China and ASIs

I don’t think I have previously this mentioned on this blog, but Professor Tim Holbrook and I have signed a contract with Oxford University Press to coedit an edited volume titled Research Handbook on Extraterritoriality and Intellectual Property Law.  I will have more to say about this project over the course of the next year or so, but for now will just note that we have assembled a list of about forty contributors, including ourselves, to address the many issues that may arise in evaluating the geographic scope of IP rights.

One group of such issues, of course, relates to standard-essential patents; among the relevant issues are whether courts can or should award global royalties, with or without consent of the parties, and whether they can or should award interim relief such as antisuit injunctions, anti-antisuit injunctions, or declarations concerning interim licenses.  In connection with antisuit injunctions, as readers are by now aware, a WTO arbitration panel last year ruled in favor of the EU's appeal from the original panel decision, in finding that China’s antisuit injunction policy violated TRIPS articles 28.1 and 28.2, read in light of article 1.1 second sentence (see my post here).  It is therefore notable that, as has been reported elsewhere, on April 1 the EU published an announcement that China had announced its withdrawal of the antisuit injunction policy at the WTO Dispute Settlement Body meeting in September.  The minutes of that meeting are available here, and the EU-China dispute is Item 2 (pages 6-9).  China expresses its agreement with the original panel opinion and its disagreement with the arbitration panel, before stating in paragraph 2.4 that the Supreme People’s Court had issued a notice on September 25 “stating that the so-called ‘ASI policy’, to the extent it ever existed, had been withdrawn and had no continuing effect upon how Chinese courts evaluated requests for anti-suit injunctions in the context of SEP litigation.”  The aforementioned EU announcement states that “[a]fter some initial technical issues were resolved, this notice is currently accessible online from outside China too” (if any readers can point me to it, I would appreciate it), but that “[g]iven the unwritten nature of China’s anti-suit injunction policy, the European Commission will continue to closely monitor the situation to ensure China’s full compliance . . .  and take further action, if necessary.”

In light of these developments, it was interesting to read an article by Yao Jianjun (former vice president of the Xi’an Intermediate People’s Court) in an issue of China Patents & Trademarks, No. 4, 2025, that recently came my way.  The article, appearing in English translation at pages 12-22, is titled Application of Anti-Suit Injunctions in SEP Disputes.  It provides an overview of Huawei v. Conversant, which was the first of five cases from 2020 in which a Chinese court (here, the SPC) granted an ASI (here, against the enforcement of an injunction granted against Huawei in Düsseldorf).  The author discusses where ASIs fit within Chinese civil procedure law, as well as the five conditions specified by the SPC for granting an ASI (“the impact of the enforcement of foreign judgments on Chinese litigation,” “the necessity of ASIs as a preservation measure,” the “balance of interests of both parties,” “the impact of ASI on the public interest,” and “international comity”) and how they played out on the facts of Huawei v. Conversant.  The author agrees with the court’s decision, though he also notes some of the limitations of ASIs, and cautions against the sequence of lawsuits being a dispositive factor (insofar as this would encourage races to the courthouse).  Apparently the article was written before the EU-China matter was completed, since the author references its existence but not its conclusion.

One thing I found interesting in the article, and which I plan to discuss in the essay I will be contributing to the edited volume I mentioned at the beginning of this post, is the author’s emphasis on the perceived need to counteract the impact of proceedings initiated in another country which, he writes, may “impair[ ] the legitimate rights and interests of the applicant,” thus requiring “a remedy . . . to the party that has suffered damage to the injunction” (pp. 14-15).   In this regard, he writes, if Conversant had applied to enforce an injunction in Germany, the result would have been that Huawei either would have exited the German market or would have settled with Conversant (at a rate, he says, that would have been 18.3 times higher than the rate determined by the Chinese first instance court); and that "such potential damage . . . may substantially harm Huawei's legitimate rights and interests" (p.18).  This framing of the issues bears some resemblance the "effects" test (as used, for example, in U.S. antitrust litigation), under which courts sometimes justify the exercise of prescriptive jurisdiction directed against extraterritorial conduct when such conduct has effects within the prescribing jurisdiction.  From an economic perspective, the application of the effects test is akin to the concept of internalizing an externality—though in this context, the twist is that the externality is caused by the foreign jurisdiction’s toleration or authorization of conduct which the domestic court would like to forbid.  Relevant to this point, a generation ago Professor Joel Trachtman wrote an intriguing paper titled Externalities and Extraterritoriality: The Law and Economics of Prescriptive Jurisdiction, in Economic Dimensions in International Law 642 (Jagdeep S. Bhandari et al. eds., 1997), in which he posits that, if we think of nations participating in a market for prescriptive jurisdiction, and of (in some cases) even having the ability to engage in some measure of Coasean bargaining, there is a range of possible options for allocating the right to prescribe.  Some allocations may be more efficient than others, under the circumstances at hand.  An unavoidable aspect of this framework, however, is determining exactly what counts or should count as a harmful externality—that is, one that causes cognizable harm, a topic that my colleague Claire Hill also has written about.  In the context of ASIs, of course, the country against which the ASI is directed (in effect though not in form, since the form of the injunction is inter partes) presumably believes that it is doing nothing wrong by entertaining a case that is lawfully before it, or by issuing an injunction against the infringement of domestic patent rights in accordance with domestic law; and indeed, if the WTO arbitration panel approach prevails, such conduct is in general privileged and does not cause cognizable harm under international law.  But one could also imagine an alternative rule under which the right to issue an ASI to prevent the perceived negative domestic effect (suffered by a domestic firm or by a domestic court) of a foreign injunction prevails over the foreign court's right to entertain a case or enter an injunction.  Determining which rule makes more sense from a policy standpoint might perhaps depend on how absolute the prohibition on ASIs is under the first approach, and how substantial the domestic effect must be under the second.  (Thinking of these issues from a slightly different angle, as I mention in a discussion of Professor Christopher Drahozal’s game theoretic approach to ASIs in my forthcoming book Wrongful Patent Assertion, in a given case reasonable minds may differ whether it is the country issuing the ASI, or the country against which the ASI is issued, that is deviating from the "comity" norm under which nations are largely left to determine their own domestic policies.)  At this stage, I'm not sure exactly where my analysis is going to lead, but this seems like an interesting problem for analysis through a law-and-econ lens; and if readers have any thoughts or suggestions, I’d be delighted to hear them.