SISVEL Vs. Haier: First German FRAND Case Decided Post Huawei vs. ZTE

The information in this blog comes to me via the German law firm of Arnold Ruess and the English language website of IAM (Joff Wild) (Nov. 12, 2015).

In what is apparently Germany’s first decision relating to FRAND and standards essential patents (SEPs) since the European Court of Justice’s decision in the Huawei vs. ZTE case, the Italian company Sisvel has been granted injunctive relief by the Düsseldorf Regional Court after a finding by that court that Sisvel’s patents had been infringed by Haier (Cases 4a O 93/14 and 4a O 144/14) (Nov. 3, 2015). The judgments are based on the German patents that belong to the Sisvel wireless patent portfolio. The judgements have not yet been appealed.

According to the IAM translation of the Arnold Ruess news release, the Court made the following determinations regarding the FRAND defense raised by Haier.

“The Court … held that the FRAND defense raised by Haier was not successful as it had not complied with the … requirements [of Huawei vs. ZTE]. It therefore did not need to decide on the preliminary question whether the FRAND defense was applicable at all as, …this would only be the case if the SEPs in suit actually conferred SISVEL with a market dominant position.

The Court found that SISVEL had complied with point 1 (information on patent infringement) [of Huawei vs ZTE]. In cases where the action was filed before [Huawei vs. ZTE] … was rendered, it is sufficient that the infringer gains knowledge about the infringement via the statement of claims.

The Court also confirmed that SISVEL had made a suitable license offer to Haier. It is sufficient if the license offer is addressed to the mother company of the alleged infringer in order to initiate negotiations. It would be a mere formality if a patent holder had to address all affiliates of a group separately.

The Court did not have to dwell on the details of whether SISVEL’s offer was FRAND and also left open whether Haier was already excluded from the FRAND defense as it had not reacted in a timely manner [as required Huawei vs ZTE, which would have mandated that if SISVEL does not accept the counter-offer, Haier had to render account and provide security for the payment of past royalties.]

… The Court in addition held that such rendering of account and the provision of a bond has to take place within a month after the rejection of the counter-offer by the patent holder.”

Huawei vs ZTE and its relationship to proposed NDRC IP abuse guidelines are discussed in further detail here.

I look forward to reading this important decision in full.

NDRC IP Abuse Guideline Out For Public Comment

IPabuseguidelines

NDRC has released a draft for public comment of its Antitrust Guidelines for Abuse o IP知识产权滥用的反垄断指南(征求意见稿)(English language wordcloud above).   As with the NDRC questionnaire this appears to have been selectively released although some versions have also been made available on line by bloggers and the like.  Several organizations are commenting on it, and some bloggers have made its content publicly available.  The release of the guidelines has also been reported by the media based on NDRC presentations at public conferences.

Below is what I believe is the Chinese text regarding on abuse of dominance involving intellectual property rights.  Unfortunately I do not have an English text I can release.  I have added English captions so that non-Chinese readers can see some of the key areas discussed.

I did notice that the provisions on the availability of injunctive relief for infringement of standards essential patents thankfully address “whether the two negotiating parties in the process of negotiations have shown real willingness to negotiate”, which I believe is a significant problem in the Chinese environment.  Interestingly, in addressing the problem, the draft incorrectly identifies requests for injunctive relief as “the request of the patentee of a judicial body to issue an order to enjoin use of relevant patents.”  In fact, I believe the injunctive relief that is sought is typically to enjoin infringement, as there has been no authorized use of the patents in the absence of a license.

I am also wondering whether other agencies, notably MofCOM and SAIC are also preparing drafts of the abuse IP guidelines, particularly as SAIC only recently released its rules in this area.

———–

三、涉及知识产权的滥用市场支配地位行为

 (一)不公平的高价许可费 [unreasonably high royalties]

权利人有权就其知识产权获得合理的经济补偿,这是弥补其研发投入和激励创新的基本动力,权利人收取许可费的行为,通常不会受到《反垄断法》的规制。但是,如果权利人滥用其具有的市场支配地位,向被许可人收取不公平的高价许可费,会排除、限制竞争,损害消费者利益。

分析和认定知识产权权利人是否收取不公平的高价许可费,可考虑以下因素:

