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had issued a notice on September 25 “stating that the so-called ‘ASI policy’, to the extent it ever existed, had been withdrawn and had no continuing effect upon how Chinese courts evaluated requests for anti-suit injunctions in the context of SEP litigation.”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.     

EU Requests WTO Panel to Determine Legality of Global FRAND Determinations in China

February was an unusually busy month for me, and my week-long bout with COVID didn't help, so I am behind schedule in blogging about recent events of relevance to the world of patent remedies.  One of the biggest of these was the European Union’s announcement on February 12 that it would be requesting the establishment of a WTO panel to determine whether China’s practice of establishing global FRAND royalties without consent of both parties violates the TRIPS Agreement.  The request for establishment of a panel in DS632 China-Worldwide Licensing Terms for Standard-Essential Patents is available here, and the EU's brief summary of the case here.  The WTO site for the case is here.

As previously noted on this blog, in January 2025 the EU instituted consultations with China concerning the issue of global FRAND royalties.  In addition, in July 2025 the EU prevailed in its other WTO dispute with China (DS611-Enforcement of Intellectual Property Rights), concerning China’s antisuit injunction policy, when an arbitration panel (assembled in the absence, for several years now, of a functioning WTO appellate body) concluded (contrary to the initial panel decision) that that policy violated TRIPS articles 28.1 and 28.2 as read in light of article 1.1, because it “frustrate[d] the exercise of the exclusive right of a patent owner to prevent the use of the subject of its patent without its consent” and “alter[ed] the negotiating position of SEP holders in a fundamental way.”  Much the same logic is expressed in the EU’s current request, along with additional reliance on Paris Convention 4bis (which is incorporated by reference into the TRIPS Agreement).  In particular, the EU argues that the challenged measure (of setting global FRAND rates without consent of both parties) violates the following:

Article 28.1, read in conjunction with Article 1.1, first sentence, of the TRIPS Agreement, because China's measure has as its effect to restrict the ability of the owner of a non-Chinese patent to exercise the exclusive rights conferred on it by other WTO Members under Article 28.1 of the TRIPS Agreement, i.e., to prevent third parties not having the patent owner’s consent from making, using, offering for sale, selling, or importing the patented product.

 

Article 28.2, read in conjunction with Article 1.1, first sentence, of the TRIPS Agreement, because China's measure has as its effect to restrict the ability of the owner of a non-Chinese patent to meaningfully exercise its right to conclude licensing contracts, as conferred in the territory of other WTO Members under Article 28.2 of the TRIPS Agreement, by freely negotiating and concluding licensing contracts for the non-Chinese patents.

 

Article 4bis of the Paris Convention (1967), as incorporated into the TRIPS Agreement by virtue of Article 2.1 of the TRIPS Agreement, because China’s measure undermines the principle of territoriality and restricts the possibility for the parties subject to a decision rendered in China to start or continue proceedings before the courts of the WTO Member that granted the non-Chinese patents, and thus for the courts of that WTO Member to adjudicate actions relating to those patents in their respective jurisdictions.

Two obvious points to note.  One is that, although the EU is challenging China’s policy only, it would seem that if the EU’s position turns out to be sound, the U.K.’s policy of establishing global FRAND rates without consent of both parties would be equally vulnerable.  Second, if the EU’s position on Paris Convention 4bis is sound—and there is language in DS611 that is consistent with that position, as I noted here—wouldn’t that place the CJEU’s decision in BSH v. Electrolux in jeopardy as well, to the extent that decision appears to contemplate that courts in EU member states may adjudicate patent infirngement claims arising under non-EU member state law (as discussed, e.g., here and here?)   

Gervais on Territoriality and Global FRAND Rate-Setting

Daniel Gervais, one of the world’s leading experts on the TRIPS Agreement, has published a very interesting article titled The Principle of Territoriality in International Intellectual Property Law and Its Implications for Global FRAND Rate-Setting, GRUR Int. (advance access pdf available here).  Here is the abstract:

The principle of territoriality under which intellectual property (IP) rights exist and are enforced only within national borders sits uneasily alongside the global nature of standard-essential patent (SEP) licensing disputes. In recent years, courts in Brazil, China, Colombia, Germany, India, the United Kingdom, and now the Unified Patent Court have asserted authority, directly or indirectly, to determine worldwide fair, reasonable, and non-discriminatory (FRAND) licensing terms, often without both parties’ consent. These practices, ranging from injunction-driven leverage to comprehensive judicial rate-setting, raise difficult questions about jurisdiction, comity, competition norms, and the coherence of international IP law.

