Wuhan and Anti-Suit Injunctions

Wuhan, China is currently a destination jurisdiction for anti-suit injunctions (ASI) and anti-anti-suit injunctions (AASI).  Although the first AASI was issued in a Wuhan maritime case in July 2017, the IP judiciary started to more seriously consider ASI’s. The ramp-up occurred around the time of a conference that I attended in China in mid-January of 2020 on the subject of ASI’s.  At that conference, Chinese judges noted that the Civil Procedure Law (Article IX, Sec. 100) regarding “action preservation” would encompass anti-suit injunctions and that ASI’s should be issued by the Chinese courts. Subsequent to that conference, an ASI was issued by a Wuhan court in the Xiaomi v. Interdigital case, which was followed by an AASI from the Delhi High Court in India (discussed in the excellent blog of Yang Yu and Jorge Contreras).  This December, Samsung also filed a suit against Ericsson in Wuhan and obtained an ASI to counter Ericsson’s earlier-filed suit against Samsung in the Eastern District of Texas.  Today, December 28, 2020, the Eastern District of Texas granted an AASI against Samsung in response to an ex parte  motion of Ericsson filed on the same day (Ericsson Inc. v. Samsung Electronics Co., Ltd, Civil Action No. 2:20-cv-380-JRG) (the “Order”).

Ericsson is seeking to resolve a FRAND dispute with Samsung. Ericsson publicly filed its case in Texas on December 11, 2020.  Ericsson first became aware of the Wuhan lawsuit on December 17, 2020.  Ericsson claims that the Wuhan suit was secretly filed on December 7, 2020 and was hid from Ericsson for ten days. Samsung sought an ASI from Wuhan on December 14, 2020.   Ericsson had “no advance notice of the Wuhan antisuit injunction until the moment it was issued” on Christmas morning, December 25, 2020. Ericsson’s request for an AASI, styled as an “Emergency Application for Temporary Restraining Order and Anti-Interference Injunction Related to Samsung’s Lawsuit Filed in the Wuhan Intermediate People’s Court of China”  was filed on Dec. 28, 2020, the Order was issued shortly thereafter on that same day.

Please note that I have not yet seen copies of any of the Wuhan filings.  I am accepting all its allegations for purposes of this blog as true.

The facts alleged do not present an unusual situation.  They are similar to other cases in China where the lack of transparency had been leveraged for strategic advantage and a case was prosecuted at an odd time in an odd court.  The Veeco case, for example, involved an injunction issued “without providing notice …  and without hearing”  in order to undermine a foreign proceeding.  The case was also filed at less well-known for court for semiconductor related litigation that had gained a recent reputation for issuing preliminary injunctions, As in the Samsung case, the Chinese court also had little relationship with either of the parties. Relief was also granted by the Chinese court against a US party within days of a US holiday.   A similar issue involving non-transparency arose with respect to the Inter Digital case.  Issues involving the actual date of filing of a “secretly” hidden case have also arisen from time to time, particularly under former civil procedure rules which permitted courts to avoid disclosing a filing of a case until 10 days after the case had been formally “established” and thereby led to suspicions of backdating of case filings.   

The ASI issued by the Wuhan court bars Ericsson from (1) seeking injunctive relief on 4G and 5G SEPs around the world; (2) seeking a FRAND adjudication anywhere other than Wuhan; and (3) seeking an AASI.  To counter this ASI, Chief Judge Gilstrap’s AASI: restrains Samsung from seeking injunctions that would impair the jurisdiction of the US court or from filing lawsuits or administrative actions to enforce or defend its United States patent rights; indemnifies Ericsson; and requires Samsung to provide Ericsson with copies of all court papers in the Wuhan matter.

At one time Chinese courts generally ignored ASI’s.  However, as I have previously noted, it is now “wrong to assume that Chinse courts take a strictly ‘hands-off’ attitude towards foreign proceedings.”  ASI’s are increasing.  There are, however, certain systemic problems and strategic considerations that should be considered by China in granting ASI’s.

Among the procedural challenges are the lack of transparency in China’s civil procedure and preliminary injunction practice, including problems concerning service of process, and special rules that apply to foreign service of process.  The problem of lack of transparency in preliminary relief in China is one that I have discussed several times in this blog. There are also inherent strategic advantages in China’s expedited civil process that may mitigate against issuance of an ASI. A Chinese court can reach a decision well in advance of most foreign courts and leverage its automatic injunction to help compel settlements, thereby averting the need for an ASI in some instances.

