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China tests the long arm of its law in Xiaomi and Huawei international patent battles
A growing showdown between China’s courts and Western countries seeking to issue rulings across borders could escalate, legal experts warned, after a local Chinese court issued an injunction on a dispute between smartphone giant Xiaomi and an American company. The case, an example of increasingly intense efforts by the Chinese judiciary to impose long-arm jurisdiction under the Beijing directive, may throw international lawsuits into uncharted waters, analysts say. It started last June, when Xiaomi approached China’s Wuhan Immediate People’s Court to seek a ruling on its dispute over license fees with US technology patent firm InterDigital. Have questions about the hottest topics and trends from around the world? Get the answers with SCMP Knowledge, our new curated content platform with explanations, FAQs, analytics, and infographics from our award-winning team. Around the same time, InterDigital sued Xiaomi in a Delhi, India court, prompting the Wuhan court to issue an injunction prohibiting the American company from taking the case outside of China or risking a daily fine of 1 million. yuan (152,000 US dollars). An appeal from InterDigital was rejected. Undeterred by the court order, InterDigital followed the case overseas anyway, eventually winning a ruling in India prohibiting Xiaomi from enforcing the Chinese court order. It also obtained a similar counter-injunction from Germany’s Munich Regional Court, paving the way for the company to file a patent infringement lawsuit in the country. The case has raised alarm among legal experts, concerned about its potentially far-reaching implications. The situation could turn into a “total mess” if there are no signs of “tolerance among judicial authorities around the world,” UK High Court Judge James Mellor said in a recent interview with the British news site. legal Managing IP. The latest development highlights the increasingly assertive approach taken by Chinese courts, which are ultimately answerable to the ruling Communist Party, to uphold the interests of Chinese business, said Henry Gao, professor of business law at Singapore Management University. . “[The Xiaomi-InterDigital case] has the potential to become an important precedent for the courts in China as they seek to follow President Xi [Jinping]”A call for a coordinated push to promote the rule of law in China and abroad in order to protect national sovereignty, dignity and fundamental interests,” Gao said. As tensions between China and Western countries rise over Beijing’s actions in Xinjiang, with the United States imposing sanctions on Chinese companies it accuses of human rights violations, the Chinese government has been trying to fight back through legal means. . In January, China’s Ministry of Commerce unveiled new rules that would punish global companies for complying with strict US restrictions against Chinese companies. Authorities said the rules were created to counter foreign laws that “unfairly prohibit or restrict” Chinese persons or entities from conducting normal business, citing the need to safeguard China’s sovereignty and national security. During China’s annual parliamentary meeting last month, the Chairman of the Standing Committee of the National People’s Congress, Li Zhanshu, said that one of China’s legislative priorities was to enact laws against foreign sanctions, interference and long-arm jurisdiction. The Wuhan court is not alone in following Beijing’s calls to protect the interests of Chinese companies in cross-border disputes. Last August, the Supreme People’s Court issued an injunction prohibiting Conversant, a US intellectual property management company, from enforcing a German court ruling against Chinese telecoms giant Huawei Technologies Co before the end of a concurrent court case in China. The case was hailed by the Chinese judiciary as the first injunction against a lawsuit issued by a Chinese court in an intellectual property case. The ruling helps China protect the “legitimate rights” of its innovative companies, Beihang University law professor Long Weiqiu was quoted as saying in a People’s Court News report. Huawei leads the world in wireless communications patents in 2020 At the center of Huawei and Xiaomi’s legal battles against overseas patent holders is the question of who can set royalty rates for so-called standards-essential patents. These are patents that protect inventions applied to broader technologies used throughout the industry, such as 5G. In most parts of the world, the owners who license these patents must charge fees on a basis known as FRAND, or “fair, reasonable, and nondiscriminatory.” However, due to the importance of the Chinese market, Chinese smartphone makers have been able to negotiate a lower rate for a long time. Huawei, for example, for years has been able to get a special discount from InterDigital and Conversant. Pressure has increased on Chinese companies to change practice. Last August, the UK Supreme Court issued a landmark decision on three cases involving Huawei and ZTE, another Chinese telecommunications company. The ruling effectively requires Chinese companies to accept the more expensive global rate if they wish to continue using two patents from Conversant and US technology firm Unwired Planet on products sold in the UK. The ruling has also given the Chinese judiciary a renewed sense of urgency to defend Xiaomi in its fight against InterDigital, as the British case is seen as a step by the British judiciary to establish itself as the global rate-setting authority. patent, said Doug Clark. , global head of dispute resolution at intellectual property consultancy Rouse & Co and adjunct professor of law at the University of Hong Kong. “The Chinese courts are saying, ‘Well, if you’re going to set rates, we can too, because all the manufacturing happens in China and we’re where the market is,'” Clark said. “Part of this reflects a frustration, on the Chinese side, of foreign companies using foreign courts to obtain court orders to prosecute people and demand what they consider to be unfairly high royalties.” However, the Wuhan court order has been surprising in its scope. Angela Zhang, an associate professor of law at the University of Hong Kong, said that the court order issued by the Wuhan court is highly unusual and controversial. “There is a risk that the court’s broad application of the anti-lawsuit injunction will be deemed inconsistent with the doctrine of international comity under international law,” Zhang said. “It is an extraordinary court order. It’s extremely broad, “said Clark of Rouse & Co.” The Wuhan court is basically trying to be the only court in the world that can set the global rate. ” Huawei has 56,492 patents, and it is not afraid to use them. The situation is “getting very ugly,” Clark said, and the case could eventually turn into an international dispute between China and the United States. “Ultimately, the only real resolution will be a complaint under the rules of the World Trade Organization (WTO) or an investment treaty of one country against the other,” he said. Xiaomi did not respond to inquiries sent by the South China Morning Post. Eeva Hakoranta, InterDigital’s director of licensing, said the company will use all necessary means to protect its interests. He said Xiaomi has refused to pay sufficient royalties to InterDigital for years and that the US firm is prepared to enter a WTO process if there is no resolution. “China is not playing by the rules of a level playing field, they are creating their own rules and they are using their judicial system to oppress others,” Hakoranta said. “It is very sad to see this happen.” More from South China Morning Post: Chinese President Xi Jinping says IP protection is a key part of the country’s development plans Intellectual property theft: what Chinese and British companies need to worry about China collides with US over Huawei’s new IP theft accusations and deals with North Korea The agency is the latest battleground as China and US compete for influence US targets China for property theft intellectual, but is it really worth the fight? This article China proves the long arm of its law on Xiaomi and Huawei’s international patent battles first appeared in the South China Morning Post For the latest news from the South China Morning Post, download our mobile app. Copyright 2021.