 

This article provides a systematic and comparative analysis of the principle of territoriality in international IP law and its tension with non-consensual global FRAND determinations. It traces the origins and enduring role of territoriality in treaties such as the Paris Convention and TRIPS Agreement, examines its implications for jurisdiction and choice of law, and explains why territoriality remains a cornerstone of global IP governance. It then turns to the distinctive case of SEPs, highlighting the role of standard-setting organizations and the unique licensing challenges they generate. Against this backdrop, the article maps national approaches across key jurisdictions, identifying functional categories (adjudicators, regulators, and leverage providers) and analyzing how their practices interact in transnational disputes.

 

Drawing on recent case law, WTO findings, and comparative treatment of other IP rights, the article argues that non-consensual global FRAND rate-setting undermines the territorial foundation of international IP law and risks destabilizing global markets. At the same time, it acknowledges arguments for efficiency and uniformity, and considers how these objectives might be pursued within a framework that respects sovereignty and due process. The article concludes by proposing both short-term and longer-term solutions, ranging from national court strategies and WTO enforcement to a possible role for WIPO, the US Congress, and the EU, designed to reconcile innovation incentives, market access, and the legitimacy of international dispute resolution.

I may have more comments to follow, but two things leap out to me upon first reading.  One is Professor Gervais’ argument that even the granting of purely domestic injunctions in FRAND cases, as in Germany, effectively albeit indirectly erodes the territoriality principle by “plac[ing] enormous pressure on the implementer to capitulate to the SEP holder’s terms” (p.13).  It might seem to follow from his analysis, then, that to uphold the territoriality principle nations would have to temper their enthusiasm for granting injunctions in at least some cases.  This may be right, though it also may seem a bit paradoxical that upholding the territorial principle under international law, as Professor Gervais understands it, would require nations to temper the use of a remedy (injunctions with domestic effect only, as a legal if not practical matter) that domestic law otherwise would permit in a given case.  (Again, that may be right—the principle seems logically appealing—but I wonder what the limiting principle would be?)  The other thing that caught my attention was Professor Gervais’ embrace of the view that, absent consent by both parties, only domestic courts can adjudicate questions of infringement and validity under domestic patent law.  This is, as previously noted here, the issue at the heart of the pending BMW v. Onesta dispute, in view of the CJEU’s 2025 decision in BSH v. Electrolux (which seems to me to point, whether rightly or not, in the opposite direction).   (Note that the Federal Circuit has temporarily stayed Judge Albright's antisuit injunction from last week, and we are still awaiting Judge Albright's written decision in that case.)

Recent Articles on Damages in China

Two recent articles in the Queen Mary Journal of Intellectual Property may be of interest to readers who follow developments in Chinese patent/SEP litigation.

1. Zhang Guangliang and Geng Bang have published An Active Exploration of Global Licensing Rate Adjudication Methods for Standard Essential Patents:  The Chinese OPPO v. Nokia Case, 15 Queen Mary J. Intell. Prop. 238 (2025).  Here is the abstract:

The decision rendered by the Chongqing First Intermediate People’s Court in OPPO v Nokia represents a landmark moment in the adjudication of global licensing rates for SEPs within the Chinese judicial system. This ruling not only expedited a resolution between the parties, who had been entangled in over 100 global SEP litigations for two and a half years, but also made significant advancements in the methodologies employed for determining global SEP licensing rates. The case achieved three pivotal breakthroughs in the context of 5G SEPs across global jurisdictions: it established the first ruling on the cumulative industry rate for 5G standards, determined the inaugural generational technical value ratio for multimode devices spanning 2G-5G and rendered the first adjudication of a global licensing rate for 5G multimode devices. This case has substantially enriched the frameworks for adjudicating global fair, reasonable and non-discriminatory (FRAND) licensing rates and has further propelled the evolution of global adjudication rules governing FRAND licensing for SEPs.