  1. 相关知识产权许可历史或者可比照的许可费标准;
  2. 权利人是否超过知识产权覆盖的范围收取许可费;
  3. 权利人是否迫使被许可人接受不合理的许可方式或者许可期限;
  4. 权利人进行一揽子许可时是否迫使被许可人接受过期或者无效的知识产权。拒绝许可是权利人行使知识产权的一种表现形式,一般情况下,权利人不承担与竞争对手或者交易相对人进行交易的义务。但是,具有市场支配地位的知识产权权利人无正当理由拒绝许可,同时符合下列条件的,可能排除、限制竞争:
  5. (二)拒绝许可 [refusals to license]
  1. 拒绝许可可能导致相关市场上的竞争或者创新受到不利影响,损害消费者利益或者公共利益;
  2. 许可该知识产权不会对权利人造成损害。(三)搭售 [tying]搭售可能对相关市场的竞争产生不利影响,主要表现为排除了被搭售品市场中其他供应商的交易机会,并损害了消费者的选择权。同时,搭售也可能对相关市场的竞争产生有利影响,主要表现为可以降低交易成本,促进产品功能的完善等。搭售的正当理由,需要在个案中进行具体分析。如果搭售是基于技术兼容、产品安全、产品性能、交易成本等方面的考虑而实施的,可能被认为具有正当理由。具有市场支配地位的权利人在交易中附加下列限制条件,可能排除、限制竞争:
  3. (四)附加不合理的交易条件 [Attaching unreasonable conditions of trade]
  4. 具有市场支配地位的经营者没有正当理由,违背交易惯例、消费习惯等或者无视不同知识产权或商品的性质及相互关系,将不同知识产权,或者知识产权与商品强制捆绑销售或者组合销售,并且使该经营者将其在搭售品市场的支配地位延伸到被搭售品市场,可能排除、限制竞争。
  5. 搭售是指权利人就一项知识产权以许可、转让等方式行使时,违背交易相对人的意愿要求其接受另一项知识产权的许可或转让,或者从权利人处或者权利人所指定的第三人处购买某种商品。
  6. 拒绝许可的正当理由,需要在个案中根据具体情况进行分析,通常考虑的因素包括:被拒绝的潜在被许可人缺乏必要的质量、技术保障或支付许可费的能力,能够确保技术的正当使用或者产品的安全和性能;被拒绝的潜在被许可人使用知识产权行为可能会对节约能源、保护环境等社会公共利益产生不利影响等。
  1. 要求交易相对人将其改进的技术进行独占性回授;
  2. 禁止交易相对人对其知识产权的有效性提出质疑,或者针对其提起知识产权侵权诉讼;
  3. 限制交易相对人利用竞争性的商品或者技术;
  4. 对过期或者无效的知识产权主张权利;
  5. 禁止交易相对人与第三方进行交易,或者对交易相对人与第三方的交易行为在对象选择、交易地域等交易条件方面进行限制。一般来说,知识产权权利人对不同的被许可人实施不同的许可条件,是权利人的自由。但是,具有市场支配地位的知识产权权利人对被许可人实施差别待遇,同时符合下列条件的,可能排除、限制竞争:
  6. (五)差别待遇 [Differential treatment/discriminatory treatment]
  1. 拒绝被许可人提出与其他被许可人实质相同的交易条件;[the party refused a license offers substantially similar conditions of trade of a prior licensee]
  2. 差别待遇对被许可人参与相关市场的公平竞争产生了显著不利影响。四、涉及标准必要专利的知识产权行使行为 [Concerning Implementation of Standards Essential Intellectual Property] 具有市场支配地位的标准必要专利权利人下列行使权利的行为,可能排除、限制竞争:标准必要专利权利人有权就其专利获得合理的激励性回报。但是,标准必要专利权利人所要求的许可费应当合理体现相关标准必要专利的经济价值。如果拥有市场支配地位的标准必要专利权利人向被许可人索取不公平的高价许可费,可能排除、限制竞争,损害消费者利益。
  3. 分析和认定标准必要专利权利人是否收取不公平的高价许可费,可以考虑以下因素:
  4. (一)收取不公平的高价许可费 [Receiving unfairly high license fees]
  5. 专利权人持有标准必要专利并不必然导致其具有市场支配地位。分析和认定标准必要专利权利人是否具有市场支配地位,可考虑以下因素: [the following may be considered](1)相关标准的市场价值与应用程度;[the value and use of the standard in the market](2)是否存在替代性标准;[are the substitutable standards](3)行业对相关标准的依赖程度及使用替代性标准的转换成本;…(4)不同代际相关标准的演进情况与兼容性;(5)标准必要专利许可双方的相互制衡能力等。
  6. 分析和认定是否构成差别待遇,在考虑被许可人的交易条件是否与其他交易对象实质相同时,[in analyzing and determining whether there is differential treatment, and considering whether the conditions of trade of a licensee are difference in substance, the primarily consideration should be from the the rightsholder perspectives regarding whether the intellectual property transaction costs are the same.]  主要从权利人的角度考量不同许可行为的交易成本是否相同。同时,还会综合考虑该知识产权的用途和使用该知识产权生产产品的属性、销售范围、销售量、销售额与利润率等因素。
  1. 被许可的标准必要专利的技术价值;
  2. 相关产业的技术特点;
  3. 符合相关标准的产品所承担的整体许可费情况;
  4. 相关标准必要专利所负担的许可承诺;
  5. 相关标准必要专利许可历史或者可比照的许可费标准;
  6. 相关产品市场上下游合理的利润空间。在标准必要专利许可中,下列交易条件可能排除、限制竞争:
  7. (二)附加不合理的交易条件 [Attaching unreasonable conditions of trade]
  1. 捆绑非标准必要专利;
  2. 强制要求免费交叉许可和回授;
  3. 强制要求被许可人给予许可人所指定的第三方免费专利许可;
  4. 就过期或者无效专利继续收费;
  5. 禁止被许可人质疑专利有效性或者针对许可人提起专利侵权诉讼。禁令救济是专利法赋予专利权人的救济手段,标准必要专利权利人有权依法申请禁令救济以维护其合法权益。但是,如果标准必要专利权利人利用禁令救济申请迫使被许可人接受其提出的不合理许可条件,可能排除、限制竞争。
  6. 分析和认定标准必要专利权利人申请禁令救济是否排除、限制竞争,可考虑以下因素:
  7. (三)滥用禁令救济 [abuse of injunctive relief]
  1. 谈判双方在谈判过程中所表现出来的真实谈判意愿;
  2. 相关标准必要专利所负担的有关禁令救济的承诺;
  3. 谈判双方在谈判过程中所提出的许可条件及许可条件的合理性;
  4. 申请禁令救济对双方谈判地位、相关市场及下游市场竞争和消费者福利的影响。