Substantive adjudication is also impaired by notions of judicial sovereignty  and overly aggressive jurisdictional reach.  Judicial sovereignty has become an increasing concern of China’s leadership, but it is not the same as comity, which seeks to minimize the impact of one court’s decision on another court’s legitimate interests.  Ericsson sought to address comity concerns in its motion by noting that the Wuhan suit’s claims were a subset of the US court action.  Ericsson argued that it was “not asking this Court to stop Samsung from proceeding in the Wuhan suit. Rather, Ericsson is asking this Court to order Samsung not to further pursue or enforce injunctions from other courts that would interfere with the jurisdiction of this Court.”  Foreign courts that directly or indirectly seek to restrain or adjudicate matters involving US patent validity or infringement are likely to raise serious concerns with US judges about comity.  Chief Judge Gilstrap addressed this issue by reaffirming the primacy of his court in the AASI in ensuring that Ericsson has the ability “to enforce or defend its United States patent rights.”

This case may present another example where a perceived lack of due process in a court proceeding provides no advantage in the court of public opinion or before non-Chinese judges.  In the Inter Digital case, the Delhi District court, similarly noted in its AASI decision that the Wuhan case “appear[s] to have been less than fair, not only to the plaintiff, but also to this Court.”

China’s Holiday Gift For Foreign Patent Agents and Agencies

In furtherance of the August 20  Notice of the Ministry of Commerce on “Issuing the Overall Plan for Comprehensively Deepening the Innovation and Development of Service Trade” (商务部关于印发全面深化服务贸易创新发展试点总体方案的通知) (商服贸发)〔2020〕(165号), CNIPA issued two notices on December 25, 2020 further liberalizing its IP services market: one notice concerns the eligibility of foreign patent agents with long residence in China to sit for the patent agents qualification exam (外国人参加专利代理师资格考试试点工作实施要点); and a second concerns the eligibility of foreign patent agencies to open offices in China (外国专利代理机构在华设立常驻代表机构试点工作实施要点).   

The first notice permits foreign patent agents to sit for the patent qualification exam in certain trial implementation localities: Beijing (Zhongguancun), Suzhou and Nanjing. The foreign patent agents would additionally need to fulfill four basic qualifications including: complete civil qualifications; a long-term residence permit in China; patent agent qualifications from another country or region; and the ability to use Chinese to take the patent qualifications exam.  The duration of the trial period is three years.  However successful trial periods are often extended and expanded.

According to the second notice, foreign patent agencies are also now permitted in these localities to open representative offices.  Authorized work includes: IP training; IP licensing and assignment; overseas IP investment and “warning” services; and emergency assistance for overseas patent disputes; and counseling on overseas disputes, including mediation services.

These are welcome developments and are small but important steps towards greater market liberalization.  One issue that limits their impact is the differing role of patent agents who are not attorneys in countries throughout the world. For example, USPTO Rules of Ethics and Professionalism, provide that non-attorney patent agents activities may not provide an “opinion of validity of another party’s patent when the client is contemplating litigation and not seeking reexamination” because such activity “could not be reasonably necessary and incident to the preparation and prosecution” of a client’s patent.  The Chinese patent agency rules permit a wider scope of activity, particularly in terms of patent-related litigation emergencies and may authorize a US patent agent to provide more extensive pre-litigation services than in the United States. 

For United States patent agents, the initial impact of this rule is likely to be especially limited.  There are only 46 registered US patent practitioners that list China as their address with the Office of Enrollment and Discipline at USPTO.  This includes eight practitioners who identify themselves as patent agents rather than attorneys.  If they fully qualify, these individuals may wish to sit for the patent agent exam.   These numbers of mainland China-based patent agents enrolled at USPTO is also small in relative terms.  There are 836 Canadian patent lawyers and agents enrolled at the USPTO, 69 from Germany, 50 from Japan, and 47 from Taiwan. 

Another limiting factor is that foreign patent agent offices will be treated as representative offices.  They may be subject to the same disadvantageous tax treatment of foreign law offices who operate as representative offices of their parent office in China, rather than as Chinese-registered legal persons.   With a scope of work limited to advising on foreign patent matters, they may also suffer from the same inequitable treatment as foreign law firms who cannot advise on Chinese legal matters and must require that their China-licensed agents suspended their license while employed at their representative office.  As I have previously noted, the rapidly changing nature of legal practice in China, including the numbers of US-admitted lawyers in Chinese firms, calls into question the scope and fairness of those earlier restrictions imposed on foreign law firms practicing in China.

These efforts may also be construed as part of a gradual liberalization of legal services in China, which included earlier efforts to permit the establishment of joint venture law firms in foreign trade zones.  It also reflects the increasingly international nature of IP practice.  The Chinese government also has openly stated that it intends to increase the global influence of its approach to IP, whether through RCEP or in transnational litigation.  Market liberalization will no doubt assist in China’s efforts to increase its IP influence.   These changes also reflect the priority that China has long placed on the development of IP-related talent and services. 

Professions such as patent and trademark agents had largely escaped the attention of the West as an area of market liberalization in China.  For example, China made no commitment at WTO accession to open up IP-related services apart from general legal services  Patent agents, however, are likely included within the scope of legal services as “legal advisory and representation services in statutory procedures of quasi-judicial tribunals, boards, etc.” (Classification 86120) and may arguably have been subject to the same market liberalization commitments as law firms that China made at WTO accession.   To the extent that patent agency services are liberalized to permit foreigners to sit for the patent qualifications exam, it is also a small sign that other commercial legal services may be liberalized over time.

