Yesterday, the Delhi High Court issued its order against Xiaomi issuing the anti-anti suit injunction. See : The Court ordered:
I am of the view that a clear case, for grant of ad interim injunction, in terms of prayer (i) in para 33 of the present application, is made out.
Para 33(i) of InterDigital's application is:
“33. (i) Grant an injunction against the Defendant Nos. 1-8 in the present proceedings, restraining them from pursuing or enforcing the anti-suit injunction order dated September 23, 2020 passed by the Wuhan Intermediate People’s Court until the final disposal of the present proceedings;
The judgement is a bit dense and runs into 73 pages. Indeed the judge is fully aware of the issue and in para 80 remarks:
I am uncomfortably aware that, as an order deciding a prayer for ad interim relief, this order is considerably prolix. There was, however, no other option, as the injunction, of the enforcement of an order, passed by a court of foreign jurisdiction, in a foreign country, even for a day, is a serious matter.
What I see here is that Xiaomi should have pursued a different strategy / argument other than the one it used.
The Court here views the lis as follows:
64. ...The present ad interim injunction, being granted by this Court, does not, therefore, interfere with the proceedings before the Wuhan Court, in any respect. The plaintiffs are not seeking any injunction against the prosecution, by the defendants, of the FRAND rate fixation complaint, preferred by them before the Wuhan Court, and this Court is not passing any order, to that effect, either. The defendants would, therefore, be perfectly at liberty to prosecute the said proceedings and, at least at this stage, no interdiction, thereof, is being granted by this Court.
How did the Court reach the above conclusion: The Court saw that Xiaomi argued for necessity of maintaining comity of courts (para 71) and sets aside the argument in favour of public policy. The Court then goes on and undertakes a (US - First Re-statement of the law) analysis and determines that public policy trumps the comity principle.
The answer to the above question is more definitively answered in para 76: There is, in my view, another, and somewhat more serious, objection, to the order, dated 23rd September, 2020, of the Wuhan Court, which directly involves the principle of comity of courts.
By conditioning the continuance of the prosecution, by the plaintiffs, of the proceedings before this Court, with a penalty of about ₹ 1 crore per day, the Wuhan Court has effectively rendered it impossible for the plaintiff to continue to prosecute these proceedings. The inexorable sequitur is that this Court is also divested of the opportunity of adjudicating on the dispute, brought before it by the plaintiffs, which it has, otherwise, the jurisdiction to hear and decide.
Accordingly, the Indian Court sees the Wuhan judgement as being a direct impediment in its way in deciding the dispute.
In my view, what could have balanced Xiaomi's case is the fact that even if one takes the view that InterDigital succeeds in its patent infringement case against Xiaomi (see my previous post), the end result is that royalty would have to be paid to InterDigital. This royalty is a FRAND royalty and this issue is before the Wuhan Court before InterDigital sued Xiaomi here in India. Hence even arguing InterDigital's best case is it wins the patent infringement suit here - at maximum it will get a FRAND royalty as it itself prays for (The suits ask that Delhi High Court fix a FRAND royalty once infringement is proven).
Second, the number of patents in India owned by InterDigital are far less than InterDigital's patents in China. One has to see the list of patents disclosed here in India but that is behind the perverse confidentiality club shield.
The DHC judgement goes on to cite that Xiaomi did not inform this court at least half a dozen times about the Wuhan matter: here the question is did InterDigital inform the court about its investigation in China in 2013?
The DHC also ignores the stark reality in SEP / FRAND disputes that defendants are strategically litigated against in specific jurisdictions.
The DHC also ignores the public interest aspect: this was ignored in the earlier Micromax, iBall, etc. matters as well. It is the public interest that actually suffers in the absence of a market participant. Here, one big reason why our homegrown players got sidetracked and did not join the 4G bandwagon was because of the Ericsson litigation. Xiaomi was a beneficiary as it was the only one who brought in the 4G phones at the time when our domestic players were stuck to 3G.
If I were to put it bluntly, a patent infringement trial in India is an ordeal by trial. Patent litigation is by far the domain of the right holder, and that too one with deep pockets.
