Thursday, July 15, 2021

Immediate and unconditional surrender is the only safe harbor for anti-antisuit defendants in Munich: IP Bridge v. Huawei decision published

On Wikipedia you can find a list of Alcatraz escape attempts. At some point--though probably not on Wikipedia--someone may put together a similar list of defendants to standard-essential patent (SEP) assertions in Munich who were forced to litigate their cases in that jurisdiction and couldn't get help from foreign courts in the form of an antisuit (or anti-injunction-enforcement) injunction:

IP Bridge v. Huawei is important precedent because it is the first case in which the pre-emptive strike doctrine (like the "Bush Doctrine" that led to the Second Iraq War) the court already laid out in InterDigital v. Xiaomi (though in that one there actually had been some actual antisuit activity in China) proved outcome-determinative.

Notably, self-defense was a cornerstone of the legal reasoning behind Nokia v. Continental. We've now gone from self-defense to pre-emptive strikes (which are nevertheless justified with the concept of self-defense).

Munich's anti-antisuit case law is heavily tilted in favor of SEP holders. While only the actual pursuit of a foreign antisuit injunction against a SEP holder is--under the Munich appeals court's Nokia v. Continental decision--certain to justify a Munich anti-antisuit injunction, there's a laundry list of types of conduct that can be held against an implementer of a standard.

The latest IP Bridge v. Huawei decision, in which the lower Munich court affirmed its own ex parte preliminary injunction after a late-April hearing, can be paraphrased as follows:

  • Huawei didn't actually move for an antisuit injunction.

  • It didn't even seek a global FRAND determination in China--just one with respect to the Chinese market. The written decision now acknowledges that the wording of the relevant prayer for relief in the Chinese action cannot be interpreted as potentially also seeking an extraterritorial rate-setting decision.

  • But Huawei had done so before: in its dispute with Conversant (which settled out last year).

  • A Huawei executive even mentioned the Conversant case in negotiations with IP Bridge. The just-published decision leans toward finding that the said reference amounted to a threat with the pursuit of an anti-antisuit injunction. However, under its own framework, the court doesn't even need to get there as it bases its decision on the entirety of circumstances.

  • What ultimately resolves the case in plaintiff's favor is that Huawei did not promise not to seek an antisuit injunction. That would apparently have been the only safe harbor for Huawei.

To describe all other harbors as "unsafe" would be a gross understatement. If there's the slightest suspicion, even if based on what you did in other cases, that you might seek an antisuit injunction (and seeking a global royalty determination is considered a first step in that direction), you'll be slapped with an anti-antisuit injunction and potentially categorized as an unwilling licensee--unless you declared in writing that you were not going to move for an antisuit injunction.

Even if you have no such history, the SEP holder may demand that you declare in writing that you'll refrain from pursuing an antisuit injunction. The SEP holder can give you a very short deadline. That's what the court already indicated in InterDigital v. Xiaomi and has now reinforced by actual application in IP Bridge v. Huawei.

There are two holdings in that decision which I disagree with, but even if the court had viewed those parts of the fact pattern differently, the outcome would have been the same:

  • The court says that an anti-[injunction-]enforcement injunction ("AEI") is even worse than an antisuit injunction because it prevents the enforcement of a decision according to which someone is the rightful owner of a valid and infringed patent and has overcome all defenses. Now, I would agree with the court that if an ASI is considered an unlawful encroachment on the SEP holder's rights in Germany, so is an AEI. But I disagree with the court's holding that it's even worse. I don't think it is because an ASI is narrower than an AEI. An ASI in a strict sense would even prevent someone from seeking a decision on the merits (which entitles the patent holder to damages). But after you win a SEP injunction, even if an AEI makes it impossible for you to enforce it immediately, you may still get to enforce it the moment the AEI gets lifted (and AEIs are typically in place only for the duration of certain foreign proceedings, or they may be overturned by appeals courts even before). In U.S. cases parties moving for AEIs always argue that it is the narrowest relief, and I haven't seen a U.S. court disagree with that perspective (and I doubt I ever will).

    Again, I think the court is right to say that if an ASI can't be tolerated, an AEI can't either. But it strikes me as implausible that a narrower AEI could be worse than a broader ASI.

  • What I find very problematic with a view to extraterritorial overreach is how the court brushes aside Huawei's argument that an IP Bridge action in the UK, where Huawei might be forced under the threat of the enforcement of a UK injunction to take a global license, does not justify the Chinese rate-setting case. Huawei had explained to the court that under UK case law a Chinese rate-setting decision can be taken into consideration by a UK court setting global terms. In paragraph 55, the Munich court now says that the related EWHC decision in Conversant v. Huawei "merely" states that the UK court "can" take a Chinese FRAND determination with respect to the Chinese market, but "does not have to." Therefore, the Munich court says the UK case law does not "open a procedural door" in Huawei's favor.

    This is utterly disrespectful of foreign jurisdictions. If the UK courts tell implementers that a FRAND determination in another country may inform the UK global FRAND determination, it certainly constitutes an encouragement to do so. That is so because the UK court made that statement when justifying its approach of setting global terms: it basically said that if there are Chinese patents involved and if a Chinese court sets a rate for China, the UK court won't ignore it. But the Munich court now holds it against a Chinese company that it is availing itself of a Chinese proceeding in order to inform a UK court and influence a UK decision. This is the opposite of what is called international comity. The difference between whether the UK court would be forced to adopt the Chinese rate-setting decision or whether it would give it consideration along the lines of persuasive authority (or whether it would normally adopt the Chinese decision unless it identifies reasons for disagreeing with it) is totally irrelevant. What does matter here is that the Chinese decision may help Huawei in the UK, and a German court has no business interfering with that--even if the interference is not an antisuit injunction against the Chinese case but just a finding that weighs against Huawei's defenses in the German case.

    It's a fact that defendants to German cases (SEP and non-SEP cases alike) often turned to UK courts for invalidity determinations just to have persuasive authority in place for the German cases, where defendants do not have a full invalidity defense. The IP Bridge situation is very similar, just that it's about FRAND (not validity) and between the UK and a third country such as (in this case, but not necessarily always) China.

    Maybe China should raise this issue--and others--with the World Trade Organization the way the European Commission just asked China questions via the WTO.

IP Bridge v. Huawei does nothing to lower international tensions over SEP enforcement. Antisuit and anti-antisuit injunctions may very well become a topic of discussion in the legislative process the European Commission has announced.

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