Saturday, March 3, 2018

Huawei may have overplayed its hand in Samsung patent dispute: antisuit injunction looms large

Procedural sophistication is a virtue, especially in cross-jurisdictional litigation. But in the event Judge William H. Orrick grants Samsung the antisuit (technically, just temporary anti-enforcement) injunction it is seeking against Huawei in the Northern District of California (in order to prevent the enforcement of a couple of Chinese patent injunctions), the world-class Chinese Android device maker and experienced patent litigant has no one to blame but itself--for excessive procedural gamesmanship of the kind that is all too obvious to (federal) judges. Should Judge Orrick find Huawei's attics "vexatious and oppressive," one of the three Unterweser antisuit injunction factors (a set of factors from the Fifth Circuit that the Ninth Circuit also applies) would be met, and someone who brings claims only to seek an immediate stay of some of them does appear to be suing for the sake of suing.

Huawei could have sued Samsung in only one country: China or the United States. It could also have brought perfectly non-overlapping complaints in any number of jurisdictions. Instead, Huawei sued in San Francisco one day (only to immediately seek a stay of some of its claims there), in Shenzhen the next day, and while requesting a global FRAND determination from the U.S. court it was going for the jugular--for injunctions in the country in which Samsung manufactures its smartphones--in China, meanwhile winning injunctions over two standard-essential patents (SEPs).

There are some valid points in Huawei's opposition brief (filed on February 20), but on the most critical questions it has nothing to offer but strawmen (this post continues below the document):

18-02-20 Huawei Opposition Brief by Florian Mueller on Scribd

Where I agree with Huawei is that the positions Samsung took on injunctive relief over SEPs in connection with an ITC import ban it was seeking and nearly (if not for a presidential veto) obtained against Apple were just the opposite of what Samsung has been saying since. However, for almost five years Samsung has been reasonably consistent, even supportive of advocacy groups and industry alliances that promote reasonable restrictions on access to injunctive relief over SEPs. Any inconsistency of the kind Huawei points to is, at best, a psychological issue--not a substantive or procedural one.

Huawei argues that Samsung is contradicting its own positions because it's seeking an antisuit injunction, for which it is required that the U.S. action be dispositive of the relevant issue(s) in the foreign litigation, while not agreeing that the U.S. court could set a global portfolio FRAND rate. At first sight, that may call into question the merits of Samsung's antisuit injunction. But Huawei had to grossly overstate the scope of the relevant issue (that's the most important one of the "strawmen") in order to portray Samsung as inconsistent. It's only a question of breadth. In its reply brief, Samsung stresses that it never argued that the California case would be dispositive of the entire Chinese actions--it's just about FRAND compliance and its implications for the entitlement to injunctive relief, and Samsung isn't against the U.S. court determining access to injunctive relief (this post continues below the document):

18-02-28 Samsung Reply Brief by Florian Mueller on Scribd

With respect to the legal standard, the most fundamental disagreement is whether Samsung must meet the general factors for preliminary injunctions in addition to antisuit-specific factors or whether the standard for antisuit injunctions stands on its own without having to additionally meet the general preliminary injunction factors. Samsung refers to a Ninth Circuit opinion from 2006, Gallo v. Andina, which was also cited in Microsoft v. Motorola, the closest case to Huawei v. Samsung: the propriety of an injunction is, therefore, determined based on the parties and issues being identical, on the first (U.S.) action being dispositive of the other (the foreign one), and whether at least one Unterweser factor applies. Ultimately, the impact on comity must be "tolerable." But that's it according to Microsoft v. Motorola.

Obviously, Samsung argues that if it had to prevail on the general preliminary injunction factors, it would do so handily, but it really looks like that's not even going to be reached.

Samsung's reply brief doesn't go into detail on this, but as probably the only non-party person to have watched the German Motorola v. Microsoft proceedings in person while following the U.S. Microsoft v. Motorola case via PACER, I found an oddity in Huawei's efforts to distinguish the "Robart injunction" from its Samsung case. Huawei claims that "[t]he German [Motorola v. Microsoft] court [i.e., the Mannheim Regional Court] thus issued its injunction without ever evaluating whether Motorola had complied with its FRAND commitment."

  1. When Judge Robart in the Western District of Washington issued the original temporary restraining order (which was converted into a preliminary injunction and upheld by the Ninth Circuit), the German rulings had not even come down yet. So theoretically there could have been anything in them, including an evaluation of Motorola's FRAND compliance.

  2. While it's correct that German contract law doesn't recognize the concept of third-party beneficiaries, the German Orange Book standard (which was relevant at the time, though by now the CJEU ruling in Huawei v. ZTE applies EU-wide), which is based on antitrust law and the Roman concept of "dolo agit qui petit quod statim redditurus est" (translation from Latin: "he who is seeking something he must return immediately is acting in bad faith"), does involve FRAND questions. Huawei is right that under Orange Book the question was not (though now, post-Huawei v. ZTE, it is) whether the patent holder made an offer on FRAND terms--it places the responsibility for making a FRAND offer on the license-seeking implementer of a standard. But the whole "dolo agit" theory I just mentioned requires anticompetitive conduct by the patent holder. The test applied by German courts in the Orange Book context was whether the patent holder could, without violating antitrust rules, refuse a licensing offer from the alleged infringer. That was, contrary to what Huawei claims, an analysis of FRAND compliance. Structurally different from the way U.S. courts look at it (antitrust vs. contract law; failure to accept vs. failure to make an offer) and from the way EU courts look at the issue now, but nevertheless a FRAND compliance determination.

While Samsung used to take different positions five years ago (an eternity in this industry) and is doing what any other defendant would do in its situation (seeking to put obstacles in Huawei's way, such as by firstly requiring an actual liability finding prior to a rate-setting decision, and by requiring country-by-country resolution of liability), Huawei's opposition appears fundamentally weaker to me than Samsung's motion. It wouldn't have been hard for Huawei to avoid a situation in which one can reasonably find its procedural tactics "vexatious and oppressive," and Huawei could have chosen to keep certain issues out of the U.S. case or at least to file the U.S. case after the Chinese ones. It has made its bed and must now lie in it. I believe Samsung's motion will succeed--if not in district court, than in the Ninth Circuit.

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