In a patent infringement case, we have seen that if a small independent elects to defend, he may win at law and lose his business anyway. If he capitulates and settles he sacrifices his independence, his competitive position, and probably some major part of his patent position as well. This outcome may occur even where the smaller party has the stronger patent position, or where the larger party is armed with patents of doubtful validity. The results to the competitive system, and to the independent, are the same. It is therefore essential to recognize that when a patent suit is decided, something more than the respective rights of the litigants is involved.
A patent infringement suit is predominantly a problem in public interest–it is in the public interest that the patent system finds its justification–and a problem in the relation between economic law and technology. The rights of the litigants are embraced within the public interest at issue and dependent upon it for the exceptional character of the rights contested.
For obvious reasons, InterDigital does not want the FRAND determination matters to be decided in China, given the manner in which it's conduct was investigated there last time.
Note: Although I have linked to just one article that diagrammatically illustrates the interest analysis approach, there are a large number of articles that discuss it. For example, one might look at: Roosevelt, Kermit III, "Brainerd Currie’s Contribution to Choice of Law: Looking Back, Looking Forward" (2015) available here or more specifically to an analysis of conflict of law and anti-trust by, James R. Ratner, Using Currie's Interest Analysis to Resolve Conflicts Between State Regulation and the Sherman Act, 30 Wm. & Mary L. Rev. 705 (1989) available here.
In Interest Analysis ("IA") approach, the first step is to determine whether there is a true conflict or not. Of course, here there is a true conflict between the Wuhan Court judgement and the matter before the Delhi High Court.
Next it is very important to look for what a legislator / judgement had in mind when issuing the said law / judgement. So we look at the Wuhan Court judgement and it is clear (from the extract as provided in the DHC judgement that - Para 1, sub-para 5 of the Wuhan Court judgement:
5. The Respondents InterDigital, Inc. and InterDigital Holdings, Inc. as well as the affiliates thereof shall not, during the trial of the present case, file lawsuits before any courts in either China or any other countries and regions requesting to adjudicate the royalty rate of the royalty disputes in terms of the 3G and 4G SEPs involved in the present case against the Applicant’s Xiaomi Communications Co., Ltd., Xiaomi Homecare commercial Co., Ltd., and Beijing Xiaomi Mobile Software Co., Ltd. as well as its affiliates;
This is obviously for the same 3G / 4G SEPs that InterDigital is agitating before the DHC.
Here the DHC should have looked at whether it was vindicating / enforcing an unconstitutional interest - or whether there was an express attempt to discriminate against a particular litigant - there is no fact that says InterDigital is being discriminated against. In fact, the very thing is that a court (in China) is looking into the matter is sufficient to show due process is being followed.
3. Then there needs to be a determination of whether this is a loss-allocating or conduct-regulating law / judgement. An example would suffice here: Conduct-regulating rules occur outside of the courtroom (DHC) before the lawsuit such as speed limiting rules and a place of tort has a more important interest in regulating the affair / judgement. Here the law of the place of the tort usually applies unless displacing it will advance the relevant substantive law purposes without impairing the smooth working of the multi-state system or producing great uncertainty for litigants. A Loss-allocation rule is after the event, while in a courtroom, regulates burden of injuries and parties’ common domicile has paramount interest in allocating losses.
In the present case, the Wuhan Court judgement is a conduct regulating judgement rather than a loss-allocating judgement and hence the Wuhan Court judgement should be given deference.
The DHC was confused (in my view) from the citations of IPCom v. Lenovo - (2019) EWHC 3030 (Pat): This is because these cases show territorial overreach rather than applicable principles of international patent litigation. In IPCom, Judge Hacon in para 24 notes: "…the less that an anti-anti-suit injunction granted in England would interfere with the foreign proceedings to which it is directed, the more likely it is that the court will exercise its discretion to grant such an injunction".
This DHC uses similar language and goes ahead and issues the order.
A couple of days ago, InterDigital filed two patent infringement law suits against Xiaomi at the Delhi High Court (DHC) for infringement of its standard essential patents (SEPs).
The matters are CS(Comm) 295/2020 and 296/2020 for infringement of its patents related to cellular and H.265/HEVC – (video compression) technologies. These are IN262910; IN295912 ; IN298719; IN313036; & IN320182 for the cellular patents and IN242248 / IN299448 & IN308108 for the video compression patents.
