“U.S. interests in adjudicating disputes involving U.S. patents . . . are stronger than the Chinese government’s interest to assert dominion over other countries’ patents.” – NYIPLA brief
On April 9, the New York Intellectual Property Law Association (NYIPLA) filed an amicus brief in Ericsson Inc. v. Samsung Electronics Co., Ltd., No. 2021-1565, urging a panel of the U.S. Court of Appeals for the Federal Circuit to balance U.S. interests in adjudicating U.S. patent rights against the rule of comity, with respect to an order by a Chinese court restricting the litigation of certain U.S. patents in U.S. courts. Senator Thom Tillis (R-NC), Judge Paul Michel and former U.S. Patent and Trademark Office (USPTO) Director Andrei Iancu also filed an amicus brief in the case on the same day in support of Ericsson.
As previously covered on IPWatchdog, the case involves a global dispute between the Swedish company Ericsson and the South Korean company Samsung with respect to standard essential patents (SEPs) regarding 4G and 5G wireless standards that are subject to fair, reasonable and non-discriminatory (FRAND) license terms. This dispute is the subject of lawsuits in several different countries, including China and the United States, even though the major market for Ericsson and Samsung’s products is the United States. Recently, a Chinese court in Wuhan claimed the authority to set a global FRAND rate with respect to the SEPs and issued an order purporting to enjoin any action by Ericsson outside China. This order was rejected by Judge Gilstrap of the U.S. District Court for the Eastern District of Texas, who is presiding over the U.S. action between the parties. Judge Gilstrap’s order rejecting the Chinese anti-suit order is the subject of Samsung’s current appeal.
Although the NYIPLA did not take a position on the exact scope and content of Judge Gilstrap’s order, it filed an amicus brief to highlight our country’s “strong policy interest in allowing U.S. patent rights to be adjudicated in U.S. courts” and to point out that “[a]llowing China to exercise exclusive dominion over U.S. patent rights and royalty rates and to preclude enforcement of U.S. patent rights within the United States would cause a severe reduction in the value of U.S. patents and jeopardize the very underpinnings of the U.S. patent system.” Brief at 5-6.
The NYIPLA’s Brief notes that the United States has a long history of ensuring the domestic protection of U.S. patent rights, but that China has long been on the Office of the U.S. Trade Representative’s Priority Watch List of countries with questionable respect for and protection of intellectual property. Of particular importance to this case, “Chinese courts have set FRAND rates much lower than what has been otherwise accepted in the U.S. and Europe.” Id. at 4.
This difference is due in part to the fact that “U.S. courts over the years have ensured that innovators’ intellectual property is appropriately valued through application of sound economic analysis, subject to judicial gate-keeping scrutiny and cross-examination, which can lead to significant verdicts when appropriate.” Id. at 7. This includes the application of a standard test for determining a reasonable royalty for FRAND obligations. See Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024, 1042 (9th Cir. 2015). In contrast, “China is still at the early stages of opening up its markets and providing legal mechanisms for enforcing intellectual property rights.” Brief at 9. But, in addition to a lack of long experience in the area, the NYIPLA explains, “Chinese courts also have a fundamentally different approach to setting FRAND royalty rates, resulting in what can be characterized as systemic undervaluing of innovation.” Id. at 10.
Finally, the NYIPLA argues, comity does not require U.S. courts to cede litigation of U.S. patents to foreign courts. “U.S. interests in adjudicating disputes involving U.S. patents . . . are stronger than the Chinese government’s interest to assert dominion over other countries’ patents.” Id. at 13. “[B]ecause China has been on the U.S. Priority Watch List . . . and its courts have comparatively undervalued patents, Chinese courts are not acceptable as a forum for determining the validity, use and value of U.S. intellectual property within the United States.” Id. Moreover, as a general principle, patent systems should. Be restrained by a “presumption against extraterritoriality.” Id.
This caution rings especially true here, where the order issued by the Chinese court is broad and unbalanced and allows Appellant to take steps that the Appellee is enjoined from taking. As the NYIPLA points out, Appellant has already sought an injunction against Appellee at the International Trade Commission and has filed for Inter Partes Review of Appellee’s patents. Id. at 15.
For these reasons, among the others that the NYIPLA’s Brief explains, allowing a Chinese court “to preclude U.S. courts from determining disputes related to U.S. patents under U.S. patent law, including FRAND rates, would be devastating to U.S. patent owners” and “be an affront to our constitutionally created patent system.” Id. at 17.
Counsel for the NYIPLA on the brief include Charles R. Macedo, counsel of record, and David P. Goldberg from Amster, Rothstein & Ebenstein LLP, Robert J. Rando, Second Vice President of the NYIPLA, and Ksenia Takhistova.