Friday, July 18, 2025

Two Important Developments out of Germany

I may have more to say about these two matters next week, and I highly recommend that readers review Florian Mueller’s posts on ip fray (see here, here, and here), if you have not done so already; but I also wanted to post something today (even if it is somewhat cursory), while these matters are fresh.  The two are (1) the decision of the Mannheim Local Division of the UPC in Fujifilm Corp v. Kodak GmbH, UPC_CFI_365/2023 (July 18, 2025) (available here), and (2) the Guidance (Hinweis) of Judge Oliver Schön of the Munich Regional Court I, dated July 14, 2025 (available here). 

The first of these holds that, under the CJEU’s decision in BSH Hausgeräte, where the defendant is domiciled in the court of an E.U. member state, a court (here, the UPC) may adjudicate the infringement of a non-E.U. member state (here, the U.K.) patent; assess the patent’s validity, at least "as a mere prerequisite for the question of infringement with inter partes effect only"; and enjoin the defendant from practicing that patent in the non-E.U. member state, applying the non-E.U. member state’s law of remedies.  (Damages for the U.K. portion of the patent also will be determined under English law.)  This is not a surprising development in view of BSH Hausgeräte, but it is obviously significant.

The second—in which the names of the parties are redacted, but it’s clearly part of the global FRAND dispute between ZTE and Samsung—includes the following important points:

1. In the event the implementer rejects the owner’s offer, the implementer may manifest its willingness to license by paying the owner at least the “undisputed” amount it eventually will have to pay (not just by posting security).  Presumably the undisputed amount would correspond to the implementer’s counteroffer.

2. As has been made clear in many other decisions before this one, there is an emphatic difference of perspective between the German and English approaches to FRAND.  Consistent with the German courts' perspective, the Guidance emphasizes the difficulty of establishing the value of patents and the importance of channeling the parties toward agreement—whereas the English view is that these cases essentially are all about money, and that the English courts are as good as any at determining the right sum.  The Munich decision also discusses at length the value of comparables as evidence of market value (and provides guidance as to what sort of inferences reasonably may be drawn from the comparables at issue, e.g., regarding the FRAND range); and it downplays top-down as, at most, a check (which is one respect, arguably one of the few, in which the Guidance is consistent with the British perspective).  To be sure, a critic would argue that reliance on comparables is problematic to the extent any given comparable may reflect some degree of holdup, and that the further use of such comparables only reinforces that problem.  In response, Judge Schön probably would say, as in fact he does say in the opinion, that if anything it’s better to over- than to undervalue patents in order to preserve the patent incentive scheme.  See p.6, part 3, third paragraph (my somewhat nonliteral, but I think reasonably accurate in conveying the meaning, translation):

It is a fundamental principle that the revenue to be gained through licensing must be high enough to preserve incentives for firms and inventors to invest the time and expense needed to further develop the technologies at issue.  In order to achieve this, high license payments are fundamentally welcome (begrüßenswert).  Royalties would be excessive only when license revenues would result in portions of the world’s population being excluded from the use of the technologies.

Judge Schön also discusses the reasons why implementers would, in his view, practice holdout, and why it is undesirable for them to do so (pp. 6-7)

3. Judge Schön discusses different types of royalty structures (per-dollar, per-unit, and lump-sum), and generally favors per-unit, stating that with per-unit royalties, it doesn’t matter where along the supply chain the owner seeks payment (see p.12).

4.  Perhaps most significantly, Judge Schön says that parties are not obligated to agree to interim licenses (responding to the EWHC’s decision from earlier this month (and other English decisions), discussed here); and he reaffirms the authority of the German courts to issue anti-antisuit injunctions when needed.  He also takes issue generally with the U.K. practice of establishing global FRAND terms (see p.14), and suggests that each jurisdiction should confine itself to adjudicating patent rights enforceable within its own territory.  (See, e.g,, p.6:  “That the same facts are handled differently in different countries is an aspect of national sovereignty and to be accepted by the courts of other countries” (my translation)).  What a critic would say this potentially overlooks, however, is not only the deviation from the purely territorial approach that may occur in at least some cases following the CJEU’s decision in BSH Hausgeräte, but also that a quick injunction in Germany can have the practical effect of compelling an implementer to agree to a global license on terms favorable to the SEP owner, before other courts have had sufficient time to adjudicate the cases before them.         

