Standard Essential Patent (SEP) disputes over the determination of fair, reasonable, and non-discriminatory (FRAND) licensing rates stand at the unique intersection of intellectual property, competition law, and contract law. While the increased interoperability of goods and services from establishing industry standards could yield consumer gains, the correlated monopolistic power of SEP holders could also generate negative externalities. FRAND-licensing regimes seek to strike the balance between upholding IP rights and promoting innovation.
Applied to the SEP context, Anti-Suit Injunctions (ASIs) prevent a party from seeking a FRAND-rate determination in a foreign court when that determination is pending in the issuing court. When properly applied, ASIs play an important role in preventing the wastage of resources arising from duplicative or parallel litigation on similar or identical claims. Additionally, they prevent SEP holders from using injunctive relief obtained through malicious patent infringement lawsuits to exclude standard implementers from key markets during the pendency of FRAND/antitrust litigation. As a temporary procedural remedy, ASIs were traditionally held on tight leashes as in personam relief of last resort that restrains litigant action rather than purporting to limit the authority of foreign courts.
However, amid the backdrop of an international tug-of-war to become the forum-of-choice for FRAND-rate adjudication (instigated by the UK courts in Unwired Planet v. Huawei) ASIs have been increasingly weaponized. They have become offensive tools to oust foreign courts’ jurisdiction to make decisions on global FRAND-rate determinations by the issuing court. The intertwining of industrial policy goals in judicial decision-making encourages forum shopping and catalyzes the breakdown of international comity.
The weaponization of ASIs can be traced back to its unprincipled transplant by Chinese courts which barred foreign litigants from initiating or enforcing parallel proceedings abroad to enforce their IP rights at the cost of harsh penalties. Most prominently, the maximum penalty under Chinese Civil Procedure Law (1 million RMB per day) was imposed against Conversant in the landmark case of Conversant v. Huawei & ZTE. This was to prevent the enforcement of the German injunctions against Huawei’s German operations and its approval of FRAND-rates (which were nearly 20 times higher than previous Chinese determinations). Subject to astronomical fines and without recourse to alternative forums, ASIs have considerable bite in coercing litigants to accede to below-market determinations by Chinese courts, seemingly in favor of national champions.
The Chinese transplant has drawn academic criticism for its unjustified doctrinal deviations and internal incongruencies. For instance, its apparent disregard for vital safeguards like due notice (and therefore opportunity to participate in proceedings to contest the ASIs) taints its judicial objectivity and ironically increases the rate of noncompliance to Chinese ASIs. Additionally, severe penalties combined with a liberal attitude towards expansive worldwide ASIs (which are not limited to enjoining enforcement of specific foreign orders/proceedings but are issued against all pending and prospective foreign actions) have sparked a destabilizing Boomerang Effect vis-à-vis the normative fabric of SEP litigation.
The Boomerang Effect refers to the phenomenon where transplanted laws can reciprocally affect the source jurisdiction perhaps even more than the recipient jurisdiction, especially if transplants are unprincipled. Under a convergent culture of protectionism and self-interested adjudication, what started off as (bad) divergent legal practices quickly became points of convergence (into something worse) as commensurately drastic foreign responses to further contort ASIs into an eventual state of disrepair.
European courts have increasingly resorted to similarly aggressive preemptive ex parte anti-ASIs to counteract Chinese ASIs, often making unprincipled departures from the very equitable safeguards Chinese courts disregarded. The resulting consequence is a race-to-the-courthouse where a vicious cycle of anti-ASIs/anti-anti-ASIs are sought in retaliation.
Similarly, here in the States, the Texan court’s innovative methods in countering Chinese ASIs in Samsung v. Ericsson also fall short of finding a sustainable solution to untangle this chaos. It ordered Samsung to indemnify Ericsson of penalties incurred for breaching a pre-existent Chinese ASI (by seeking the Texan anti-ASI, which it granted). Rather than deescalate tensions, Samsung v. Ericsson represented the worst instance of the race-to-the-courthouse, with the competing injunctions eventually exceeding the tipping point to render the conflict unresolvable. As a result, the only viable option was to settle privately, signalling a total failure of the SEP litigation mechanism rendered kaput by ASIs. This gained great traction among the legal community, ringing mass alarm bells at the hopeless “catch-22” situation the litigants found themselves in. If all disputes were to reach a dead end (and if settlements are undisclosed), this stagnates the jurisprudential development of case-law towards convergent FRAND-determination standards.
Ultimately, this creates undesirable legal gridlock and desecrates the sanctity of mutual respect for legitimate court processes. The inconsistency of litigation of outcomes exacerbates the wastage of resources to shop for desirable outcomes rather than to comply with objectively/mutually accepted FRAND-terms. This represents a perversion of the common goal of both FRAND-regimes and ASIs to prevent inequality arising from jurisdictional conflicts due to forum shopping by SEP holders.
Although legislative solutions, such as the Defending American Courts Act (statutorily imposing penalties to disincentivize foreign ASIs) have been proposed, preliminarily foreclosing ASIs entirely to prevent SEP disputes from spiralling out of control is undesirable. It will be missing the broader picture to obfuscate the important role of ASIs in SEP litigation for no good reason except uncontrollable side-effects from unjustified divergence or deviations.
The preferable way forward centers on a renewed emphasis on judicial restraint and international comity coupled with soft-law mechanisms/trade-based solutions. Ideally, these would pave the way for inter-governmental consensus building of plurilateral SEP best practices and norms substantiated by binding treaties as sustainable, long-term solutions.
In our increasingly fragmented world, the law should be used as a constructive force for progress. The de-weaponization of laws to purify legislation/legal mechanisms of ulterior motives, the foregrounding of comity as the touchstone, and adherence to the rule of law, could very well be positively “transplanted” to become the new norm – but this must start somewhere. And to this end, the misuse of ASIs must stop.