2. Renjun Bian has published an article titled Explaining the ‘Low and Unexplainable’ Patent Damages in China:  An Empirical Analysis of 992 Judicial Opinions, 14 Queen Mary J. Intell. Prop. K. 405 (2024).  Here is the abstract:

Patent damages in China are commonly criticized as low and unexplainable, which raises concerns over the overall credibility of China’s patent system. This article describes and reports the results of a large-scale empirical analysis of 992 invention patent infringement lawsuits decided by Chinese courts between 2014 and 2018 with damages awarded. The results show that whether patent damages in China are low depends on the selection of standards. If compared with damages granted by courts in the United States or the expectations of patent holders, patent damages in China are undoubtedly low. However, if considering the patent holder’s actual losses – a more rational standard – the allegation of low patent damages does not stand. In addition, around 64.1% of the variations in patent damages in China can be explained by pre-selected ex ante factors, among which proxies for patent value and scale of infringement play an important role. These findings demonstrate that patent damages in China are not as low and unexplainable as commonly believed. Instead, the rather ‘low’ damages compared to their counterparts in the United States reflect the main body of patent infringement lawsuits between small entities over technology improvements on small widgets and goods in China. 

3. Also of interest, in regard to China and SEPs, is an essay by Michael Franzinger in today’s Law360, titled How WTO’s Anti-Suit Injunction Ruling Affects IP Stakeholders.  For my previous post on the recent ruling by a WTO arbitration panel, finding in favor of the E.U. in its case against China, see here.

Thoughts on the WTO Arbitration Panel’s Award in China-Enforcement of Intellectual Property Rights

I have now had a chance to read the arbitration award which, as I noted yesterday, reverses the initial decision of the WTO panel and finds China's antisuit injunction (ASI) policy to be in violation of the TRIPS Agreement.  In some respects, the award (in my view) raises more questions than it resolves, as discussed below--though readers should note that what I have written here is a matter of first impression concerning a fairly densely-written document, and that I may revise or refine some of these impressions as I continue to give these matters more thought.  

1. My first question concerns the precedential value of the award.  Obviously it binds the parties (here, the E.U. and China), but aside from that WTO decisions generally do not create hard precedents as under common-law adjudication systems.  Elsewhere the WTO itself explains the effect of panel and appellate body reports as follows:

A dispute relates to a specific matter and takes place between two or more specific Members of the (WTO). The report of a panel or the Appellate Body also relates to that specific matter in the dispute between these Members. Even if adopted, the reports of panels and the Appellate Body are not binding precedents for other disputes between the same parties on other matters or different parties on the same matter, even though the same questions of WTO law might arise. As in other areas of international law, there is no rule of stare decisis in WTO dispute settlement according to which previous rulings bind panels and the Appellate Body in subsequent cases. This means that a panel is not obliged to follow previous Appellate Body reports even if they have developed a certain interpretation of exactly the provisions which are now at issue before the panel. Nor is the Appellate Body obliged to maintain the legal interpretations it has developed in past cases. The Appellate Body has confirmed that conclusions and recommendations in panel reports adopted under GATT 1947 bound the parties to the particular dispute, but that subsequent panels were not legally bound by the details and reasoning of a previous panel report.

If the reasoning developed in the previous report in support of the interpretation given to a WTO rule is persuasive from the perspective of the panel or the Appellate Body in the subsequent case, it is very likely that the panel or the Appellate Body will repeat and follow it. . . .

The wrinkle here is that this is not a report of a panel or appellate body, but rather of an arbitration panel that was called into existence as a result of there being no functioning appellate body for over five years now.  But surely an arbitration award can’t be any more binding than an appellate body report, and perhaps it is even less of a persuasive (soft) precedent than an appellate body report.  (If any readers with knowledge of arbitration and/or WTO procedure could provide some insight on this issue, I would appreciate it.)

2. Moving on to the contents of the award, the arbitrators agree with the initial panel that the E.U. established the existence of China’s ASI policy “as a rule or norm of general and prospective application” (para. 4.42), constituting an “unwritten measure” going beyond “written Chinese laws and judicial decisions” (para. 4.22).  That policy, as found by the initial panel and affirmed by the arbitration panel, is described as follows (paras. 4.24, 4.29, 4.100):

. . . Regarding the precise content of the measure, the Panel based its assessment on the three broad categories of evidence that the European Union argued demonstrated the precise content and existence of the ASI policy: (i) the temporal overlaps and the similarities of the five ASI decisions; (ii) the relevance of the designation of some of these decisions as typical cases, or other types of designation, and their promotion by the SPC and regional government bodies; and (iii) the alleged calls from the SPC and the NPC Standing Committee to continue using and improving the ASI policy. . . .