..consider the following factors:

  1. whether the two negotiating parties in the process of negotiations have shown real willingness to negotiate;
  2. whether the relevant standardsessentialpatentsare burdened by commitmentsrelating to injunctiverelief;
  3. the proposed licensing conditions and the reasonableness of the licensing conditions brought forth by the two negotiating parties during the negotiation process;
  4. the role of applications for injunctive relief in negotiations of the parties, competition in the relevantmarketand the downstream market, and the effectson consumer welfare.

本指南所称禁令救济,是指专利权人请求司法机构或者准司法机构颁发的限制使用相关专利的命令。

Injunctive relief as referred to in this guide, refers to the request of the patentee of a judicial body to issue an order to enjoin use of relevant patents.

The Scotch Whisky Victory for Trademarks

On September 17, the Scotch Whisky Association announced a significant anti-counterfeiting victory in the Anqing Intermediate Court in Anhui Province.  The case is Scotch Whisky  Association vs. Anhui Guangyu Packaging Company Ltd., Wang Xuming and others (Trademark Infringement, First Instance) ,” 苏格兰威士忌协会与安徽广宇包装科技有限公司、王旭明等侵害商标权纠纷一审民事判决书.”(August 31, 2015) ((2015)宜民三初字第00024号).  The case is available on line at the Chinese court website.

This case appears to have involved the unauthorized printing of Scotch Whiskey packaging in the form of bottle caps, some of which appears to have been made available for sale on line through Alibaba.com.  The court awarded damages of 100,00 RMB, and injunctive relief.  The court found that the SWA had difficulties proving damages and therefor awarded what appears to be statutory damages, plus costs of 11,820 RMB.

Damages may seem quite low, but according to the CIELA database, the average damages for the eight trademark infringement cases in the food and beverage area that they collected in Anhui Province (where SWA likely had to bring the case) was 6,000 RMB.

The case has been picked up by the media.  One article in the spirits sector noted that it was the second victory for Scotch Whisky, in addition to some additional recognition of its GI in Africa. Another article linked the victory to the Scotch Whiskey’s “historical granting” of a “Geographical Indication in 2010”which is “fully backed by China’s government through the GI”.

Curiously, both of these articles refer, directly or indirectly, to the sui generis GI system which is administrated by AQSIQ and the Ministry of Agriculture, and failed to mention the role of trademark protection.  This might lead one to suspect that the protection arose under China’s sui generis GI system,which the SWA has been actively promoting. However, China’s trademark system is much more fully developed in enforcement by comparison to the sui generis GI system, which lacks the full panoply of TRIPS-mandated civil, criminal and border remedies that attach to trademarks as intellectual property that may be granted to, and owned and protected by individuals and enterprises.

As I read the civil decision, the basis for the civil enforcement action was the 2008 collective mark obtained by the Scotch Whisky Association in Trademark Class 33  (no. 5915031  for “ScotchWhisky”).  Information on sui generis GI protection was, however, accepted as evidence of proof of the fame of the mark, although it had been introduced for its distinctiveness (evidentiary group 2, in the court’s decision).

The court decision did not analyze in great detail issues such as the application of the newly revised trademark law, the role of statutory damages and proof of injury,  and the role of the bottle caps in the export trade.  A principal of the company,l Wang Xuming was, however, held jointly liable with the packaging company for paying damages.   The caps were, according to one media report, used to produce counterfeit whiskey for sale in Burma.