InterDigital is seeking injunctive relief apart from compensatory / punitive damages for infringement of its asserted patents, unless Xiaomi elects to take a license on terms determined to be FRAND by the court.
The current InterDigital suit is one of the latest ones to be filed before the DHC – last year, Nokia had filed law suits against Lenovo and a company called Fractus had filed law suits against Vivo Mobile and Xiaomi for infringement of their SEPs.
In my view, a lot of patent owners would start to use DHC as the go to forum to litigate their SEPs given Ericsson’s success in the Micromax, Lava, Intex, iBall, Gionee matters. This is especially true when companies cannot litigate in China. Or for that matter bring any action. InterDigital had at one point (in 2013) refused to meet Chinese competition authorities fearing that its officials would be arrested. See the Reuters coverage on this issue here.
Given this kind of reception to patent claims in China, it is anybody’s guess why companies prefer to bring actions against Chinese companies outside China. As one can see, all the Defendants are Chinese entities, and are being sued here in the DHC. The current political environment also is a changed circumstance from earlier times. For example, in an earlier case, the argument that royalty for China could be seen in China (obtained legally in China) would be okay, but now Indian courts will be asked about global rates / setting a FRAND portfolio rates.
One thing that is different from the earlier SEP litigation that we have covered on this blog, presumably because defendants were Indian entities, is that now patent law-suits are filed in multiple jurisdictions against the same defendants using jurisdiction specific patents. For example, Fractus had filed a law suit against Xiaomi in the Netherlands early this year but failed to get any kind of expected traction it had hoped (see Juve Patent coverage here). Similarly, Sisvel (an entity to whom Nokia had sold some of its patents) had also filed a law suit against Xiaomi mid-last year (see Juve Patent coverage here).
Readers know my view against both portfolio licenses and global licenses: a portfolio license / global FRAND rate license hides the inefficiencies inherent. For example, why the assumption that all patents are equal in scope, etc. Then there is the issue about license on the end product or only the component.
For H.264/HEVC patents, what is the relationship with say Bluetooth, or RAM or marketing costs, of the mobile phone? Similarly, for 2G/3G/4G – what is the relationship with RAM / screen / marketing costs etc. It is these questions that will have to be answered by the Court while deciding the issues and license rate demanded.
It is worth repeating the fact that any SEP litigation is necessarily an exercise in the determination of public rights. It is public interest that suffers when one has to pay extortionary costs to a SEP owner. These costs are not just higher royalties, but payment for expired patents that are bundled into a patent license, irrelevant patents, and non-essential patents. This is because in SEP litigation, it is not general competition in the market. Rather, it is competition for the market. The more entrenched a standard is, the more power a SEP owner has. Those that give examples of multiple businesses operating in the same market (where SEPs are implicated) mistake the presence of multiple players as a healthy sign. However, they are not comparing the right market and make multiple logical fallacies: mistake cause for effect, confuse between apples and oranges, etc. Just because there are 10 handset brands does not mean it is a healthy market. If one looks closely, all 10 brands are based on the same standard and all 10 have to approach the SEP owner for a license. There is no competition here as the market is already locked in into a particular standard. Just think, what other cellular standard are any of your phonebook contacts using today? Hint: They all use some form of LTE (Long Term Evolution)/ 4G technology as it is popularly known. You don’t even buy a phone because it is LTE compliant: you buy it because of other reasons, such as price etc.
A few other major cases involving SEPs that either have been settled or decision is pending are as follows:
In April this year – Unwired Planet (a company owned by PanOptis – that also purchased patents from Ericsson) settled its patent litigation with Huawei in Germany and the United States. The UK action before the UK Supreme Court is still pending (see UK Supreme Court site). The impact the judgement has remains to be seen as even after Brexit, the UK remains subject to EU law and remains part of the EU customs union during the transition, but is no longer part of the EU’s political bodies or institutions.
It is now apparent that the CJEU case of Huawei v. ZTE, C-170/13, did not give much clarity to SEP disputes and as a result there are differing opinions among member states even within the EU. The example is the differing opinions by UK, EU and Dutch courts. Very briefly, the Huawei v. ZTE had ruled that parties must negotiate in good faith, the use of an injunction against a willing licensee was an abuse of dominant position under Article 102 of the TFEU. There are strict obligations that a licensor that has to adhere to including offering a FRAND rate – to the would be licensee, before it can ask for an injunction.
