Due Process and ASI’s: Wuhan and Texas

Attached is the December 25 decision of the Wuhan Intermediate Court (Chinese language only) (the “Decision”) in the matter of Samsung v. Ericsson, about which I previously blogged.   The Fosspatents blog has also posted some of the other recent filings in the E.D. of Texas, including former Chief Judge Rader’s expert opinion, and the patent infringement case recently filed by Ericsson against Samsung.

I will focus here on the procedural elements of the Wuhan case (Samsung v. Ericsson). 

Anti-Suit Injunctions (“ASI”) are often discussed as if they were a “first to file” priority right where timing is critical.  In the Huawei v. Samsung ASI case in the Northern District of California and Shenzhen, the separation in filing times between the two case was a matter of hours, owing to time zone differences between the West Coast and California.   However, timing is not the only determinant of whether an ASI should grant.  It is certainly less critical if there are forum selection clauses in contracts between the parties.  In Microsoft v. Motorola, an earlier SEP ASI case, other factors such as whether one case would be dispositive of another, and the jurisdiction’s interest in limiting forum shopping, were supportive of the lower court’s decision to grant an ASI.  

In terms of the first court to grant an ASI, the Wuhan court comes out ahead, but only nominally.  The Decision granting Samsung’s Anti-Suit Injunction (ASI) was signed by five judges of the Wuhan Intermediate Court on Friday December 25, 2020, a US holiday.  Counting for the difference in time zones, this is only one business day ahead of Judge Gilstrap’s Anti-Anti Suit Injunction decision/ TRO of the morning of Monday December 28, 2020.    

To the extent that the Samsung ASI was intended to thwart the original exercise of jurisdiction of Judge Gilstrap, it also came a few days too late. Samsung requested the ASI on Monday December 14, 2020 (Decision pp. 1, 2).  Ericsson had brought suit in the Eastern District of Texas on Friday December 11, 2020. 

As the preceding indicates, the difference in time between different filings is often quite nominal.  The gaps in time were considerably shorter than the “several months into… the domestic litigation” behavior of Motorola in Microsoft v Motorola.  Comparisons might also be made to the slower docket in Xiaomi v InterDigital case in Wuhan, which involved three of the five judges to the Samsung v. Ericsson dispute, and which was initiated on August 4, 2020 with an ASI decided on September 23, 2020. 

Samsung comes up especially unfavorably when taking into consideration the adequacy of notice to the adverse party. Samsung sued on December 7, 2020 in Wuhan (qisu/起诉) (Decision, p. 5).  Ericsson filed its case in Texas on December 11, 2020. Samsung filed it request for an ASI on December 14, 2020. There is no record in the Decision of service or notice having been delivered to Ericsson for the initiation of the case, or on the motion for an ASI, although 18 days had elapsed since the case was accepted on December 7, and 11 days had passed Samsung requested its ASI.  Samsung left Ericsson operating in legal darkness.

In Chinese civil procedure and practice, there are several periods of case opacity where the court de facto condones secrecy.  These periods can include: before a case is accepted; when service of process is being made; when a final decision is being reached and an adjudication committee of outside judges may be involved; and when a decision is made to publish a judgment and a case may be written or denied publication on political grounds.  The first period is the most germane here.

A party initiates a case by “suing” (qisu).  When a party “sues” it should file a complaint that meets the minimal criteria set forth in Article 119 of the  Civil Procedure Law (CPL).  These criteria include indicating: a party in interest, an actual defendant, an actual complaint with facts and reasons, and appropriate jurisdiction.   The court has seven “opaque days” to “accept and review” (shouli/受理) the complaint.  After acceptance and review,  the case will be “established” (li’an/立案).  Docketing, assignment of judges and service of process follows thereafter.   The relevant terms are drawn from the CPL, particularly Art. 123.  The Wuhan court generally adheres to this statutory nomenclature in its Decision. 

In Huawei vs Conversant, the Supreme People’s Court looked at case acceptance as one milestone event in determining the priority of filings (p. 9). However, I believe that the Chinese case acceptance procedure, despite recent reforms, lacks adequate transparency for significant international rights to be affected without further inquiry.  Case acceptance has long been the subject of criticism and concern from both domestic and foreign litigants.  See Liu Nanping and Michelle Liu, “Justice Without Judges: The Case Filing Division in the People’s Republic of China,” 17 U.C. Davis J. Int’l L. & Pol’y 283 (2011), and my blog.  Concerns about discretion and opacity in case acceptance decisions have also caused foreign litigants to make “noisy” filings in China before a holiday which involve an immediate press conference after the filing in order to limit the risk that a case suddenly appears that was filed in advance of another filing. 