 

While indeed the essential content of the ASI policy was materialized in the judicial decisions, the European Union did not claim that these judicial decisions constituted the policy themselves. Rather, as the Panel concluded, these decisions were "an expression of the ASI policy, as a principle or course of action, whereby Chinese courts are empowered to issue ASIs in the context of SEP litigation." As part of the appraisal of the precise content, the Panel assessed the policy objectives of the Chinese government and found that the judicial decisions where ASIs had been issued were in furtherance of broader policy considerations expressed by Chinese authorities. The policy objectives refer to: strengthening the protection of independent IP rights; the national innovation-driven development strategy and intellectual property strategy which included "the construction of an 'anti-suit injunction' system with Chinese characteristics, and the maintenance of judicial sovereignty over foreign-related intellectual property rights"; the protection of legitimate rights and interests of Chinese and foreign property right owners on an equal footing; extraterritorial application of Chinese laws to protect the security and legitimate rights and interests of Chinese citizens and enterprises in foreign countries; and the strengthening of IP-related judicial cooperation with other countries. The Panel found that the policy objectives "were to be implemented by Chinese courts at all levels. . . .

 

. . . We note that the objectives of the ASI policy identified by the Panel (and set out in para. 4.98 above) include considerations relating to parallel litigation and the protection of the legitimate rights and interests of Chinese and foreign property right owners. Further to the objectives of the Chinese authorities, the Panel identified at least five factors¹⁹⁶ that typically form the grounds on which ASIs are issued by Chinese courts. . . .

 

¹⁹⁶ Panel Report, para. 7.98. These are: (i) "the impact on Chinese courts of the application for the enforcement of judgments of extraterritorial courts"; (ii) "the necessity of the ASI (i.e. the harm caused to the applicant if the ASI were not granted)"; (iii) "the balance of interests (i.e. whether the damage caused to the applicants by not taking act preservation measures exceeded that caused to the respondent by taking act preservation measures)"; (iv) "the effect of granting the ASI on the public interest"; and (v) "the compatibility of the ASI with the principle of international comity or a similar consideration"

3. Perhaps the most important conclusion the arbitrators reach concerns TRIPS article 1.1, first sentence, which states that “Members shall give effect to the provisions of this Agreement.”  The panel concludes that, read in context, this sentence means that each WTO “member is obliged to make operative the Agreement in its territory” (para. 4.70)—and that, as a corollary, “[a]ctions that frustrate the ability of other WTO Members to protect and enforce IP rights in their own territories and which thereby upset the balance of rights and obligations embodied in the TRIPS Agreement would not be consistent with the requirement to ‘give effect’ to the provisions of the TRIPS Agreement” (para. 4.71).  Moreover, the panel states that

            In our view, it is clear from the context of the first sentence of Article 1.1 that the TRIPS Agreement seeks to establish "national systems" for the effective and adequate protection of IP in each and every Member, and that these "national systems" may interact where necessary to address trade-related aspects of IP rights. The raison d'être of the TRIPS Agreement is to have minimum standards for the protection and enforcement of IP rights given effect through national systems in the territory of each WTO Member (para. 4.61).

It therefore follows, in the arbitration panel’s view, that the initial panel’s  

conclusion that Article 1.1, first sentence does not address the implementation of the TRIPS Agreement by other WTO Members fails to recognize a key corollary of each Member's duty to give effect to the TRIPS Agreement within its own domestic legal system. As noted above, the raison d'être of the TRIPS Agreement is to have minimum standards for the protection and enforcement of IP rights given effect through national systems in the territory of each and every WTO Member. The provisions of the TRIPS Agreement would be rendered inoperative if Members were allowed to frustrate the implementation by other Members of their obligations under the TRIPS Agreement.

 

. . . Thus, in our view, there is only one obligation in the first sentence of Article 1.1, namely, the obligation to "give effect to the provisions of th[e] Agreement" in its territory, where the corollary of the obligation is to do so without frustrating the functioning of the systems of protection and enforcement of IP rights implemented by other Members in their respective territories. We therefore find that the Panel did not properly interpret the obligation in the first sentence of Article 1.1 (paras. 4.73, 4.74).

4.  Next, the arbitrators consider whether China’s policy violates TRIPS articles 28.1 and 28.2 in light of article 1.1, first sentence.  Articles 28.1 and 28.2 read as follows:

1.  A patent shall confer on its owner the following exclusive rights:

 

(a)  where the subject matter of a patent is a product, to prevent third parties not having the owner’s consent from the acts of: making, using, offering for sale, selling, or importing (6) for these purposes that product;

  

(b)  where the subject matter of a patent is a process, to prevent third parties not having the owner’s consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.

