Friday, April 30, 2021

Explain-away exercise: mention of antisuit injunction case in negotiations may lead to Munich anti-antisuit injunction (IP Bridge v. Huawei)

It's antisuit time again. The related case law is evolving in ever shorter intervals, and I'll give a talk about that topic on May 19 in a European Commission (specifically, DG GROW) webinar, entitled Enforcement of Standard-Essential Patents -- current bottlenecks and possible solutions. I'll be one of the three panelists on antisuit injunctions, and I'm looking forward to providing an overview of extraterritorial issues in standard-essential patent (SEP) litigation and their interdependencies. I'll talk about developments in multiple jurisdictions on three continents and make a specific proposal for a way out without having to agree on a new international treaty. Access will be free, but typically those webinars have only a limited window for sign-up. Subsequently to my little contribution to the event, I'll upload my slide deck to Scribd and post something to this blog.

Both the European Commission and the Munich I Regional Court are aware of my occasional criticism of their COVID and/or patent policies, yet I know they completely accept that I exercise (within reason, of course) my freedom of speech, and I don't feel unwelcome in those institutions.

Yesterday I was the only member of the general public with a sufficient interest in antisuit injunctions (especially so close to my upcoming presentation) to follow the IP Bridge v. Huawei anti-antisuit injunction hearing held by the Seventh Civil Chamber (Presiding Judge: Dr. Matthias Zigann; side judges: Judges Dr. Benz and Kuttenkeuler) of the Landgericht M√ľnchen I (Munich I Regional Court)--my first visit to that court in about nine months. Counsel and parties participated via videoconferencing, so there were only a total of four people in the 700 sq. ft. courtroom, a super low density that facilitated social distancing. Nevertheless we were all wearing N95 masks (all the time); all of us had taken a rapid test across the courthouse before the session; and there were multiple ventilation breaks during the two-hour hearing. This sense of responsibility was exemplary, and I hope the United States District Court for the Northern District of California--sort of my other "home court"--will protect judges, court staff, counsel, parties, and a press pool member at a comparably high level when the Epic Games v. Apple antitrust trial kicks off on Monday.

IP Bridge is a Japanese state-owned licensing firm (link to IAM article), or non-practicing entity (NPE), or if you'd rather have it the disparaging way, a "sovereign patent troll."

It monetizes patents for contributors such as (in this case) Panasonic. In the course of licensing negotiations with Huawei, it undisputedly so occurred in a mid-December video conference that the Chinese mobile equipment and smartphone maker dropped the caption of an already-settled dispute: Huawei v. Conversant. In that one, Huawei had obtained a Chinese antisuit injunction against the other party (an NPE just like IP Bridge).

A couple weeks later, IP Bridge electronically ran to the Munich courthouse and moved for an anti-antisuit injunction, arguing that Huawei had threatened with an antisuit injunction by way of its reference to the Conversant case. This was a clever forum choice by EIP's German lawyer, who are representing IP Bridge--and almost prescient, as the Munich court shortly thereafter handed down its InterDigital v. Xiaomi A2SI/A4SI, not without listing a litany of potential circumstances under which an A2SI/A4SI may be granted in the world's #1 venue for patent and anti-antisuit injunctions. The icing on the cake, according to an obiter dictum in InterDigital v. Xiaomi, is that when you as an implementer of a standard are hit with a Munich A2SI/A4SI, you may also be deemed an unwilling licensee.

Huawei disagreed sharply because of the specifics of its dispute with IP Bridge, and requested yesterday's hearing to discuss the ex parte preliminary injunction. While it appears more likely than not that the Munich court will uphold the PI, the fact pattern is distinguishable from a definitive threat to obtain an antisuit injunction. The question is whether it is distinguishable to the extent of a game changer. The court will have time until June 10 to reflect on the question of whether Huawei's counsel managed to explain away the alleged connection between the mentioning of Huawei v. Conversant and a thinly-veiled threat to throw a wrench in IP Bridge's German SEP enforcement works from China.

Judge Dr. Zigann clarified that his InterDigital v. Xiaomi criteria are neither exhaustive nor per se prohibitions: other circumstances may also give rise to A2SI/A4SI grants, and even if a criterion is met, there may be countervailing facts that might dissuade the court from an A2SI/A4SI.

Whatever the outcome will be here, there is a lesson to be learned, and it resembles an integral part of the Miranda warning: anything you say may be used against you in a court of law.