At this time, further information is needed in order to substantiate the December 7 filing date.  Case acceptance is not automatic and can be denied or accelerated for a variety of reasons, including the political sensitivity of a case, such as in environmental matters.  The Decision states that Samsung sued on December 7 (p. 5), and that case was accepted and established  on the same day (pp. 2, 5).  It is possible that Samsung filed its case and the court reviewed and accepted and reviewed the same day.  However, by law, the Wuhan court had a week to review the case.  Moreover, accelerating review during December might have been difficult because this case acceptance was accomplished during a pandemic and the end of the year is also typically a busy time for China’s IP courts when they try to resolve all pending cases for that year.  Hubei Province, where Wuhan is located,  has also had an unusually high increase in IP-related litigation.  In 2019 alone the province’s IP docket of cases “accepted and reviewed”  increased by 100%  to a total of 20,825 cases.  While a December 7 filing, review and acceptance is not impossible, it is also likely that there were other reasons that all three of these tasks were accomplished on one day.   For example, Samsung may have sued during the week prior to December 7 and was required to make changes to its filing, or perhaps the court decided that it would permit Samsung to enjoy a filing date of December 7 due to problems that may had arisen later during the review process.   A case acceptance date clearly is more ambiguous in its significance than a US court filing made with the Clerk of the Court.

US courts increasingly have to concern themselves with problems posed by lack of transparency of this type.  The US Supreme Court has had to grapple recently with these issues.  In Animal Sci. Prods., Inc. v. Hebei Welcome Pharm. Co., 138 S. Ct. 1865, 1873-74 (2018), the Court noted that “the transparency of the foreign legal system” is one factor in China in determining the level of deference that should be given to the Chinese legal system. In a recent University of Pennsylvania Law Review  article, “Illiberal Law in American Courts” (May 2020), Mark Jia has noted that China’s legal regime has increasingly imposed difficult questions for US judges.  Ultimately, he advises “American judges … [s]ometimes …must decide whether the foreign legal system is fair.”

There are now numerous IP cases where foreign judges have decided that Chinese courts failed to provide adequate notice or procedural transparency.  The Delhi High Court in InterDigital v Xiaomi,  noted in its AASI decision that the parallel Wuhan case “appear[s] to have been less than fair, not only to the plaintiff, but also to this Court.” Judge Kaplan in Vringo v. ZTE, another SEP dispute, noted that:  “Vringo long remained entirely unaware of the Shenzhen litigation.  It was not until June 26, 2014 – more than four months after the lawsuit was initiated – that it received a copy.”  In a non-SEP case involving semiconductor manufacturing equipment, and a US company,  Veeco, a preliminary  injunction was issued “without providing notice …  and without hearing”  in order to undermine a long pre-existing foreign proceeding in the Eastern District of New York.   Knowles, another US corporation, which was sued in China in retaliation for filing a Section 337 patent action, was also barred from attending legal proceedings and stated that “a fair trial is impossible.”  In antitrust actions, including IP-related antitrust actions, the situation had become so severe that the US government had to obtain a promise from China that it would “allow Chinese practicing lawyers to attend and participate in meetings with any of the three [anti-trust agencies].”   Still worse, foreign lawyers have complained that company officials have been threatened with arrest if they did participate in meetings in China, and there have been rising concerns of detentions of foreigners as commercial hostages including during the pendency of civil litigations

As Mark Jia notes, this is within the discretion of the presiding judge.  While judicial procedures vary from nation to nation, delays in notification to adverse parties can raise concerns about violation of generally accepted standards of IP litigation, as reflected in the TRIPS Agreement.  That agreement requires “timely” written notice of “civil judicial procedures” to the parties as well as the right to an “independent counsel” (Art. 42 “Fair and Equitable Procedures”). 

There are other, troubling aspects of the December 25 decision. The court appears to base its jurisdiction on SEP cases being global and affecting Chinese and other national and territorial courts (pp. 2, 11).  It therefore has jurisdiction over “global licensing conditions, including licensing rates” (p. 7).  The court does not explain its departure from prior Chinese practice, such as the Guangdong SEP Guidelines, which would authorize a court to consider a worldwide rate setting if the parties agreed to it, nor does it consider whether it is the optimal form for these disputes.  Long-standing US precedent for ASI’s also establishes that “comity teaches that the sweep of the injunction should be no broader than necessary to avoid the harm on which the injunction is predicated.” (Laker Airways v. Sabena, 731 F.2d 909, 933 n. 81 (D.C. Cir. 1984)).  The court also adopts an anti-trust like approach to granting the ASI, by looking at harm to consumers and competition if an infringer were to be enjoined (p 10, para. 4). A thoughtful analysis of the choice of law and ASI issues could likely have helped de-escalate and de-conflict the issues. To rub salt further into the choice of law wound, the ASI extends to access to all courts, including those of the United States, and thereby includes US patent matters (Decision, p. 12, para. 2).  

To be fair, Chinese courts’ entry into the “global SEP litigation” arena in 2020 has been preceded by global rate setting decisions elsewhere in the world, including the recent Conversant and Unwired Planet cases in the United Kingdom.  Additionally, the Chinese courts have been instructed to take a more aggressive approach to international parallel litigation. The court at this stage should, however, also be committed to the increase of procedural fairness  as well as careful legal analysis in order to minimize friction among the parties and with other jurisdictions.

Updated on January 5 & 11, and Feb. 21, 2021 to correct minor typographical errors.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s