IPO’s Comments on Recent Patent Legislation: Untangling a Complex Web

IPO has graciously made available two recent comments on recent legislative proposals.  On December 10, 2020 IPO  submitted comments to the China National Intellectual Property Administration on Draft Amendments to the Patent Examination Guidelines (Second Batch of Draft for Solicitation of Comments) (“Draft Amendment”) published on 10 November 2020.   The examination guidelines comments are attached here.

IPO’s comments on the examination guidelines are primarily addressed to the patentability of computer programs in those revised guidelines.   IPO has reservations about the Patent Examination Guidelines making substantive changes in the requirements for determining whether applications contain appropriate subject matter for patent protection absent higher-order changes to the laws or regulations, such as the draft Implementation Regulations of the Patent Law of China (“Draft Implementing Regulations”) which were published for comment on November 27, 2020.  The criticism is a fair one, and is one that I also drew attention to in terms of CNIPA/SAMR’s draft rules regarding patent linkage.  It is also an almost inevitable outcome of the current flood of draft IPR-related legislation released for public comment or implementation, including a year-end rush to complete key laws such as the patent and copyright laws. 

Among its other comments, IP also discusses the comments on potential risks  of functional claiming in software patents, and on the need for a stated time period for delayed examination when an invention patent and utility model patent are filed simultaneously.

There are several other changes proposed in the examination guidelines, not discussed in the IPO comments but which may be inherent in its critique regarding changes in the examination practice without higher level guidance in the law. These changes also show a pattern of continuing reform in this area, including an increasingly flexible approach by China’s examiners in examining software-enabled inventions.  Among the changes, a computer program should be interpreted as a software product that realizes its solution mainly by a computer program.  In addition, technical means has assumed a higher priority among the three technical factors (technical problems, technical means, technical effect) in technical solution assessment.  A solution utilizing a technical means implemented by a computer necessarily solves a technical problem and thereby has a technical effect. If an algorithm in the claims improves the internal performance of the computer system, the algorithm features and the technical features can be considered to functionally support each other and be interactive.  The contributions made by the algorithm features to the technical solution shall thereby be considered in examining inventiveness. 

The IPO comments note that some case examples in prior guidelines have been removed in this Draft Amendment. IPO believes that illustrative examples serve an important purpose in providing clarity to patent examiners and guiding applicants to enable higher quality application (and claim) drafting.   I agree. By contrast to the lack of exemplars noted by IPO, there was inclusion of examples in the first batch of draft related examination guidelines, which included significant pharma-related changes.  The PTO translation of the draft is attached.  The amended guidelines were announced December 14, 2020 and are described in greater detail by Aaron Wininger.

IPO also submitted comments to China’s Supreme People’s Court on the Draft Provisions on Several Issues Concerning the Application of Law in the Trial of Patent Civil Cases Involving Drug Marketing Review and Approval (Oct. 29, 2020) The comments are attached here.  My blog on the draft is available here.  My blog also includes links to the previous IPO comments on  NMPA/CNIPA rules on linkage.    IPO flags such issues as: the lack of clarity regarding “abuse of patent rights”; the tight time constraints to prepare for litigation especially in the absence of mandatory notification to the patentee; and the removal in the final patent law of a linkage limitation to those patents listed in China’s “orange book,” which is not reflected in the draft.  

The generalized, persistent and pervasive Chinese concern around “abuse of rights” is troubling.  As I had mentioned in testimony before the House Committee on the Judiciary in 2016, there are  “concerns whether China is overly focused on IP abuse, and not sufficiently directed to improving IP use.“  While there are no doubt individuals and companies “gaming” the system, it is unclear to me if any special rules on IP abuse in patent linkage is necessary particularly at this time and in light of long-standing difficulties in commercializing patented innovative pharmaceuticals in China and other measures that address IP abuse.

The revised Patent Law was passed by China’s National People’s congress on October 17, 2020.  The various patent-related regulations, rules, judicial interpretations and other documents will no doubt be revised to conform to any significant differences made in higher level laws.

The huge number of legislative changes in China’s IP regime in 2020 is likely more extensive than a prior wave of similar reforms made when China joined the WTO.  This “tangled web” of legislation reflects: China’s increasingly sophisticated and complex IP regime; China’s efforts to better implement legislative aspects of the Phase 1 Trade Agreement; and China’s own desire to make necessary reforms in its quest to become an innovative economy.  There is nothing in the Phase 1 Agreement, for example, requiring China to make changes to its computer software patent regime, an area which many view as critical to China’s innovation and industrial competitiveness goals.   

On a related note, Berkeley Law is hoping to host a webinar early next year to review all of these legislative changes and discuss what additional changes in China’s IP regime may be occurring in 2021.

Thank you, IPO, for sharing your comments!