 

2.  Patent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts.

To cut to the chase, the arbitration panel concludes, first, that “Article 28.1, read in conjunction with Article 1.1, first sentence, requires that Members not frustrate the patent owner's ability to exercise the exclusive rights conferred on it by another WTO Member under that provision, i.e. to prevent third parties not having the patent owner's consent from making, using, offering for sale, selling, or importing the patented product” (art. 4.86); and that China’s ASI policy violates this provision because it “establishes a course of action that frustrates the exercise of the exclusive right of a patent owner to prevent the use of the subject of its patent without its consent, as conferred on it by another WTO Member under Article 28.1 of the TRIPS Agreement” (para. 4.107).  The analysis of article 28.2 is a bit more complicated.  Here, the arbitrators note the initial panel’s factual findings regarding SEPs, stating that:

. . . the Panel observed that, while claims concerning the infringement of the subject matter of a patent must be brought before the national courts of the territory that has granted the patent right, the same is not true for contractual claims relating to licence fees and that courts in some jurisdictions will consider contractual claims concerning worldwide licences. Pursuant to conditions set out by the SSO, the SEP holder commits to provide an irrevocable undertaking or a licensing declaration to the relevant SSO that it will license or allow access to the subject matter of the patent-protected product or process to implementers of the standard on FRAND terms, which is, as we have explained, known as a "FRAND undertaking". . . . In effect, the SEP holders have waived their right not to conclude licensing contracts, but that waiver is conditional on the SEP implementer paying royalties on FRAND terms. . . .

 

Accordingly, in the particular context of SEPs, a SEP holder's "right … to conclude licensing contracts" is conditional. The SEP holder has effectively waived its right not to conclude licensing contracts, conditioned on obtaining FRAND rates for such contracts. This necessarily requires users to enter into good faith negotiations as to what those FRAND rates will be. As the Panel found, it is possible that those good faith negotiations between SEP holders and SEP implementers may not yield an outcome, in which case a court may be called upon to intervene. However, the Panel found that this occurs only in instances where "parties do not reach an agreement". Hence, an opportunity for good faith negotiations on FRAND terms is necessary before any such court intervention can be warranted (paras. 4.137, 4.145).

Based on these premises, the panel states that the question whether an ASI issued under China’s ASI policy could frustrate a SEP holder’s right under article 28.2 “is contingent on whether the ASI policy frustrates that central condition on which the SEP holder has pre-committed to enter into licencing contracts. It follows that, in the particular context of SEPs, the underlying reason for which an ASI is issued under the ASI policy is key to whether it frustrates the patent owner's ‘right … to conclude licensing contracts’" (para. 1.146).  “It is clear, therefore, that the question of whether the ASI policy is inconsistent with SEP holders' "right … to conclude licensing contracts" turns on whether the policy disrupts the negotiating process between SEP holders and SEP implementers” (para. 4.155), and in the arbitrators’ view:

The option created by the ASI policy for SEP implementers to obtain ASIs alters the process of negotiation in a fundamental way. As described in section 4.6, an ASI prohibits SEP holders from pursuing or enforcing the legal proceedings outside China that are specified in the given ASI, particularly injunctive relief for infringement by SEP implementers. It therefore abates the very "risk" that the Panel identified as the main incentive for SEP implementers to seek to obtain a licence and start paying royalties for use of a SEP. Meanwhile, SEP holders have made an irrevocable commitment to provide licences on FRAND terms or risk facing litigation for breach of contract or other relief. Their ability to withdraw from negotiations is accordingly constrained. In our view, therefore, the grounds on which an ASI can be obtained by a SEP implementer are pivotal to understanding whether the ASI policy frustrates SEP holders' "right … to conclude licensing contracts" which they have, in effect, conditionally waived through the irrevocable FRAND undertaking. If the ASI policy undermines the process of negotiations to arrive at FRAND terms, this would mean that SEP holders would be entering into licensing contracts without fulfilment of the central condition on which their exercise of that right was premised. . . .

 

Accordingly, we consider that the availability of ASIs to SEP implementers under the ASI policy alters the negotiating position of SEP holders in a fundamental way. It removes the main incentive for SEP implementers to negotiate with a SEP holder a licensing contract on FRAND terms (paras. 4.156, 4.158).

For these reasons, China’s policy violates article 28.2 read in light of article 1.1 first sentence.

