Is Pro-SEP Holder Trend Suggested by Beijing High Court’s Newly Updated Guidelines on Patent Infringement Determination?

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(Author: Hongbin Zhang; Source: Global Law Office) 

On April 20, 2017, Beijing High Court issued its updated Guidelines on Patent Infringement Determination (the “Updated Guidelines”), which was first promulgated on October 9, 2013. The Updated Guidelines reflects Beijing High Court ‘s most recent opinions on injunctions under FRAND-encumbered SEP, which are in detail formulated through Article 149 to Article 153.

  1. FRAND commitment made before international SSO may be applicable before Chinese court

The Supreme Court’s Patent Law Judicial Explanation II issued in 2016 deals only with FRAND commitment made under optional national, by the Article 24industrial or local standard【1】, but does not address FRAND commitment for international standard made before international SSO. The Updated Guidelines clears away the uncertainty by giving affirmative answers in its Article 149, which states that for the standard made by international SSO, FRAND commitment made before such international SSO may be addressed in the same way as the optional national, industrial or local standard contemplated by the Article 24.【2】

  1. To shield behind FRAND commitment by SEP holder, the potential licensee shall actively negotiate in good faith towards reaching SEP license

Compared with an earlier draft version which is not published, Article 150 is remarkably included, which stresses that in negotiating licensing, not only SEP holder shall stick to FRAND commitment previously made, but also potential licensees shall actively negotiate towards reaching licensing on good-faith basis. Article 152 further addresses that injunction shall be denied in case that the potential licensee acts at no fault during negotiation process and has already provided a security no less than the licensing fees or royalties it believes in good faith as being FRAND.

In case that otherwise the potential licensee is found at fault, Article 153 prescribes that the court shall decide to grant injunction or not, upon taking account of the degree of the potential licensee’s fault against the seriousness of breach of FRAND commitment on the part of SEP holders. Article 153 further sets forth several circumstances where the potential licensee shall be found at fault, namely, (1) no timely response after being altered of patent infringement, (2) not timely responding to the SEP holder’s offers, or not timely providing counter-offers after denying SEP holder’s offers; (3) carrying-out delay tactics, or (4) providing counter-offers which contain obvious non-FRAND terms.

In general, compared with the non-published earlier draft versions, in addition to the FRAND commitment on SEP holder’s side, the Updated Guidelines stresses the good faith negotiating obligations on the potential licensee’s side. At least in this respect, we could probably conclude that the Updated Guidelines should be more friendly to SEP holders compared with the earlier draft version.

  1. A Pro-SEP holder trend on an international perspective?

Earlier this year, the U.S. Department of Justice (‘DOJ’) and Federal Trade Commission (‘FTC’) jointly published the updated Antitrust Guidelines for the Licensing of Intellectual Property. This new version reflects the theme of strengthening IP protections and a prudent use of antitrust laws, which could be traced back at least since Trinko【3】 where Justice Scalia empathizes the “false condemnation” concern by arbitrarily applying Antitrust laws to condemn activities that are in the long run would boost rather than dampen competition or innovation.  Following that, similar to the opinions outlined above in the Updated Guidelines, the Unwired Planet International Ltd v. Huawei judgment by England court【4】 points out that “The implementer must take a FRAND approach to the negotiation and accept a licence on FRAND terms if it wishes to take advantage of the constraint on the patentee’s rights imposed by the FRAND undertaking. ”【5】

Against such backdrop in the international perspective, historically speaking, could we safely say that a pro-SEP holder trend, which calls for a FRAND process equally burdened on both sides when negotiating licensing, is already being started?

【1】SeeArticle 24 therein.

【2】Id.

【3】See,Verizon v.Trinko, 540 U.S. 398 (2004).

【4】See,Case No: HP -2014-000005 [2017] EWHC 711 (Pat).

【5】Id.atparagraph 163.