Ericsson sued Samsung in the District Court for the Eastern District of Texas (Marshal Division) for violating contractual obligations to negotiate in good faith, and to licence patents on FRAND terms.

However, Ericsson ignored the harsh sanction threats from Wuhan. Immediately after Christmas, it filed an AASI at the District Court of Texas. The court temporarily allowed Ericsson to proceed with its FRAND lawsuit. On 12 January, the Texas court extended the measure (case ID: 2:20-CV-00380-JRG).

District Court judge Rodney Gilstrap said he has the right to determine if Samsung and Ericsson are fulfilling their obligations to licence their SEPs on fair terms. Gilstrap barred Samsung from enforcing a ruling that limited Ericsson’s ability to pursue its case.

According to sources, Gilstrap said the cases aren’t exactly the same and both are able to proceed. Therefore the US judge did not directly intervene in the Chinese proceedings. However, the judge acted to protect the jurisdiction of the US judiciary.

Royal rumble

Ericsson and Samsung have often faced each other in court. Their last cross-licence deal, in 2014, came about only after extensive patent suits. The companies had intended to avoid a repeat of this, according to trial documents. This time, the two corporations negotiated the continuation of the licensing agreement early on.

As is so often the case, the companies failed to reach an agreement because of money. In quick succession, Ericsson and Samsung then sued in the Wuhan and Texas courts. Meanwhile, actions are also pending at the US ITC. The actions here aim to ban imports of the competitor’s products.

In early January 2021, the patent dispute escalated. Both Ericsson and Samsung filed patent claims in the US. In Europe, Ericsson filed lawsuits in Germany against Samsung. Additionally, it sued the Korean competitor in Belgium and the Netherlands. In all eight European lawsuits, Ericsson claims infringement of so-called implementation patents. Observers expect that Samsung will also file counterclaims against Ericsson in Europe.

However, the ASI claims remain at the centre of the dispute. Ericsson has appealed these in Wuhan, with Samsung doing so in Texas.

New phenomenon

ASIs seem to be the new ‘magic bullet’ in global SEP and FRAND battles. The ASI against Ericsson is now the second of its kind ordered by the Wuhan court. Back in September, in the dispute between Xiaomi and Interdigital, the court issued an ASI (case ID: (2020) E 01 Zhi Min Chu 169). Interdigital countered with an AASI from the Delhi High Court (case ID. 8772/2020 in CS(COMM) 295/2020).

Last summer, 5G giant Huawei applied to the Supreme Court of China for an ASI, in its SEP battle with NPE Conversant. As such, the Chinese court prohibited Conversant from enforcing the Düsseldorf judgments (case ID: 2019 Zui Gao Fa Zhi Min Zhong No.732, 733, 734 Part I).

Prior to this, the famous ASI battle in the German connected cars dispute between Nokia, and Daimler and its suppliers, raged on. Daimler’s co-litigant Continental had applied to a US court for an anti-suit injunction. However, the Regional and Higher Regional Courts of Munich declared an ASI incompatible with German law.

In the end, the bitterly-fought ASI dispute did not stop Nokia’s patent suits in Munich, Düsseldorf and Mannheim. The German courts still merrily hand down their judgments today. Indeed, just recently Düsseldorf Regional Court referred a Nokia claim to the European Court of Justice (CJEU) to clarify important FRAND issues.

Limiting the logic

Ari Laakkonen, anti-suit injunctions

Ari Laakkonen

ASIs are thus well-established in common law systems of law. Courts in the UK and the US have also found them to be useful, and available, tools.

Ari Laakkonen, partner at London-based firm Powell Gilbert, represents Lenovo in an SEP dispute with IPCom. He says, “UK courts have historically had the possibility of granting anti-suit relief in IP cases, when the circumstances warrant it.

“However,” he continues, “in 2009 the CJEU held, in West Tankers (C-185/07), that an anti-suit injunction was incompatible with the EU jurisdictional framework set out in the Brussels Regulation, in relation to arbitration.”

“The CJEU’s logic is equally applicable to IP disputes governed by the Brussels Regulation.” Therefore, says Laakkonen, the granting of ASIs in the UK is more limited.

On the other hand, in recent years US patent courts have vigorously applied ASIs. Most notable is an ASI from the Western District Court of Washington (case ID: C10–1823JLR), which prohibited Motorola from enforcing an injunction of Mannheim Patent Court against Microsoft.

In 2019, the Paris High Court also got in on the ASI act. Here, the Paris court declared itself competent and thus objecting to the US District Court decision in San Jose (case ID: 19/59311). It also demanded that Lenovo withdraw its lawsuit in the US.