5.  The rest of the award of pretty anticlimactic.  First, the arbitrators conclude that the ASI policy does not violates TRIPS article 44.1 (authorizing members states’ judiciaries to enter injunctions) read in conjunction with article 1.1, because the in personam nature of an ASI does not affect the authority of the judiciary of another member state, even though it “may restrict SEP holders from requesting ‘judicial authorities’ in other Members to exercise their ‘authority’ in this regard” (para. 4.174).  Second, the ASI policy is not an “enforcement procedure” for purposes of article 41.1, and thus there is no violation of that provision (paras. 4.177 to 4.197).  Third, given the arbitrators’ conclusion that the ASI policy violates articles 1.1 and 28, there is no need to resolve the E.U.’s “as applied” challenged (that is, to determine whether the five individual ASI decisions violate TRIPS).  Fourth, the initial panel was correct in concluding that China had violated TRIPS article 63.1 by not making publicly available the Xiaomi v. InterDigital ASI decision, which was a judicial decision of “general application” (para. 4.234).

6.  Assuming that the award is persuasive precedent going forward, what are its potential implications?  I think the following are worth considering:

             a. The E.U. has another matter pending before the WTO, concerning whether China’s practices in establishing the terms of global FRAND licenses violates Paris Convention article 4bis, as incorporated under TRIPS article 2.1, as well as TRIPS articles 1, 28, and 63. See WT/DS632-1—China—Measures Concerning Patent Licensing Terms:  Request for Consultations by the European Union, Jan. 22, 2025.  On my initial reading, this arbitration award seems to take a firm stand in favor of national determinations, and of the need (as it sees it) to permit SEP owners to seek remedies in the country in which the patent(s) at issue are registered.  That understanding would seem, on its face, inconsistent with nonconsensual global FRAND determinations.

             b. Although the arbitration award does not necessarily condemn all use of ASIs, it might be difficult to justify any ASI under the arbitrators’ reasoning, because the whole point of issuing an ASI in a case involving patent rights is to preclude, albeit indirectly, a court of another state from enforcing the patent owner’s rights in that state.  (That said, the arbitrators do note some of the unique features of the Chinese policy, including the very substantial penalties imposed for violations of an ASI.  See, e.g., paras. 4.103, 4.104, 4.161.  A more traditional ASI, moreover, might only prohibit a party from litigating in another state in which litigation is already pending, rather than anywhere in the world.)  But that conclusion seems a bit superficial to me.  The practice of some courts of routinely granting injunctions in SEP cases also can undermine, as a practical matter, the ability of other courts to decide SEP cases in accordance with their own national law, because it can compel the implementer to settle before the other courts have had a chance to adjudicate the claims before them.  (See, e.g., Microsoft v. Motorola.)  At least in these types of cases, ASIs in my view can be defensible.  (As a policy matter, this raises the question of whether the court issuing the ASI, or the court poised to enter an injunction that as a practical matter will bring the global litigation to an end (or to enter an AASI), is the one that is defecting from the comity norm.  For further ruminations on these sorts of issues, see my forthcoming book Wrongful Patent Assertion and its discussion of Professor Drahozal's game-theoretic analysis of ASIs.)  The award also leaves open the question (as Daniel Gervais points out) of whether SEP owners might have a legitimate interest in obtaining an ASI, where an implementer is trying to forestall a national court from making a global FRAND determination that might preempt litigation in another country (see, e.g., Conversant v. Huawei and ZTE, where Mr. Justice Carr stated that he would have entered an ASI under just such circumstances, had ZTE not amended its complaint in China).  Overall, the arbitrators’ perspective on FRAND strikes me as similar to that expressed by the German courts, insofar as they state more than once that a FRAND license is the outcome of negotiations (see, e.g., para. 4.144).  

             c.  The arbitrators also cite, with apparent approval, the initial panel’s observation that “claims concerning the infringement of the subject matter of a patent must be brought before the national courts of the territory that has granted the patent right” (para. 4.94, which then goes on to note, however, that “the same is not true for contractual claims relating to licence fees”; see also para. 4.137).  As Miquel Montañá suggests, this sort of language might seem to difficult to reconcile with the CJEU’s decision in BSH Hausgeräte v. Electrolux, which holds that in cases in which the defendant is domiciled in an E.U. member state the courts of such a state may adjudicate claims for the infringement of non-domestic patents and, in cases of non-E.U. patents, even adjudicate validity (albeit only inter partes).  (See my blog post here.)  But that might be reading too much into the WTO proceeding, where this language might be characterized as dicta.  Taking it too literally also would call into question the (I think relatively uncontroversial) position of U.S. and U.K. courts that domestic courts may adjudicate claims for the infringement of foreign copyright rights.  But, we’ll have to see what others make of these statements.

             d.  The TRIPS Agreement wasn’t designed with today’s SEP cases in mind, but as is frequently the case the law lags behind real-world developments.  This might suggest the need for some degree of flexibility in interpretation.  In this regard, while I have long expressed concern over the profligate use of ASIs and of global FRAND determinations, I wonder whether the reasoning in the award is perhaps a bit too formalistic in view of where matters stand today.