  

Thursday, July 17, 2025

The UK IPO’s Consultation on SEPs

As has been mentioned on a few other blogs recently (see here and here), on Tuesday the UK’s Intellectual Property Office (IPO) released a Consultation on Standard Essential Patents.  The agency’s principal concerns of relevance here are that, in the current environment, there is a lack of transparency regarding SEPs, essentiality, and FRAND rates, which poses special risks to small and medium-sized enterprises (SMEs); and relatedly, the high cost of litigating FRAND cases.   In this regard, the agency is soliciting input from the public on certain initiatives that the agency may present to Parliament, including (1) the introduction of a Rate Determination Track (RDT), under which SEP owners or implementers could initiate proceedings before the Intellectual Property Enterprise Court (IPEC) for a binding (albeit subject to appellate review) SEP rate determination; and (2) a government service providing information on SEPs, possibly including essentiality checks.  With regard to the RDT in particular, the process would be “limited to cases where infringement, validity and essentiality are not in dispute,” and there also would be “an expectation that ADR mechanisms will have been used before use of the RDT” (para. 66).  The UKIPO solicits comments on, among other things, whether the RDT process would serve the “objectives of providing fast and efficient rate determinations,” how the mechanism should be structured, what methodologies it should use, and whether publication of decisions would enable “transparency or discourage use of the RDT.”  The agency also seeks responses relating to the appropriate remedies for SEP infringement, including injunctive relief. 

The Consultation document closes with two Annexes, one a report prepared by Professor Jorge Contreras titled Rate-Setting for Standard-Essential Patents:  International evidence and analysis, which is also available on ssrn, and the other an estimate of case volumes over the next ten years for the proposed SEP Rate Determination Body.  In regard to the latter, the agency estimates a high of between 50 and 100 cases in Year 2, after which it foresees a gradual decrease.  The Consultation also predicts the estimated costs and benefits of the RDT at paras. 109-17.  It foresees “a long-term average cost of running the RDT of £85-£210k per year” (para. 109), based inter alia on estimated use and the cost of employing three “expert panel members paid at a rate of £50-£100 per hour” and each case taking “between 20-30 hours” (para. 111).   This strikes me as rather low, though I can’t say that I necessarily know better than the agency does what to expect.  I assume that the agency expects the RDT would mostly (exclusively?) be employed by SMEs, which would be consistent with placing it within IPEC; it’s not clear to me from the document whether the agency expects the RDT process to result in global rate determinations and what exactly the jurisdictional bases would be.

As for Professor Contreras’ report, which is worth reading even aside from the UKIPO Consultation, here is the abstract on ssrn:

The UK Intellectual Property Office commissioned this Report to collect and analyze evidence regarding: (1) the creation of a SEP rate setting board to determine (on a non-binding basis) FRAND rates that can be used in SEP negotiations (i.e., on a bilateral basis between a SEP holder and an implementer), and (2) the determination of an aggregate FRAND royalty rate (i.e. total maximum price) for the SEPs covering a particular standard, before or shortly after its publication.

 

The Report evaluates the feasibility of these policies, and their potential effectiveness in improving price predictability in SEP licensing, whilst maintaining innovation incentives and consumer welfare. Royalty determination and distribution proceedings conducted by rate-setting bodies in a range of industries share similarities with the types of determinations that would be required of a FRAND rate-setting tribunal for SEPs. Namely, multiple parties with divergent interests are involved; the parties are initially permitted to work out an arrangement amongst themselves, but if they cannot, the tribunal’s procedures are activated; and the tribunal is empowered to compel discovery, conduct hearings, and otherwise adduce all relevant evidence. Accordingly, this Report first summarizes, in Part II, the historical and theoretical basis for governmental rate-setting. It then describes in some detail rate-setting procedures in other fields that can offer instructive models for a potential FRAND rate-setting body. These include rate-setting for US interstate transport, one of the first regulated industries and, at certain points in its history, one of the largest; public utilities such as gas, water and electricity; copyrighted works in the UK and US that are subject to compulsory licensing schemes; pharmaceutical products in the UK and US that are subject to price control and regulation, and the statutory interpleader cause of action in the US that enables multiple parties having claims on a single asset pool to petition a court to assess their claims in a single action to divide those assets equitably.

