Both the IAM Blog and FOSS Patents are reporting this morning on an opinion entered by Judge William Orrick (N.D. Cal.) preliminarily enjoining Huawei from enforcing against Samsung the injunction entered by the Intermediate People's Court in Shenzhen, China, in January. Here is a copy of Judge Orrick's opinion.
As readers of this blog are aware, in January the Chinese court issued an injunction against Samsung's infringement of two FRAND-committed SEPs owned by Huawei; the court found that Samsung had not negotiated in good faith, and that Huawei had. (See previous posts here and here.) Litigation between the parties was already pending in the U.S., however, involving multiple patents on both sides. (Huawei filed the U.S. action on May 24, 2016, and the Chinese action the next day; Samsung counterclaimed in the U.S. action and has asserted its own patents against Huawei in China, where unlike in the U.S. each patent gets its own separate lawsuit.) On February 1, 2018, Samsung moved to enjoin Huawei from enforcing the Chinese injunction, and last Friday Judge Orrick granted the motion. Here are some highlights from the opinion:
1. On the standard for granting an antisuit injunction:
“A federal district court with jurisdiction over the parties has the power to enjoin them from proceeding with an action in the courts of a foreign country, although the power should be ‘used sparingly.’” Seattle Totems Hockey Club, Inc. v. Nat'l Hockey League, 652 F.2d 852, 855 (9th Cir. 1981). “Such injunctions allow the court to restrain a party subject to its jurisdiction from proceeding in a foreign court in circumstances that are unjust.” E. & J. Gallo Winery v. Andina Licores S.A., 446 F.3d 984, 989 (9th Cir. 2006)(“Gallo”). The Ninth Circuit employs “a three-part inquiry for assessing the propriety of such an injunction.” Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 881 (9th Cir. 2012)(“Microsoft II”); see also Gallo, 446 F.3d at 990 (establishing framework for determining whether to issue anti-suit injunction).
First, we determine whether or not the parties and the issues are the same in both the domestic and foreign actions, and whether or not the first action is dispositive of the action to be enjoined. Second, we determine whether at least one of the so-called Unterweser factors applies. Finally, we assess whether the injunction’s impact on comity is tolerable (p.6).
Notably, the moving party doesn't have to prove the four Winter factors that are usually required for the entry of a preliminary injunction, including likelihood of success on the merits (pp. 7-8).
2. The court concludes that the parties and issues are functionally the same, which on its face seems correct (pp. 10-15).
3. The court also concludes that "domestic policy and other equitable considerations" favor Samsung, and I'm less sanguine about this:
Samsung argues that allowing Huawei to enforce the Shenzhen Court’s injunction would frustrate specific domestic policies against injunctive relief on SEPs and general public policies against anticompetitive conduct and breaches of contract. Mot. at 18. The bulk of precedent supports its position. See, e.g., Microsoft II, 696 F.3d at 884 (“Implicit in such a sweeping promise [made by Motorola to standards-setting organization] is, at least arguably, a guarantee that the patent-holder will not take steps to keep would-be users from using the patented material, such as seeking an injunction, but will instead proffer licenses consistent with the commitment made.”); id. at 885 (“[I]njunctive relief against infringement is arguably a remedy inconsistent with th[at] licensing commitment.”); Realtek Semiconductor Corp. v. LSI Corp., Case No. C–12–03451–RMW, 946 F. Supp. 2d 998, 1006–07 (N.D. Cal. 2013)(“In promising to license on RAND terms, defendants here admit that monetary damages, namely a RAND royalty, would be adequate compensation for any injury it has suffered as a result of Realtek’s allegedly infringing conduct.”); Apple, Inc. v. Motorola Mobility, Inc., No. 11-CV-178-BBC, 2012 WL 5416941, at *15 (W.D. Wis. Oct. 29, 2012)(“ I agree with Apple that from a policy and economic standpoint, it makes sense that in most situations owners of declared-essential patents that have made licensing commitments to standards-setting organizations should be precluded from obtaining an injunction or exclusionary order that would bar a company from practicing the patents.”)