WTO Arbitration Panel Finds China's Antisuit Injunction Policy in Violation of TRIPS

On Monday, the WTO Arbitration Panel reversed the initial decision of the WTO panel, and found that China's antisuit injunction policy violated the TRIPS Agreement.  Here is the arbitration award.  Initial stories are on Law360 (by Dani Kass), Kluwer (by Miquel Montañá) and IPKat (by Daniel Gervais).  I will have more to say after I read the award more carefully.  For now, here is the conclusion:

5.1. In this Award, we have reached the following findings:

a. We uphold the Panel's findings in paragraphs 7.197, 7.205, 7.206, and 8.1 of its Report that the European Union provided sufficient evidence and argumentation to demonstrate the existence of the ASI policy as a rule or norm of general and prospective application.

b. We reverse the Panel's findings in paragraph 7.231 of its Report and find that the corollary of the obligation in Article 1.1, first sentence of the TRIPS Agreement to "give effect" to the provisions of that Agreement in a WTO Member's territory is to do so without frustrating the functioning of the systems of protection and enforcement of IP rights implemented by other Members in their respective territories.

c. We reverse the Panel's findings in paragraphs 7.240 to 7.242 and 8.2.a of its Report. In completing the legal analysis, we find that the European Union has demonstrated that the ASI policy is inconsistent with Article 28.1, read in conjunction with Article 1.1, first sentence, of the TRIPS Agreement.

d. We reverse the Panel's findings in paragraphs 7.247, 7.248, 7.250-7.252 and 8.2.b of its Report. In completing the legal analysis, we find that the European Union has demonstrated that the ASI policy is inconsistent with Article 28.2, read in conjunction with Article 1.1, first sentence, of the TRIPS Agreement.

e. We uphold, albeit for different reasons, the Panel's finding in paragraph 8.2.c of its Report that the European Union has not demonstrated that the ASI policy is inconsistent with Article 44.1, read in conjunction with Article 1.1, first sentence, of the TRIPS Agreement.

f. We uphold the Panel's findings in paragraphs 7.309 and 8.2.d of its Report that the obligation in the second sentence of Article 41.1 of the TRIPS Agreement is not applicable to the ASI policy, as the ASI policy is not an enforcement procedure as specified in Part III of that Agreement.

g. We uphold the Panel's findings in paragraphs 7.383, 7.388-7.391, 7.394.b, and 8.4.a of its Report that the decision issuing an ASI in Xiaomi v. InterDigital, read together with the reconsideration decision in the same case, is a judicial decision "of general application" within the meaning of Article 63.1 of the TRIPS Agreement.

5.2. Paragraph 9 of the Agreed Procedures provides that the findings of the Panel that have not been appealed in this Arbitration shall be deemed to form an integral part of this Award together with our own findings, and that the Award shall include recommendations where applicable.

Accordingly, we recommend that China bring into conformity with the TRIPS Agreement those measures found in this Award, and in the Panel Report as modified by this Award, to be inconsistent with this Agreement.

EU Requests WTO Consultation with China Regarding Global FRAND Royalties

I just read about this on ip fray.  Yesterday, the EU’s Permanent Representative to the WTO send a Request for Consultations to the Permanent Representation of the PRC.  (There is also a press release, here.)  The letter notes that Chinese courts have taken on “the authority to determine, without the consent of both parties, worldwide licensing conditions, and in particular royalty rates, for portfolios of standard essential patents (SEPs) which include non-Chinese SEPs,” and that “[i]n accordance with China’s law, a legally effective decision determining such conditions is binding on both parties and is enforceable in China including with respect to the non-Chinese SEPs.”  In this regard, the letter references the late 2023 decision of the Chongqing First Intermediate People’s Court in OPPO v. Nokia (previously noted on this blog here and here). 