The Munich court explained at the start of the hearing that it would apply the same standard to alleged antisuit injunction threats as it would to threats in other fields of law: it's not about what was actually the recipient's interpretation, but the objective standard of what a reasonable person placed in the same situation would have thought. Here, between SEP licensing execs working for organizations that know this stuff, the court's inclination is to conclude that a reference to an antisuit injunction case will be understood as such even without the word "antisuit" having been uttered--unless the defendant can explain away the alleged overtone.

There are some relevant facts in this case that Huawei's counsel, Hoyng Rokh Monegier's Dr. Tobias Hessel, pointed to. The Chinese rate-setting action brought by Huawei is only about Chinese SEPs, and is meant to inform the England & Wales High Court's global rate-setting decision in a case brought by IP Bridge. As I announced further above, antisuit injunctions really must be seen as part of a wider extraterritorial-overreach issue, and this is a good example: it makes a lot of sense that Huawei did what the UK judiciary explicitly suggested, which is to seek a rate-setting decision in another jurisdiction such as China (the key jurisdiction in the Unwired Planet v. Huawei/Conversant v. ZTE pair of UK cases) and provide the results to the UK court, which may consider it as part of its global portfolio rate determination. Here, China makes even more sense considering where Huawei sells most of its smartphones.

Judge Dr. Zigann appears inclined (and rightly so, as far as I can see) to give Huawei the benefit of the doubt for the inclusive language of its Chinese motion ("including, but not limited to, royalty rate for Chinese SEPs"). Instead of interpreting this as meaning that the Chinese court may end up setting a rate including German patents, the court will take Huawei's word for it. But that's not enough for Huawei to avoid the A2SI/A4SI.

In my opinion, an implementer deserves the benefit of the doubt to an even greater extent. If it were up to me (as it obviously isn't), I would accept every plausible and reasonably convincing explanation as to why the relevant case (here, Huawei v. Conversant) was mentioned. There are multiple policy reasons for which I think so:

  1. Patent licensing negotiations involve, to some extent, also a simulation of what might happen in threatened or pending litigation. In that context, negotiators shouldn't have to be Mirandized by someone else in their own company each and every time they're about to reference another case. The alternative would be cumbersome, and might dissuade parties from oral communication, which would result in slower negotiations and a lower rate of success of those efforts.

    In this case, a plausible showing of a connection between IP Bridge's UK lawsuit (which was of its own making and not Huawei's idea) and the Chinese rate-setting action on the one hand and the Huawei-Conversant history on the other hand might be exculpatory.

  2. Under Germany's "loser pays" principle, the defendant would have to pay a significant amount of money after losing an A2SI/A4SI case (court and legal fees). There is also a possibility for German courts to hold that the plaintiff was entitled to the decision, but that the defendant's pre-litigation behavior didn't reasonably necessitate the action, in which case the plaintiff may prevail on the merits, but end up paying. However, in order to avoid the fee award, the defendant would have to accept the decision immediately and focus exclusively on costs, arguing that their conduct didn't warrant litigation.

  3. When a "threat" of an antisuit injunction is identified on a basis that--to use U.S. evidentiary standards--is at best a substantial evidence or maybe preponderance finding but far from clear and convincing and definitely nowhere near beyond reasonable doubt, I don't think it's a sufficient basis for declaring the defendant an unwilling licensee.

Part of Huawei's problem in this case is that a sworn declaration by its IP chief Jason Ding (whom this blog mentioned last month as he announced Huawei's 5G SEP license fee) contained a passage according to which Huawei didn't rule out filing for an antisuit injunction at a later stage. The Munich court appears inclined to consider this another indicium of Huawei having meant "antisuit" when they said "Huawei v. Conversant." Were this a U.S. case, I could download at least a public redacted version of the affidavit from PACER and see the context. In Germany, I only know what I hear in the courtroom, and in this case that is just not enough to form an opinion, other than that this is another tale of caution for SEP implementers. "Anything you say..."

The IP Bridge v. Huawei case may or may not be a vehicle for a further evolution of Munich's anti-antisuit case law, depending on what the appeals court will make of it. My concern is that SEP litigations anywhere in the world (provided that the implementer might be susceptible to enforcement action in Munich) may become a very slippery slope. It's not unheard of in the technology sector for licensing negotiators to have more a business and/or technical background. One of them (working for one of the largest U.S. companies at the time) used to quip that his company didn't let him go anywhere without being accompanied by lawyers. And even those with formal legal training may increasingly prefer to just write letters rather than talk via Zoom or Microsoft Teams...

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