But Huawei insists that there is no “per se rule that injunctions are unavailable for SEPs[.]” Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1331 (Fed. Cir. 2014), overruled on other grounds by Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015). It highlights precedent and policy that suggest “an injunction may be justified where an infringer unilaterally refuses a FRAND royalty or unreasonably delays negotiations to the same effect.” Id. at 1332 (citing U.S. Dep’t of Justice and U.S. Patent and Trademark Office, Policy Statement on Remedies for Standard–Essential Patents Subject to Voluntary F/RAND Commitments, at 7–8 (Jan. 8, 2013));see also Makan Delrahim, Asst. Attorney General, Antitrust Division, U.S. Dept. of Justice, Remarks as Prepared for Delivery at USC Gould School of Law – Application of Competition Policy to Technology and IP Licensing: Taking It to the Limit: Respecting Innovation Incentives in the Application of Antitrust Law (Nov. 10, 2017), available at https://www.justice.gov/opa/speech/file/1010746/download (“A patent holder cannot violate the antitrust laws by properly exercising the rights patents confer, such as seeking an injunction or refusing to license such a patent.”)(Greenblatt Decl. ¶ 5, id., Ex. 4, Dkt. No. 240-8).
That may be true, but the policy that is undermined is this court’s ability to determine the propriety of injunctive relief in the first instance. See, e.g., Zynga, Inc. v. Vostu USA, Inc., No. 11-CV-02959-EJD, 2011 WL 3516164, at *3 (N.D. Cal. Aug. 11, 2011)(“But one clear policy that all federal courts recognize—even those which have been loath to interfere with foreign proceedings—is the need to protect the court’s own jurisdiction.”). There is a risk of inconsistent judgments if I were to find that Huawei is not entitled to seek injunctive relief for its SEPs. See Microsoft I, 871 F. Supp. 2d at 1100 (“Courts have found that court policies against avoiding inconsistent judgments, forum shopping and engaging in duplicative and vexatious litigation sufficient to satisfy this step.”). In addition, in the absence of an antisuit injunction, Samsung faces the risk of significant harm, not just in China, but with impacts percolating around the world. The Chinese injunctions would likely force it to accept Huawei’s licensing terms, before any court has an opportunity to adjudicate the parties’ breach of contract claims.18 Under these circumstances, the Shenzhen Order “interfere[s] with ‘equitable considerations’ by compromising the court’s ability to reach a just result in the case before it free of external pressure on [Samsung] to enter into a ‘holdup’ settlement before the litigation is complete.” Microsoft II, 696 F.3d at 886. As in Microsoft, the Chinese actions “have frustrated this court’s ability to adjudicate issues properly before it.” Microsoft I, 871 F. Supp. at 1100. The integrity of this action, therefore, will be lessened without an anti-suit injunction. See id. (pp. 16-17).
4. Finally, the court concludes that the injunction would not have an intolerable impact on comity:
Samsung points out that the Shenzhen Order provides that “Huawei can agree after the appeal that the injunction will not be enforced, and further states that the Shenzhen Court would also permit non-enforcement if the parties agree to an SEP cross-license.” Shenzhen Order at 209; Xie Decl. ¶ 7. So the relief it seeks would have no impact on the Chinese courts; rather, it asks me to restrain Huawei from enforcing any injunction order until I have the opportunity to determine the propriety of injunctive relief for the parties’ SEPs. It specifically notes that Huawei would remain free to seek damages for infringement of its Chinese patents while this action is pending (p.20).
I'm not sure I'm surprised by the result, but I have to say that decisions like this do seem a bit hard to square with the territorial nature of patent rights. I recently blogged about the U.S. Supreme Court's pending decision in WesternGeco (see here), and I opined that granting damages that are proximately caused by an act of domestic infringement do not intrude upon other countries' laws, even when those damages are suffered in another country. Reasonable observers may disagree with me on that, but (to me) it would seem odd to not award damages in a case like WesternGeco but to permit antisuit injunctions in a case like Huawei, where the intrusion on the ability of the foreign court to adjudicate a dispute according to its own lights seems more severe. I'll be giving more thought to this matter throughout the day, however, and may come back with some further observations.
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In other news, the U.S. Supreme Court is hearing oral argument in the aforementioned WesternGeco case this morning. I'll post the transcript when it is available later today.