The letter makes two principal legal claims.  The first is that the “measure at issue adversely affect[s] the protection and enforcement of intellectual property rights,” in violation of article 4bis of the Paris Convention (as incorporated into TRIPS under TRIPS article 2.1) and TRIPS articles 1(1) (first sentence), 28(1), and 28(2).  By way of reference, article 4bis of the Paris Convention, titled “Patents:  Independence of Patents Obtained for the Same Invention in Different Countries,” states in paragraph 1 that “Patents applied for in the various countries of the Union by nationals of countries of the Union shall be independent of patents obtained for the same invention in other countries, whether members of the Union or not.”  The first sentence of article 1(1) of TRIPS states that “Members shall give effect to the provisions of this Agreement. Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement.”   TRIPS article 28(1) states that “[a] patent shall confer on its owner the following exclusive rights:  (a)  where the subject matter of a patent is a product, to prevent third parties not having the owner’s consent from the acts of: making, using, offering for sale, selling, or importing . . .  for these purposes that product; (b) where the subject matter of a patent is a process, to prevent third parties not having the owner’s consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.”  Article 28(2) states that “[p]atent owners shall also have the right to assign, or transfer by succession, the patent and to conclude licensing contracts.”  The gist of this set of claims, set forth in six numbered paragraphs in the letter, is that China’s “measure” has the effect of interfering with parties’ ability to start or continue litigation, or owner’s ability to exercise their exclusive rights, in other member states.  The invocation of TRIPS articles 1(1) and 28 dovetails with some aspects of the WTO proceeding the EU initiated in 2022, which is still pending and was prompted by the flurry of antisuit injunctions Chinese courts issued in 2020.

The other claim is that China has failed to comply with its obligations under TRIPS article 63(3).  Article 63 is titled “Transparency,” and the first sentence of paragraph 1 (which paragraph is referenced in paragraph 3) states that “Laws and regulations, and final judicial decisions and administrative rulings of general application, made effective by a Member pertaining to the subject matter of this Agreement (the availability, scope, acquisition, enforcement and prevention of the abuse of intellectual property rights) shall be published, or where such publication is not practicable made publicly available, in a national language, in such a manner as to enable governments and right holders to become acquainted with them.”  Paragraph 3 then states “Each Member shall be prepared to supply, in response to a written request from another Member, information of the sort referred to in paragraph 1. A Member, having reason to believe that a specific judicial decision or administrative ruling or bilateral agreement in the area of intellectual property rights affects its rights under this Agreement, may also request in writing to be given access to or be informed in sufficient detail of such specific judicial decisions or administrative rulings or bilateral agreements.”  The letter states that the EU requested that China supply the OPPO v. Nokia decision in December 2023, but that China’s response to that request was inconsistent with article 63(3), second sentence.  The EU made analogous claims in the WTO proceeding initiated in 2022.

International trade lawyers may have a better sense that I do how this is likely to play out.  As an initial take, I'll just note a few brief observations.  First, it is interesting to consider whether the EU’s argument, if accepted, would impact the UK’s practice of setting global FRAND rates--though perhaps the UK practice can be distinguished insofar as the English courts offer the infringer a choice of either being enjoined from practicing the infringed patents in the UK, or accepting a court-determined global FRAND license; I’m not sure that the Chinese measure at issue offers a similar option (whatever its value may be) of being enjoined in China and thus not being subject to a court-determined global license.  Also, when the UK courts started setting global terms in 2017 in Unwired Planet, this was seen as being favorable to SEP owners, or at least more favorable than proceeding on a country-by-country basis, which Mr. Justice Birss (as he then was) referred to as “madness”--though in light of the last couple of UK-determined FRAND licenses in Optis v. Apple and InterDigital v. Lenovo, as well as the fall 2024 decision in Panasonic v. Xiaomi, it may seem that the UK approach is actually not such a bad deal for implementers, all things considered.  More favorable to SEP owners is the possibility of getting a relatively quick injunction from a court in Germany or the UPC, which as Olivia Rafferty points out in her ip fray post often compels a global settlement.  Second, it’s also interesting to consider the impact of a WTO ruling on the EC’s own draft SEP Regulation, which would have conciliators make nonbinding global FRAND determinations “unless otherwise specified by the parties in case both parties agree to the FRAND determination or by the party that requested the continuation of the FRAND determination,” and would permit SEP owners to agree to global royalty caps.  Finally, the press release alleges that the Chinese practice "pressures innovative European high-tech companies into lowering their rates on a worldwide basis, thus giving Chinese manufacturers cheaper access to those European technologies unfairly," and the letter states that the EU "reserves the right to raise additional measures and claims . . . regarding the above matters."