The Hauwei v. ZTE decision leaves out the determination of what is FRAND etc. and which is why the divergence of opinions in almost polar opposites by different courts.
In a matter brought by Xiaomi against InterDigital, a Chinese court just (September 23, 2020) issued an anti-suit injunction against InterDigital from pursuing matters pending in the Delhi High Court. InterDigital also stands to be fined up to one million yuan per day if it were to violate the order. InterDigital has filed an anti anti-suit injunction application at the DHC on 29.09.2020.
Any pursuit of these matters by InterDigital before the DHC is likely to evoke a per day fine by Chinese courts. This means that the entire matter (FRAND adjudication) cannot be pursued not just injunctive relief because the same is intrinsically coupled to InterDigital's demands at the DHC. In my view, the Chinese courts decision is absolutely correct because Xiaomi had first approached Chinese courts for resolution of the matter.
Contrary to popular belief that InterDigital had filed suit in India first - it was Xiaomi that first filed the matter in Chinese courts: On June 3, 2020, Xiaomi had filed a complaint against InterDigital in the Wuhan Intermediate People's Court seeking a determination of the FRAND royalty terms payable for InterDigital's 3G and 4G SEPs. More importantly, this is a request to determine global royalty rates made before a Chinese court.
This means that InterDigital's India action was a response to the Xiaomi's court filing.
In addition, the India filing was a deliberate attempt by InterDigital to scuttle or at least severly dilute the matter before the Chinese courts. This is because Xiaomi's sales in India would be severely impacted given any adverse order from the Delhi High Court and the Chinese court decision would be significantly diluted if a decision issued from our DHC.
Another factor against InterDigital is that it is a pure R & D company and does no manufacturing - and hence there would be no impact on InterDigital. Public interest is also a factor in favour of the anti-suit injunction. ------------------------------------------------------------------------------------------------- InterDigital has also filed an anti- anti suit injunction before the Delhi High Court on 29.09.2020 as given in one of its regulatory filings. While it is clear that InterDigital is not averse to taking its chances before the Delhi High Court, the Chinese court will most certainly see this filing as a blatant disregard of its orders regardless of whatever has been put out by InterDigital.
This is because InterDigital has been careful to say in the filing that the Chinese court order pertains only to 3G / 4G and not H.265/ HEVC (video codecs). All I can say is that this is a stretched argument by any standard - that HEVC and 3G / 4G patents pertain to different end points.
The defendant is the same 'Xiaomi' and end result of InterDigital's actions whether for HEVC / H.265 patents or 3G / 4G patents will be the same - either Xiaomi gives them FRAND royalty (FRAND definition to be argued by InterDigital ) or Xiaomi faces an injunction. This is clearly in the teeth of the orders issued by the Wuhan People's Court. -------------------------------------------------------------------------------------------------
The matters pending before the Delhi High Court are: InterDigital had filed these matters on 29.07.2020 against Xiaomi and the first complaint (CS. COMM. 295/2020) alleges infringement of five of IDCC's patents related to 3G and/or 4G/LTE standards: Indian Patent Nos. 262910; 295912; 298719; 313036; and 320182.
The second complaint (CS. COMM. 296/2020) alleges infringement of three of IDCC's patents related to H.265/HEVC standards: Indian Patent Nos. 242248; 299448; and 308108.
In these proceedings, InterDigital is seeking compensatory and punitive damages for Xiaomi's infringement of the asserted patents as well as injunctive relief to prevent further infringement of the litigated patents in India, unless Xiaomi elects to take a license on terms determined to be FRAND by the Delhi High Court.
InterDigital said a court in Wuhan, China, issued an order that would prevent it from seeking an injunction against handset maker Xiaomi in India over the use of wireless technology for the 3G and 4G standards.
InterDigital faces a fine of as much as one million yuan ($147,000) per day if it violates the order, the company said in regulatory filing...
IDCC said the Chinese order limiting its actions in India was imposed without any prior notice to the company, nor did it have a chance to be heard IDCC said it filed a petition in the Delhi High Court...