 

The Report then turns in Part III to current methods of rate-setting for SEPs, including the private setting of aggregate royalty rates by patent pools, and judicial FRAND rate setting in and non-judicial alternative dispute resolution (arbitration and mediation). Part IV then summarizes recent proposals that have been made to establish FRAND rates for SEPs by other means. This includes the European Commission’s proposed EUIPO SEP Competence Centre, which is intended to maintain a database of European SEPs, to check the essentiality of SEPs to the standards under which they are declared on a sampled basis, and to determine, on a non-binding basis, aggregate FRAND royalty rates for all SEPs covering a particular standard, and rates for particular SEPs and SEP portfolios. This section then describes the proposed US Standard Essential Royalty Act (SERA), which would limit the ability of non-US courts from establishing FRAND royalty rates for US SEPs by creating a new US judicial body having the exclusive authority to determine FRAND rates for US SEPs. Next, it addresses a series of SDO and academic proposals concerning group negotiation of aggregate SEP royalty rates and caps, and an academic proposal for an international, non-governmental tribunal for setting aggregate SEP FRAND rates and allocations. This section then summarizes related proposals that may affect FRAND rate-setting, such as ex ante rate disclosure prior to the publication of a final standard, systems for “checking” the essentiality of declared SEPs and systems for checking the validity of declared SEPs. Finally, Part V applies the evidence presented in Parts II, III and IV to the specific features of a FRAND rate-setting system that are the subject of IPO’s inquiry, including its legal and institutional setting, decisional scope, and procedural design aspects.       

  

Tuesday, July 15, 2025

Teunissen on Proportionality

Peter Teunissen has an article coming out soon in GRUR Int., titled Intellectual Property, Injunctions, and Proportionality: Towards a Uniform Approach, advance copy available here.  Here is the abstract:

This article examines the role of proportionality in the context of injunctive relief. It highlights the need for flexibility where an injunction could impose excessive burdens on infringers or third parties, such as in cases involving minor infringements, complex products, or conflicting fundamental rights. The article argues for a uniform test, positioning proportionality as a hardship clause that enables courts to tailor the scope or timing of injunctions through measures such as grace periods and carve-outs. Although the primary focus is on injunctive relief, the article also considers the relevance of proportionality for corrective measures such as destruction, removal, and recall. By providing a structured framework, the article aims to support courts in striking a fair balance between effective enforcement and the interests potentially affected by an injunction.

Professor Teunissen’s proposal makes for an interesting contrast with Léon Dijkman’s, previously noted here and here.  I discuss both authors’ proposals in my forthcoming book Wrongful Patent Assertion:  A Comparative Law and Economics Analysis (Oxford Univ Press 2026).  Although neither author recommends that EU courts adopt the U.S. eBay standard, both of them envision a greater use than EU courts have embraced thus far of the proportionality principle as a restriction on injunctive relief.

Friday, July 11, 2025

Some Thoughts on Radian v. Samsung

Radian Memory Systems LLC v. Samsung Electronics Co., Civil Action No. 2:24-cv-1073 (E.D. Tex.)—a patent infringement action in which an NPE has filed a motion for a preliminary injunction—has already achieved a degree of notoriety (see, e.g., here, here, and here) as a result of (1) the plaintiff’s argument that it is entitled to a finding of irreparable harm, based on the historic practice of equity courts circa 1789; and (2) the filing by the Antitrust Division of the Department of Justice and the USPTO of a Statement of Interest, arguing that “[u]nder the traditional principles of equity for a preliminary injunction,” “an ongoing patent infringement would, in many cases, result in irreparable harm based on the inadequacy of a monetary remedy, which can be difficult to calculate accurately.”  In a supplemental filing post-dating the DOJ/USPTO Statement of Interest, the NPE argues that its position is supported by, inter alia, the recent decision in Trump v. CASA, Inc., in which the U.S. Supreme Court held that federal courts lack authority to issue universal injunctions, based on the majority’s reaffirmance of the holding in Grupo Mexicano de Desarrollo S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999), that the Judiciary Act of 1789 authorizes U.S. district courts to grant “only those sorts of equitable remedies ‘traditionally accorded by courts of equity’ at our country’s inception.”  As applied to injunctive relief in patent cases, the argument in Radian is that, under traditional principles, a court of equity would have presumed that the (alleged) infringement of a patent is an irreparable harm.  The implication therefore might be that the Supreme Court’s decisions in eBay v. MercExchange and Winter v. Natural Resources Defense Council, Inc., which appear to allocate to the party seeking a permanent or preliminary injunction burden of showing irreparable harm, (1) were wrongly decided (even if they do not say, in so many words, that presuming irreparable harm is not good law), or (2) should be interpreted as at least permitting courts to presume irreparable harm in some cases, such as patent infringement actions, or (3) at least should make courts more receptive to finding irreparable harm, even when the patent owner is not a practicing entity.  The government’s Statement of Interest is consistent with the third of these possibilities, and therefore not as far-reaching as the plaintiff’s, but still the filing of a Statement of Interest in connection with a motion for a preliminary injunction seems pretty remarkable—though it is consistent with the agencies’ practice, during the first Trump Administration, of filing statements of interest and other documents favoring injunctive relief in patent cases (and also disapproving of the use of antitrust law to regulate FRAND disputes).  It also may prove consistent with the self-styled “American First" antitrust policy recently announced by AG Abigail Slater.

What Judge Gilstrap will make of it all is anyone’s guess, though I suspect he will feel bound by eBay and its subsequent interpretation by the Federal Circuit and other courts, and reject the invitation to revive the presumption of irreparable harm.  To be fair, other common-law countries still apply a rebuttable presumption of irreparable harm in patent infringement actions, and efforts by Senators Coons and Tillis to enact legislation to that effect in the U.S. have been ongoing for several years.  How significant such a change to U.S. practice, post-eBay, would be depends on how difficult it would be for accused infringers to rebut the presumption, though presumably the change would make it at least marginally, and perhaps a lot more than marginally, easier for patent owners including NPEs to obtain injunctive relief.  It also is true, as the DOJ/USPTO point out, that patents are hard to value, and this is the principal economic argument in favor of protecting patents by means of property as opposed to liability rules.  Nevertheless, arming patent owners with a presumption of irreparable harm also would risk enabling them to extract holdup rents that exceed the value of the invention in comparison with alternatives.  Whether the error costs resulting from the denying injunctive relief would be greater than the error costs resulting from granting is, strictly speaking, indeterminate (though I have suggested what I believe to be some reasonable inferences courts could make, here); but there is a body of empirical research suggesting that, if anything, eBay has had a positive effect on U.S. innovation.  (See Filippo Mezzanotti & Timothy Simcoe, Patent Policy and American Innovation After eBay: An Empirical Examination, 48 Rsch. Pol'y 1271 (2019); Filippo Mezzanotti, Roadblock to Innovation: The Role of Patent Litigation in Corporate R&D, 67 Mgmt. Sci. 7362 (2021); see also Samuel Antill et al., The Efficiency of Patent Litigation, Jan. 21, 2025, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4842424; Fred Bereskin, Po-Hsuan Hsu & Huijun Wang, Growth of Firms under Injunction Risk, July 31, 2023, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4281493; Christian Helmers & Brian J. Love, Patent Law Reform and Innovation: An Empirical Assessment of the Last 20 Years, Oct. 19, 2023, https://ssrn.com/abstract=4580645.)  To be sure, every study has its limitations, but I have yet to see any of the people claiming that eBay has stifled innovation engage with this work, much less refute it with their own econometric studies.  For this reason, my view for several years has been that, whatever eBay’s flaws may be purely as a matter of legal analysis, the U.S. is probably better off keeping it intact than re-instituting a presumption of irreparable harm.    

As one might gather from the above, I also am firmly of the view that economic considerations should be paramount in this context.  In my view, the fact that courts thought something was a good idea in 1789 is not a compelling reason to continue following their lead today, especially when we are talking about something like equity, which by its very nature should provide a measure of flexibility and adaptability in the application of the law.  That said, Grupo Mexicano (a decision that rejected the federal courts’ authority to enter injunctions freezing a defendant’s assets pending trial to ensure the ability to pay compensatory damages, which is something the U.K. courts today are in fact authorized to do even if their counterparts in the 1700s were not) does state that U.S. courts only have “authority to administer in equity suits the principles of the system of judicial remedies which had been devised and was being administered by the English Court of Chancery at the time of the separation of the two countries.”  But does that mean courts of equity today are obligated to follow 1790s-era practice so closely that must classify something as “irreparable harm” just because that was the common practice back then?  For what it’s worth, I argued the following in a recent paper, Standing, Nominal Damages, and Nominal Damages “Workarounds” in Intellectual Property Law After TransUnion, 56 UC Davis L. Rev. 1085, 1162-63 (2023) (footnotes omitted): 

          I close by suggesting one possible further implication of the above analysis, relating to the availability of injunctive relief. Critics of the Supreme Court’s eBay decision often decry contemporary courts’ departure from the traditional equitable practice of granting prevailing patent owners injunctions in most cases. As the Article has shown, however, courts did not consistently recognize the “reasonable royalty” concept prior to Dowagiac [Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641 (1915)] though, subject to strict conditions, they sometimes would award a lump-sum established royalty covering both past and future use of the patented invention, and when did they did so, injunctive relief was unavailable. On the other hand, when owners could not prove either a lost profit for past infringement, or an established royalty for past and future infringement, they could expect to recover only nominal damages; and since nominal damages are hardly an “adequate” remedy at law, it is not surprising that owners usually could convince a court of equity to grant an injunction. With the passage of time, however, reasonable royalties have become the most common form of monetary relief in patent cases, and sometimes may be adequate to compensate the patent owner not only for past infringement, but (in the form of ongoing royalties) for future infringement as well. Given these changed conditions, it may make sense to conclude that many patent owners today — unlike their nineteenth-century counterparts — have an adequate remedy at law that weighs against the entry of an injunction. Put another way — and consistent with the principle that “the expansion of adequate legal remedies . . . necessarily affects the scope of equity” — it may be that the adoption of reasonable royalties as a nominal damages workaround has alleviated, in some cases, the need for an equitable remedy altogether. At the very least, the historically-based criticism of eBay seems less secure. 

I do note the following in a footnote, however: 

         . . . there is a debate over whether ongoing royalties are legal or equitable in nature. Compare H. Tomás Gómez-Arostegui & Sean Bottomley, The Traditional Burdens for Final Injunctions in Patent Cases c.1789 and Some Modern Implications, 71 Case W. Rsrv. L. Rev. 403, 436-41 (2020) (arguing that reasonable royalties are rarely awarded as “legal” relief for future injuries and noting that the Federal Circuit has characterized them as equitable relief), with Mark A. Lemley, Ongoing Confusion over Ongoing Royalties. 76 Mo. L. Rev. 695, 695-99 (2011) (arguing that “while the question is not free from doubt, there are reasonable arguments for treating ongoing royalties as within either the law or the equity power of the courts rather than resorting to a series of continuing lawsuits for past damages”). This rationale may not be relevant in some other IP cases, for which an award of total or partial profits or of statutory damages is available but not intended to compensate for future use — though there may be other valid reasons (e.g., balance of hardships) for denying injunctions in some of these cases.

 

I understand that the hearing on Radian’s motion will take place on July 16.  

 

 Update (7-11-25):  Law360 reports this morning that Radian has withdrawn its motion for a preliminary injunction.

Monday, July 7, 2025

The EWHC’s Interim License Decision in Samsung v. ZTE

While I was on vacation in late June, Mr. Justice Mellor handed down his decision in Samsung Elecs. Co. v. ZTE Corp., [2025] EWHC 1432 (Pat).  The decision grants the interim declaration that Samsung had sought, to wit:

i) a declaration that the Defendants (ZTE) are in breach of their obligations of good faith under ETSI;

 

ii) a declaration that a willing licensor in the position of ZTE and a willing licensee in the position of Samsung would enter into an interim licence in respect of each other’s standard essential patents (SEPs) with appropriate royalty terms to be determined by this Court, subject to adjustment and amendment upon final determination of global FRAND terms by this Court (or as otherwise agreed by the parties); and

 

iii) a declaration that if ZTE refuse to offer Samsung such an interim licence, ZTE are unwilling licensors (and unwilling licensees in view of the cross-licence).

Although other commentators have already written about the decision, I will provide a short summary and add a few thoughts of my own.

First off, however, for readers who are new to the topic of interim licenses, a little background on interim licenses for FRAND-committed SEPs may be helpful.  The foundational decision, still less than a year old, is Panasonic Holdings Corp. v. Xiaomi Tech. UK Ltd., [2024] EWCA Civ 1143, in which the Court of Appeal for England and Wales held that Xiaomi was entitled to a declaration that a willing licensor in the position of Panasonic “would agree to enter into, and would enter into, an interim licence of” Panasonic’s SEP portfolio “pending the determination by the Patents Court of what terms for a final licence” are FRAND.  In that particular case, the SEP owner had agreed to submit a global FRAND determination by the U.K. courts, but then appeared to renege on that commitment by proceeding with litigation in Germany, which might have had the effect of coercing Xiaomi to settle before the resolution of the matter in the U.K.  The EWCA concluded that the declaration “would serve a useful purpose in forcing Panasonic to reconsider its position” (and in fact, the case settled shortly thereafter), and stated that the requested relief would be less intrusive than an antisuit injunction (ASI).  Since then, the English courts have considered requests for declarations concerning interim licenses in four additional cases, including the present one.  The most far-reaching of these, arguably, is Lenovo Group Ltd. v. Telefonaktiebolaget LM Ericsson (Publ), [2025] EWCA Civ 182, in which the EWCA held that Lenovo was entitled to an interim-license declaration despite the fact that Ericsson, unlike Panasonic, had not agreed to the U.K. court’s determination of global FRAND terms, and the U.K. action (initiated by Lenovo) was not the first filed between the parties.  

Coming back to the present case, the facts, briefly, are as follows.  On December 19, 2024, Samsung filed an action in the EWHC for the infringement of certain SEPs, and requested the determination of global FRAND terms including a cross-license for ZTE’s SEPs.  (Samsung will be a net licensee rather than licensor.)  The next day, Samsung filed an E.U. competition law claim against ZTE in Frankfurt, Germany.  On December 23, ZTE filed an action in the Chongqing Intermediate People’s Court for a global FRAND cross-license.  Thereafter, ZTE commenced actions for the infringement of individual SEPs in Germany, the UPC, Hangzhou (China), and Brazil, obtaining a preliminary injunction in the last of these.  Samsung also filed additional actions, including an antitrust action in the Northern District of California and claims for the infringement of certain patents in Germany, the UPC, and China.  Unlike the previous English cases involving requests for interim declarations, however, in this dispute both parties have offered to agree to interim licenses, the difference being that Samsung wants the declaration to state that the terms of the interim license will be adjusted to bring them “into line with the terms of the final global license determined to be FRAND by the High Court of Justice of England & Wales at the UK FRAND Trial, and subject to any later adjustments or amendments following any appeals in the UK FRAND Proceedings, or the license that is otherwise agreed between the Parties” (para. 10), whereas ZTE wants the interim license to be adjusted “in accordance with the final determination of FRAND terms in an action brought by ZTE in Chongqing (absent earlier agreement by the parties)” (para. 9; see also para. 71).  

In reaching its decision in favor of Samsung, the court concludes, first, that ZTE breached its obligation to negotiate in good faith.  According to the court, ZTE’s purpose in proceeding with the Brazilian, German, UPC, and Hangzhou litigation is “to try to force Samsung into accepting that global FRAND terms would be decided in Chongqing”—that is, to use “the exclusionary power of national injunctions to enforce its jurisdictional preference” for the Chongqing forum, which ZTE perceives as advantageous—despite the fact that the U.K. courts were the first seised (a matter that the court describes as not being “a trump card in all situations,” but a possible “tie-breaker in an appropriate case”) (paras. 99-100, 105, 117, 119).  Moreover, given the UKSC’s decision in Unwired Planet, recognizing the English courts’ jurisdiction to determine global FRAND royalties even in the absence of the consent of both parties, there was nothing improper about Samsung’s resort to the English courts to make a global FRAND determination here (para. 120).  All of this leads the court to conclude as follows:

127. In my judgment, a willing licensor in the position of ZTE would have engaged with this action and proceeded as speedily as possible to the FRAND trial, in the absence of earlier agreement between the parties. In my view, a willing licensor would not commence a wave of injunctive proceedings, whatever the aim of the pressure which those proceedings would exert on the SEP licensee. The wave of injunctive proceedings commenced by ZTE were completely unnecessary since Samsung were and are actively seeking fresh global FRAND  cross-licence terms, to replace the previous global cross-licensing terms which the parties abided by for several years. There is no suggestion that Samsung were operating other than as a willing licensee (and as a willing licensor).

 

128. I acknowledge that a SEP licensor who seeks to persuade what they perceive to be an unwilling licensee to take a licence on FRAND terms will necessarily seek injunctive relief as the ultimate incentive to force the licensee into accepting the FRAND terms determined (in this instance) by the Court. In the UK, a so-called FRAND injunction presents the licensee with that choice. There is, however, a clear difference between seeking final injunctive relief in the FRAND proceedings on the one hand and seeking interim injunctive relief in many jurisdictions to try to force the other party off various markets. In FRAND proceedings, the licensor’s ultimate remedy is money and the risk of irreparable damage is rare or non-existent where substantial companies are involved.

 

129. Of course, from ZTE’s standpoint, the wave of injunctive proceedings was necessary to fulfil a principal aim of ZTE: to force Samsung into accepting a global FRAND determination in Chongqing.

 

130. Overall, and notwithstanding the manoeuvring by ZTE to narrow the gap between the two sides, the conclusion in my judgment is inescapable. ZTE have acted in bad faith with their wave of unnecessary injunctive proceedings, and by using the continuing threat imposed by them to seek to sideline or displace the jurisdiction of this Court and in seeking to secure their preference for a determination in Chongqing.

The court’s statement that, in FRAND cases, “the licensor’s ultimate remedy is money and the risk of irreparable damage is rare or non-existent where substantial companies are involved,” is of course consistent with the views expressed in other English decisions, particularly those authored by Lord Justice Arnold, and is quite different from the views expressed by the German and UPC judges (see, e.g., here). 

Second, the court concludes that the requested declaration would serve a useful purpose because it may “force ZTE to reconsider its position”:   “Faced with a decision by this Court that ZTE are in breach of their obligation of good faith and a formal declaration that a willing licensor would enter into the interim licence proposed by Samsung, would ZTE really persist in conduct that the Court has unequivocally and publicly condemned? I not only hope that ZTE will see the error of their ways but consider there is a prospect of them doing so” (paras. 135-36).  More specifically, in view of the declaration “a number of possibilities arise, including the following: i) First, both actions will proceed to trial, yielding two global FRAND determinations. From an academic and practical perspective, it would be interesting to have the opportunity to compare those outcomes even if they are unlikely to match due to the fact that each court is likely to hear different evidence. ii) Second, the parties agree that only one of these actions should proceed. If the parties manage to agree that, I suspect they would have moved closer to agreeing FRAND terms. iii) Third, the parties agree FRAND terms” (para. 139).

 Third, the court concludes that the declaration would not undermine comity, writing that “[i]f the declaration does induce ZTE to reconsider their position and grant Samsung an interim licence on the terms Samsung seek, that would promote comity because it would relieve the courts and tribunals of Brazil, Germany, the UPC and Hangzhou of a great deal of burdensome and wasteful litigation commenced by ZTE, but also the retaliatory litigation in those jurisdictions plus the USA commenced by Samsung” (para. 152).  To be sure, “the various offers made by ZTE would, if accepted, also relieve the same courts of the same amount of burdensome and wasteful litigation”; but in the court’s view “there is no basis . . . for criticizing Samsung for not accepting ZTE’s terms” given that the English court has jurisdiction over the matter, whereas “there is a basis for criticizing ZTE’s conduct in trying, through their interim licence terms, backed by their wave of litigation, to either derail or displace this action. ZTE’s terms interfere with the jurisdiction of this Court which they have accepted . . . . In practical terms, ZTE’s terms are designed to render this action pointless, so that Samsung effectively has to abandon it, unless they can bear the prospect of the costs of two FRAND determinations” (paras. 155-57).  The court acknowledges “that one of the unintended consequences of this judgment is that it enhances the significance of the Court first seised of a claim to determine FRAND terms, with the consequences mentioned by Arnold LJ in Nokia CA at [16] and particularly the first”—that is, the “rush by each party to the court to establish jurisdiction in a forum which is perceived to be favourable to that party’s position”—but states that “[t]here is nothing I can do about that. It is a further reminder that ETSI and other Standard Setting Organisations need to focus attention on incorporating some dispute resolution procedure(s) into their terms” (para. 161).

 I’ll be giving this case a good deal of thought over the next week, and may speak about it at the upcoming IP Day Conference at Boston University a week from today.  For now, I’ll just note a few initial thoughts.  First, on one view this case might seem similar to Microsoft v. Motorola (in which Judge Robart issued an ASI) and Panasonic v. Xiaomi (in which Lord Justice Arnold concluded that an interim license was appropriate), in that the SEP owner can be viewed as using litigation in another forum to derail proceedings that are properly before the forum issuing the requested relief.  (See, e.g., para. 159:  “If ZTE were right in their opposition to this application and the position they have adopted, it would add a powerful weapon to the SEP licensor’s armoury, in this sense. Any action for FRAND terms commenced by an implementer or net payer under a cross-licence, could be derailed in short order by the SEP licensor offering an interim licence on condition that the other party must accept the SEP licensor’s choice of forum, the offer being backed with injunctive relief in other jurisdictions, most likely targeted to cause the maximum damage to the SEP licensee’s business.”)  On the other hand, although ZTE is not challenging the English court’s jurisdiction, it hasn’t committed to agreeing to whatever the court’s global FRAND determination happens to be, which might distinguish this case from Microsoft and Panasonic.  Second, as the court acknowledges, the EWHC’s conclusion that ZTE has acted in bad faith is not binding on any of the non-U.K. courts and does not preclude those courts from proceeding as they see fit—though it may have consequences in the U.K. litigation, if it leads to the conclusion that ZTE is an “unwilling” licensor/licensee (see paras. 5(iii), 28-29).  Third, however, if ZTE doesn’t back down and the Chongqing court reaches a global FRAND determination first, what then?  If Samsung were to accede to the Chinese court’s terms, that would seem to be the end of the matter, I would think, and perhaps that is what ZTE is hoping for—though whether the Chongqing litigation is likely to terminate first is unclear (see paras. 35, 47), and the decision surely shifts some bargaining leverage to Samsung.  Fourth, as noted above, the decision would seem to encourage forum shopping by exacerbating the race-to-the-courthouse phenomenon—though perhaps only marginally so, since even if the decision had come out the other way I should think that both net licensors and net licensees would have a substantial incentive to strike first in their favored forums.  Fifth, is it possible that there would be less strategic maneuvering in cases like the present one if the English courts hadn’t first embraced global FRAND determinations in Unwired Planet–or would the Chinese courts have adopted that practice eventually anyway, and in so doing encouraged the U.K. to do the same?  I suppose we will never know—though even without courts making global FRAND determinations, SEP owners would surely use the prospect of injunctive relief in jurisdictions such as Germany, the UPC, and Brazil to nudge licensees into global settlements on licensor-friendly terms, forum shopping being one of those things that everyone condemns and that every advocate nevertheless does to serve their clients’ interests.  (In the words of La Rochefoucauld, “l'hypocrisie est un hommage que le vice rend à la vertu.”)  Sixth—although I think it is unlikely things will actually get this far—perhaps this will be the first case in which two different courts each establish global FRAND terms for the very same portfolios.  As Mr. Justice Mellor notes, if that came to pass it would “be interesting to compare the FRAND ranges or rate determined by each Court and the reasoning which led to each result”—although “because the evidence heard and accepted by the English Court may well be different to that heard and accepted by the Chongqing Court, the two Courts might reach differing conclusions, but one would hope their FRAND ranges would overlap to a significant extent” (paras. 28(iv), 91).  One would, indeed, hope so.       

Wednesday, June 18, 2025

Quintuple Damages in South Korea

As readers may be aware, China’s IP laws now authorize up to quintuple damages for the intentional or malicious infringement of IP rights that causes serious consequences.  I was not aware until just recently, however, that South Korea enacted similar legislation last year, applicable to patents (and, by extension, to utility models and plant variety rights) and to trade secrets.  The relevant provision of the patent act is section 128(8), and the current text (in Korean) can be found at https://wipolex-resources-eu-central-1-358922420655.s3.amazonaws.com/edocs/lexdocs/laws/ko/kr/kr332ko_1.pdf.  For further discussion, there are several English-language discussions by Korean IP practitioners, including here, here, and here.  Enhanced damages remain out of bounds in Japan, however, while to my knowledge Taiwan so far has stuck with at most treble damages enhancements for certain IP rights, including patents.  

In other (albeit somewhat related) news, I am pleased to note that I have now turned in the manuscripts of my two pending book projects, Wrongful Patent Assertion:  A Comparative Law and Economics Analysis, and Remedies in Intellectual Property Law (the former to OUP, the latter to Elgar).  I now plan to take a work and blogging break for the next two weeks, with the blog resuming on or about July 7.