United States: U.S. Courts May Order Owners Of Standard Essential Patents Not To Enforce Foreign Injunctions Obtained To Prevent Implementers From Infringing Those Patents

Abstract

The Ninth Circuit has established a legal framework for courts to use when determining whether to enjoin litigants from enforcing injunctions ordered by courts in other countries.


Background

Samsung and Huawei both owned certain patents that they declared as essential to the standards for 4G and 3G cellular phones established by the European Telecommunications Standards Institute (ETSI). Consistent with ETSI's policies, both also agreed to license their declared standard essential patents (SEPs) under fair, reasonable, and non-discriminatory (FRAND) terms and conditions.

After discussions between the parties to cross-license their patents fell through, Huawei sued Samsung in federal court in California for infringement of eleven of its SEPs and alleged that Samsung breached its commitment to enter into an SEP cross-license under FRAND terms and conditions.

Samsung responded by filing counterclaims for infringement of its SEPs, as well as non-infringement, invalidity, and antitrust claims against Huawei on Huawei's SEPs.

Huawei subsequently filed eleven separate infringement actions in China, eight involving counterpart patents to the patents asserted in the U.S. case.

While the California case was pending, the Chinese court in Shenzhen found Samsung infringed two of Huawei's Chinese SEPs and enjoined Samsung's Chinese affiliates from manufacturing and selling its 4G LTE standardized smartphones in China.

Relying on the negotiations between the parties, including Huawei's offers to Samsung (which the Shenzhen court found were within a reasonable range based on the strength of the patents) and Samsung's delay in the negotiations and sole offer (which the Shenzhen court found did not comply with FRAND principles), the Shenzhen court found that Huawei had complied with its FRAND obligations while Samsung had not.

Samsung filed an appeal in China and a motion in the U.S. case to enjoin Huawei from enforcing the injunction from the Shenzhen court. The U.S. Court ultimately granted Samsung's motion.

The Huawei-Samsung Decision

Legal Framework

The U.S. Court in California noted that when it has jurisdiction over parties, it has the power to enjoin the parties from proceeding with an action in the courts of a foreign country when the circumstances are unjust, but the power should be used sparingly.

Following the Ninth Circuit's test for determining whether such an injunction is proper, the Court explained it had to determine (1) whether or not the parties and the issues are the same in both the U.S. and foreign actions, and whether or not the first action is dispositive of the action to be enjoined; (2) whether at least one of the  Unterweser  factors applies (described below); and (3) whether the injunction's impact on comity is tolerable.

 Under the  Unterweser  factors, a U.S. court may enjoin foreign litigation "when it would (1) frustrate a policy of the forum issuing the injunction; (2) be vexatious or oppressive; (3) threaten the issuing courts  in rem  or  quasi in rem  jurisdiction; or (4) where the proceedings prejudice other equitable considerations."

The Parties and Issues Are Functionally the Same
Huawei and Samsung agreed the parties were functionally the same, and the Court explained that perfect identity of parties was not required.

Samsung also argued the issue in the Shenzhen court was the same issue being addressed by the California court, namely, the availability of injunctive relief for Huawei's SEPs. Samsung relied on the  Microsoft v. Motorola case, where the district court and Ninth Circuit rejected Motorola's argument that the U.S. action could not resolve a German action because patent law is territorial. The Ninth Circuit in  Microsoft cited Motorola's promise in its declaration to the standard setting organization that included a guarantee the patent holder would not seek an injunction to find that injunctive relief was inconsistent with Motorola's licensing commitment.

Huawei countered by trying to distinguish the  Microsoft case from the pending action:

  1. Microsoft initiated the U.S. action, did not contest the essentiality or infringement of the Motorola SEPs, and asked the court to set a FRAND rate. Here, Samsung did not initiate the U.S. action and is contesting the essentiality and infringement of the Huawei SEPs.
  2. Motorola filed the German action months after Microsoft had filed the U.S. action in an effort get around the U.S. case. Here, Huawei argued the opposite was true because Huawei filed the U.S. and Chinese actions at the same time.
  3. Huawei sought to distinguish this case from Microsoft because the German court in that case issued an injunction without evaluating whether Motorola complied with its FRAND commitments, and here, the Shenzhen order explicitly considered and decided the FRAND issues before determining the injunction issue.

Ultimately, the Court found these distinctions irrelevant to whether this action is dispositive of the foreign case because both parties presented breach of contract claims based on commitments to the standard setting organization; neither party disputed the other's right to enforce those commitments as a third-party beneficiary to a contract; and the availability of injunctive relief depends on the breach of contract claims.

The Court also precluded Samsung from arguing that the breach of contract claim in this case (whether the parties' licensing offers were FRAND) depends on evidence not before the Court such as the validity, infringement, or essentiality of foreign patents because Samsung previously argued that this Court did not have the authority to set FRAND rates for non-US SEPs.

Unterweser Factors

1. Domestic Policy and Other Equitable Considerations
The Court found that the relevant policy issue here was the Court's ability to determine the propriety of an injunction in the first instance. The Court noted the risk of inconsistent judgments if it came to a different conclusion than the Court in China. Moreover, denying an anti-suit injunction would significantly harm Samsung worldwide. The Court found that the Shenzhen order would essentially force Samsung to accept Huawei's licensing terms before any other court has an opportunity to adjudicate the parties' breach of contract claims, and thus frustrated this Court's ability to adjudicate the issues before it.

2. Whether the Foreign Would be Action Vexatious or Oppressive
Samsung 
also argued that the foreign actions here were vexatious and oppressive. Although Huawei's VP admitted during a talk that legal action in China was a bargaining chip for the negotiation between the parties, given the proximity in time from when Huawei filed suit in the U.S. and in China, the Court refused to find that the Chinese actions were vexatious or oppressive.

Because one of the  Unterweser  factors applied, the Court then proceeded to determine whether the anti-suit injunction's impact on comity was tolerable and determined the impact was negligible. To do so, the Court relied mainly on the scope of the injunction Samsung sought, which was limited to enjoining Huawei from enforcing the Chinese injunctions until the Court evaluated the propriety of injunctive relief for the parties' SEPs.

Strategy and Conclusion

Defendants facing injunctive relief for SEPs in foreign jurisdictions may be able to get a U.S. court to enjoin the patent holder from enforcing the foreign injunction, at least temporarily, while the U.S. court considers the pending issues.

Further Information
The Huawei  opinion can be found  here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
18 Dec 2018, Webinar, Washington, DC, United States

As part of Strafford Publications’ webinar series, Finnegan attorneys Adriana Burgy, Chris Johns, and Show Summary

2 Jan 2019, Conference, Washington, DC, United States

Finnegan is a Silver sponsor of the 36th annual National CLE Conference. Finnegan partner Erika Arner will co-present “The Interplay Between IPRs and Other PTAB Trial Proceedings and Litigation—Strategy and Lessons.

6 Jan 2019, Webinar, Washington, DC, United States

As part of Strafford Publications’ webinar series, Finnegan attorneys Virginia Carron and Jessica Marks will consider patent eligibility issues with engineered natural products.

Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions