Retired Federal Circuit Chief Judges Battle Over Whether Chinese Court Can Prohibit U.S. Patent Lawsuit From Proceeding

January 5, 2021

by Jonathan H. Spadt, Benjamin E. Leace, Christopher H. Blaszkowski & Shayne D. Rasay, RatnerPrestia

Our prior coverage of the recent developments in the global FRAND dispute between Samsung and Ericsson may be found here.

SAMSUNG FILES ITS OPPOSITION, SUPPORTED BY THE DECLARATION OF THE HONORABLE RANDALL RADER

Highlighting the jurisdictional issues of the case, Samsung’s Opposition filed on January 4 specifically described the present litigation as a “global licensing dispute between a Korean company and a Swedish company, regarding the appropriate worldwide royalty rate for…SEPs…pursuant to a contractual obligation under French law.”

Samsung advanced three principal arguments in support of its opposition to Ericsson’s requested injunction. First, the Wuhan Intermediate People’s Court of China (“Wuhan Court”) properly issued the anti-suit injunction (ASI) related to Samsung’s lawsuit filed on December 14, 2020 (the “China Action”). The ASI was proper because (1) it was neither “vexatious” nor “oppressive” to Ericsson and (2) it did not present a threat to U.S. court jurisdiction.¹

To begin, Samsung summarily dismissed Ericsson’s due process complaints over Samsung’s filing of the China Action as “surprising,” “egregious,” and “secret” because Samsung otherwise complied with Chinese civil procedure laws in its filing. Samsung characterized the ASI as an “ordinary aspect” of and an “appropriate measure” in global licensing disputes.

Citing to a single case: Unwired, Samsung contended that “[o]nly two forum[s] in the world claim the authority to set global FRAND rates…the United Kingdom and China.” And, according to Samsung, China is a “natural choice to adjudicate the SEP dispute.” The Honorable Randall Rader, former Chief Judge of the U.S. Court of Appeals for the Federal Circuit, who provided a Declaration in support of Samsung’s Opposition, agreed. Judge Rader views China as an “appropriate and fair venue” for the resolution of global FRAND disputes. In particular, Judge Rader deems the Wuhan Court as especially proper because it is one of the “specialized tribunals acknowledged by the Supreme People’s Court [as] featuring competent judges with expertise in IP disputes.”

Samsung cautioned the court that the anti-interference injunction sought by Ericsson is an “extraordinary remedy” that “should be exercised sparingly…because they…invite escalation.” Such escalation can take on the form of a “perpetual game of jurisdictional ping-pong,” which creates unnecessary uncertainty. Accordingly, Samsung argued that in accordance with the principles of international comity, subsequent courts should defer to the “forum of the first-filed action.” As applied here, the Wuhan Court acted appropriately in granting the ASI to protect its jurisdiction because it was the “forum of the first-filed action.” Notably, these arguments underscore the significant implications of global forum shopping in this arena.

Second, Ericsson’s request for indemnity and relief in other forums was overbroad and lacks legal basis. When applicable in practice, Ericsson’s requested injunction could improperly “nullif[y]” the Wuhan Court’s authority to enforce its own order and potentially any other actions it may take in response to Ericsson’s actions in other forums. Further, a broad reading of the scope of relief sought by Ericsson would exceed a U.S. court’s inherent authority because it could potentially implicate unrelated “conduct of the Chinese court or conduct in foreign proceedings.” Specifically, to award Ericsson’s request for an injunction preventing Samsung from enforcing the ASI in other forums would be improper because Ericsson cited no authority for such an overbroad request and such a remedy would be outside the scope of a U.S. court’s proper legal basis for granting an injunction.

Finally, Ericsson’s U.S. subsidiary, the movant, lacked standing to seek the requested injunction because the owner of the subject SEPs and the signatory of the global license in dispute is Ericsson’s Swedish entity. Accordingly, since the movant is not subject to the alleged harm, injunctive relief should not be awarded to the movant.

THE HONORABLE PAUL R. MICHEL SUBMITS AN AMICUS BRIEF CHALLENGING THE ANTI-SUIT INJUNCTION

The importance of the dispute was underscored again on January 5, with an amicus brief submitted in the EDTX action by the Honorable Paul R. Michel who, like the Honorable Randall Rader, was a chief judge of the U.S. Court of Appeals for the Federal Circuit.  Judge Michel’s amicus brief, opposed by Samsung and unopposed by Ericsson, was not authored by or with (or paid for by) any party or party counsel.

Judge Michel rejected Samsung’s plea to cede jurisdiction to Wuhan as the first filed action as inappropriate, noting that “[i]mportant global disputes about critical intellectual property should not devolve into a mere question of who filed first.”

Judge Michel weighed in to emphasize “the likely implications” of Judge Gilstrap’s TRO given “the complex and [] controversial” “interaction between U.S. and Chinese patent law.”  He identified “substantial notice and due process concerns” stemming from the Wuhan court’s anti-suit injunction.  These concerns included Ericsson’s apparent lack of opportunity to be heard before the “relatively unknown court in Wuhan” issued its injunction, as well as the lack of any apparent procedure for Ericsson to be heard ex ante (whether by the Wuhan court or an appellate court).

Judge Michel contrasted the U.S.’s meaningful notice and opportunity to be heard with the Wuhan court procedures, which “divest[ed] this Court—as well as every other non-Chinese court—of the authority to litigate a live FRAND dispute at its earliest stages ….”  He used Judge Gilstrap’s TRO to illustrate these procedural concerns—it was granted upon ex parte application, but set to expire after a limited duration.

Beyond the due process concerns, Judge Michel challenged Judge Rader’s views on the propriety of Wuhan court.  For example, Judge Michel  questioned  the scope of relief the Wuhan court could ultimately order and, citing to a blog post from the same blog relied upon in Judge Rader’s declaration, whether the Chinese court system could be “leveraged for strategic advantage” against non-Chinese foreigners.

While taking no position on the merits of the underlying dispute, Judge Michel implored Judge Gilstrap to “independently assess whether it should maintain its jurisdiction and proceed with the FRAND dispute ….”  This is not a simple patent dispute, but a FRAND litigation which concerns “immensely important issues that impact global intellectual property rights and valuations.”  In Judge Michel’s view, the fact that Samsung filed its action first should not necessarily outweigh the determination of “which forum will provide the most judicious outcome.”  Additionally, Judge Michel saw no reason why both cases could not proceed in parallel.

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¹ In order to prevail in an anti-interference injunction, the movant must show that the “need to prevent vexatious or oppressive litigation and to protect the court’s jurisdiction” outweighs the “need to defer to principles of international comity.” Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357, 366 (5th Cir. 2003).

About RatnerPrestia

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