Anti-suit injunctions and the Xiaomi v InterDigital dispute

By Huang Wei and Yin Bei, Tian Yuan Law Firm
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It has become common practice in recent years for implementers and right holders to engage in global litigation that is centred on standard essential patents (SEPs). Against a tide where right holders resort to anti-suit injunctions to constrain Chinese companies’ domestic litigation filed to extraterritorial regions like Europe and the US, Huawei and Xiaomi also filed applications for anti-suit injunctions in China this year.

Huang Wei, Partner, Tian Yuan Law Firm
Huang Wei
Partner
Tian Yuan Law Firm

On 28 August and 20 September, the Supreme People’s Court (SPC) and the Wuhan Intermediate Court sided with two Chinese companies by granting anti-suit injunctions, respectively, against Conversant and InterDigital, with regard to their extraterritorial litigation-related conduct.

After being granted the anti-suit injunction from Wuhan Intermediate Court, InterDigital applied to Delhi High Court in India for an anti-antisuit injunction against Xiaomi, which was upheld by that court. Delhi High Court noted that the suit filed in India by InterDigital intended ultimately to stop the infringement, while the Chinese suit was to determine the SEP royalty rate. In addition, the court stressed that Xiaomi had committed fraud in obtaining the anti-suit injunction, and that the grant of the anti-suit injunction by Wuhan Intermediate Court violated the principle of international comity.

Both the SPC and Wuhan Intermediate Court issued the above-mentioned injunctions based on the act preservation provisions in the Civil Procedure Law, which stipulate that an act preservation ruling shall be made on the condition that: “The conduct of one party, or any other cause, has made it difficult to enforce the judgment, or led to other damage to another party.”

The Wuhan Intermediate Court, when making the anti-suit injunction ruling, also followed the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Examining Cases Involving Taking Act Preservation Measures in Intellectual Property Disputes, which, as a judicial interpretation, has included the following factors in consideration for deciding whether to make an act preservation ruling: Whether the applicant’s request has a factual and legal basis; the damage caused to the applicant, and to the respondent, by the adoption or non-adoption of act preservation measures; whether the adoption of act preservation measures will be detrimental to the public interest; and other factors that should be taken into account.

Yin Bei, Senior lawyer, Tian Yuan Law Firm
Yin Bei
Senior lawyer
Tian Yuan Law Firm

In light of relevant injunctive practices in China and other countries, an analysis of the views of the Wuhan Intermediate Court and Delhi High Court in India has provided the following insights.

(1) Domestic litigation is different from foreign litigation, but the difference will not prevent domestic courts from granting anti-suit injunctions. In cases where domestic and foreign litigation are identical, the opinions of the foreign court will have a more direct impact on the domestic counterpart’s hearing and decision of the case. Under that circumstance, the domestic court is more likely to issue an anti-suit injunction. However, relevant judicial precedents in both China and the US hold that the court may still issue an anti-suit injunction, even if litigation conducted in different jurisdictions is not the same.

In the Huawei v Conversant case, the SPC made it clear that the SEP licence dispute brought in China by Huawei was different in nature from the patent infringement dispute filed in Germany by Conversant. However, the Düsseldorf court’s decision to stop the infringement was based on the premise that the SEP royalty rate proposed during the negotiation process by the SEP rights holder, Conversant, be in line with the fair, reasonable and non-discriminatory (FRAND) principle. Therefore, the trial objects of the two cases partially overlapped.

Similarly, in Microsoft v Motorola, the district court of Washington noted that although Microsoft’s suit against Motorola, filed in the US, and the latter’s suit against Microsoft, filed in Germany, involved breach of contract and patent infringement, respectively, if the US court held that Motorola had breached its FRAND obligations to the standard setting organisation (SSO), Motorola would not be entitled to seek injunctive relief against Microsoft in any jurisdiction, including Germany. In view of that, the court sided with Microsoft’s application for an anti-suit injunction.

(2) Chinese courts may likely attach greater importance to the principles of international comity in the future. The existing provisions of the Civil Procedure Law, and relevant judicial interpretations concerning act preservation, have not explicitly included the principle of international comity as a factor to be considered in relevant measures. However, the SPC clearly stated in the Huawei v Conversant case that, “International comity factors should also be taken into account when examining an application for act preservation that prohibits a party from applying for enforcement of judgments of an extraterritorial court, or from seeking judicial relief, outside the jurisdiction.”

China has adopted the Implementation Measures on the Establishment of Mechanisms for Resolving Differences in the Application of Law, which stipulate that departments of the SPC and other people’s courts at all levels should maintain the same principles or standards for the law application as those determined by the effective rulings and judgments of the SPC. In view of that fact, together with the criticism expressed by Delhi High Court against the Wuhan Intermediate Court’s decision on the basis of the latter’s failure to consider international comity, the author expects that Chinese courts will properly consider international comity factors in future anti-suit injunction hearings.

(3) Anti-suit injunction applications may increase in China, and they may be used in SEP-related anti-trust litigation. The author expects that, following the issuance of anti-suit injunctions by the SPC and the Wuhan Intermediate Court, Chinese companies will be further motivated in future to seek anti-suit injunctions in China, through the act preservation system, in the civil disputes with their foreign counterparties.

As yet there has been no application for an anti-suit injunction in any antitrust case involving an SEP. Given the close ties between such litigation and those regarding licensing terms and conditions of SEPs, Chinese companies may also be likely to apply for anti-suit injunctions in antitrust SEP litigation in the future, to counteract the arbitration or court ruling on SEP licensing disputes by the relevant rights holders abroad, thereby ensuring relevant claims.


Huang Wei is a partner at Tian Yuan Law Firm and secretary-general of the Antitrust Committee of the All China Lawyers Association. He can be contacted on +86 10 5776 3888 or by e-mail at hwei@tylaw.com.cn

Yin Bei is a senior lawyer at Tian Yuan Law Firm in Beijing. She can be contacted on +86 10 5776 3539 or by e-mail at yinbei@tylaw.com.cn