In the same dispute, the London High Court also ordered an AASI. However, the UK court denied Lenovo’s UK company the right to take action against IPCom in the US.

First AAAASI in Germany

In Germany, ASI dispute have frequently featured in the country’s courts since 2019. This phenomenon is now spreading across to China.

Hubertus Schacht, judge at the 21st Civil Chamber at Munich Regional Court, says “We are currently seeing a substantial rise in the number of applications for an anti-anti-suit injunction in both chambers.” His chamber was responsible for the 2019 AASI in Nokia against Continental. Schacht says, “Currently, most defendants are from China.”

ASI applications are also increasing at Düsseldorf Regional Court. On the other hand, JUVE Patent has learned that the Regional Court Mannheim has, as yet, received no filed ASI applications.

Yesterday, the 7th Civil Chamber of Munich Regional Court heard Xiaomi’s appeal against an AASI from Wuhan in its dispute with Interdigital.

Furthermore, apparently an AAAASI has already occurred in the global SEP dispute between Sharp and Oppo. This is according to conference documents from Euroforum which show that, in early 2020, Oppo filed a suit at the Shenzhen Intermediate People’s Court for a global licence fee for Sharp’s WiFi, 3G and 4G patents.

This was followed in October by an ASI and AAASI against Sharp’s actions for injunction at Munich Patent Court. The Munich court responded on 16 October with an AASI and AAAASI (case ID: 7 O 13508/20) – the first fourfold anti-suit injunction.

Concern over trade war with China

Patent lawyers in western jurisdictions view the rise of ASI battles in China with great concern. One German patent litigator says, “The fact that the Chinese courts are now ordering an ASI and AAASI at the same time is a declaration of war against the US and Europe.”

“This is pure imperialism,” rages another. “China is exploiting its market power to get cheaper licences for Chinese mobile phone manufacturers.”

A major problem identified by many lawyers is that between the US, Europe and China, opposing political and social systems collide.

“The Chinese courts aren’t playing fair,” says another lawyer. “The problem is that they’re controlled by the government. China is not a nation of law. There is a political agenda there.”

Increasingly, western companies are accusing Chinese authorities of bullying their employees in China over patent suits in Europe. Sisvel voiced this in spring, in the oral proceedings against Haier before German Federal Court of Justice.

One German patent judge says, “We are seeing more and more of a backlash by the authorities against SEP holders and their employees who are suing Chinese manufacturers.”

Furthermore, judges report that serving lawsuits and delivering rulings in China is another problem. If they are possible at all, then they can take a very long time. A judge said, “The Chinese courts can issue their anti-suit injunction in the meantime.”

UK patent judges also expressed concern about the ASI escalation at Chinese courts. Other western experts are particularly worried about the high administrative penalties imposed by Chinese courts on SEP holders.


Anti-suit injunction

On 25 December 2020, the Wuhan Intermediate Court of China issued an anti-suit injunction against Ericsson ©AS_SleepingPanda/ADOBE STOCK

Over to Ericsson

Western experts are particularly worried about the high administrative penalties imposed by Chinese courts on SEP holders. Sometimes, there is a threat of several hundred thousand euros in fines per day.

So far, JUVE Patent does not know how much Ericsson would have to pay, per day, for disobeying an ASI from Wuhan. The Chinese proceedings are being held behind closed doors. Furthermore, Ericsson only became aware of the ASI when the court served the injunction.

However, the Wuhan court has definitely imposed an administrative fine – equivalent to 150,000 US dollars per day – against Interdigital, if the company ignores the ASI in its dispute with Xiaomi.

One lawyer says, “Companies that do business in China, like Ericsson, have an extremely hard time against such ASIs.”

“In my experience, these fines sometimes induce patentees to comply with the anti-suit injunction,” reports Hubertus Schacht from Munich Regional Court.

The courts cannot counter with German legal measures. One conceivable option is for the German courts to seize the assets of German subsidiaries and their Chinese managers. “But to develop countermeasures, companies must file creative applications,” says a German judge. “We can only enact what they request.”

Recently, Chinese courts continuing to pursue ASIs – even after parties withdrawn the application – has worried German judges. JUVE Patent understands that this recently occurred in a recent ASI dispute between an NPE and a Chinese mobile phone manufacturer. The latter withdrew its application for an ASI in China. The court is holding firm to its order.

Randal Rader, anti-suit injunctions

Randall Rader

Chinese perspective on ASIs

“China is an appropriate and fair venue to decide an international contract and patent disputes like the one between Samsung and Ericsson,” says former US patent judge Randall Rader. “There is no reason to give the Chinese courts handling this global FRAND dispute any less deference than similar courts in the US.”

Rader is a retired chief judge of the United States Court of Appeals and experienced in the Chinese patent court system. He has written about anti-suit injunctions in a declaration on behalf of Samsung on the dispute with Ericsson.

Curiously, it was a dispute between a Korean and a Swedish company – no Chinese company involved – that ignited the discussion surrounding ASIs from China.

A natural choice?

In the AASI proceedings before the Texas court, Samsung writes that, “China is a natural choice to adjudicate that SEP dispute”. This is because of the country’s economic importance, especially for Ericsson. However, it also because the Chinese courts, like the UK courts, can decide on global SEP licence rates.

In fact, aside from the UK High Court, only courts in Wuhan and Shenzhen have so far dared to set a global FRAND rate.

An in-house lawyer for a Chinese company says, “With the ASI in the Interdigital/Xiaomi battle, the Wuhan court has put itself on the international FRAND litigation landscape. Chinese courts have the jurisdiction to set FRAND rates. This also makes the courts attractive to international corporates.”

Another in-house lawyer says, “China has a vested interest in shaping global FRAND jurisprudence. It is the largest mobile market in the world. Chinese companies are playing a major role in the development of the 5G standard, and 5G will impact the lives of all Chinese citizens in the future. The Chinese courts must give their opinion on FRAND, whether the west likes it or not.”

China and US battle over leadership

What is also noteworthy is how the US courts in particular have recently issued ASIs. For instance, in the dispute between Continental and Nokia.

Under former president Donald Trump, the US also took a tougher stance in its trade policy towards China. For a while now, the US and other Western countries have made life difficult for Huawei. This is because of its strong position in 5G technology.

Currently, it is mainly Chinese mobile phone manufacturers Huawei, ZTE, Xiaomi, Lenovo and Oppo that are being sued by SEP holders such as Conversant, IPCom, Sisvel or Interdigital in US or European patent courts for SEP infringement. The plaintiffs usually say this is “Because they are not prepared to accept the normal licence rates.”

Future solutions

A German judge criticises , “I am seeing a race between the parties and the courts. The only possible remedy at present would be political intervention.”

He points out that, “ASIs are not only possible in SEP disputes but also in other contractual disputes”. Additionally, the CJEU’s West Tankers judgment may no longer apply to the UK since the bloc left the EU. As such, UK courts could happily order ASIs against EU courts in future.

Another judge says, “We are addressing the problem to the federal government to seek a remedy through a political agreement with the Chinese government.”

The main problem is that, although there is system of standardisation established through ETSI, there is no comprehensive global framework of private international law to regulate the jurisdiction of courts in relation to IP disputes. Experts already discuss the possibility of adding an arbitration instrument to the ETSI regulations.

Powell Gilbert partner Ari Laakkonen says, “The main issue is that a requirement to arbitrate in ETSI rules would only apply to those bound by ETSI rules. Arbitration requires consent, and it is possible to imagine that in many disputes one or both parties would not consent to arbitration. There appears to be no consensus on this issue even amongst the holders of claimed SEPs.”

Laakkonen continues, “It is notable that there are other standards that include provisions relating to arbitration, such as the Blu-ray standard.”

On the other hand, some initial voices call for a global patent court. Considering how things have gone with the Unified Patent Court, this appears highly unrealistic. From a European perspective, negotiations between the EU and China seem most promising.

Experts also believe that internal WTO regulation is a good possibility. “The escalation in ASIs benefits neither side,” says a patent lawyer.

A question of staying power

Ericsson and Samsung reached a stalemate in their dispute at the end of 2020 and beginning of 2021. Samsung is facing the AASI in the US, which analysts say is the most important market for the Korean mobile phone giant. Ericsson must grapple with the ASI from Wuhan. China is considered a crucial market for the network technology supplier.

Although both companies have appealed the ruling unfavourable to them, no party has yet gained a distinct advantage. Now the ITC suits in the US, and infringement and revocation claims, are returning to the fore.

With or without ASIs, the opponents will eventually tire of the lawsuits. They will then offset their court victories against each other, with an agreement then being reached at the negotiating table. Most experts are convinced that the disputing parties must agree on the amount in the licence anyway.

One in-house lawyer for a mobile phone company says, “For this, the courts merely have to determine whether the offers are FRAND or not”. Foisting the problem onto the courts would lead nowhere.