Information presented on police actions involving these defendants in prior years were accepted into evidence.  According to the English press reports, additional police investigations are also possible.

Altogether, this is a well-deserved victory for the SWA.  In addition to vindicating the role of the trademark enforcement system, the case showed the impact of such hot issues as the efforts to better coordinate civil, criminal and administrative enforcement actions, address on-line sales,  consider the impact of the new trademark law on pending cases, address transnational sales, successfully bring a case in the home court of a counterfeiter, and address those who contribute to the chain of counterfeit production.

Congratulations to the SWA and its team!

Note: Please send any corrections to the author (chinaipr@yahoo.com).  This article consists of the author’s personal opinion only.

“Case Filing” In China’s Courts and Their Impact on IP Cases

In my experience over the past decade and in talking to local IP courts in China, the IPR judges have for the most part been very forthcoming, knowledgeable and engaging.  However, their colleagues in the Case Filing Division (立案庭) (“CFD”) have operated in a much more opaque way, typically not willing to meet at all, despite their playing a critical role in certain WTO / TRIPS obligations of China, such as granting/denying preliminary injunctions, and preliminary evidence or asset preservation measures (“provisional measures”) (TRIPS Art. 50).  The CFD of a court is more than a court clerk or docketing officer, the CFD actually operates to accept or deny cases, typically without handing down written decisions of any kind.

The opaque nature of the CFD was highlighted more generally in some recent postings on China Law Net, hosted by Prof. Don Clarke.  Dr. Liu Nanping and Michelle Liu recently authored an article on the significance of the CFD.[1]  The article argues, generally without the benefit of the much smaller quantity of data from IPR-related cases, that a right to justice can often be taken away by the CFD before ever reaching the courtroom for trial. In theory, the CFD was designed to filter disputes for resolution through other channels, thereby limiting the judges’ power and controlling court jurisdiction.  In practice, however, it has been found that the division often abuses its discretion, including by pushing off controversial cases.  The authors point out that the CFD rejects cases that should have passed the initial threshold and leaves litigants with reduced channels to pursue justice.

Case filing became especially important after China joined the WTO, as decisions on provisional IP civil measures are initially sent to this division.   As China does not yet afford these provisional measures in other civil cases, the experience of the CFD in handling these matters was likely limited or non-existent before WTO accession.  Regrettably, the statistics to date show only a limited number of these measures actually being made available to rights holders, and call into question whether use of the CFD is the optimal means for China to fully make this right available to litigants.

China’s statistics in this area are confusing:  they show a high “grant” rate of accepted cases involving provisional measures – but they don’t reveal how many cases were rejected by the CFD, since such cases were deemed to have never been “filed”.  This “pre-screening”, I believe, contributes to the high grant rate. A more revealing data point is made by comparing the numbers of such provisional measure cases with the total number of IP cases filed.  The incidence of such cases is very low, most likely because the cases never appear on the docket.   If one were to look at the grant rates alone, one might think that China had particularly robust preliminary injunctions in all IP rights.  In 2009, 85.42% of pre-trial preliminary injunction applications admitted in IP cases were granted.  The number is especially striking because in US practice, preliminary injunctions for patents are rarely granted.  China also showed even higher grant rates for other provisional measures: 98.72% of admitted applications for pre-trial preservation of evidence were granted and 100% of admitted applications for pre-trial preservation of property were granted. In 2010, the grant rates for these provisional measures were 89.74% for preliminary injunction applications, 97.46% of preservation of evidence applications, and 97.41% for preservation of property applications.

A more revealing data point is made by comparing the numbers of such provisional measure cases with the total number of IP cases filed.  In 2009, there were 59 pre-trial preliminary injunction applications, 237 pre-trial preservation of evidence applications, and 56 pre-trial asset preservation applications admitted amongst a total of 30,626 IP-related civil cases admitted at first instance. In 2010, 55 pre-trial preliminary injunction applications, 294 pre-trial preservation of evidence applications, 126 pre-trial asset preservation applications were admitted amongst a total of 42,931 IP-related civil cases admitted at first instance. The high grant rate undercuts the reliability of the overall data: if preliminary injunctions, evidence and asset preservation measures were so readily available, why then did only 0.12% of the civil IPR cases “request” preliminary injunctions, 0.68% of the cases involve evidence preservation, and 0.29% of the cases request asset preservation?

If one compares China to the United States, the rate of grants is likely higher than that of the U.S. for similar types of motions, but the actual number of cases considered by judges is dramatically lower. Moreover, if US experience is a guide, one would expect different grant rates for different types of provisional measures, depending in part on the right being asserted and the context of the case.  Preliminary injunctions in patents are likely to be rare, because of the technical difficulties in adjudicating patent cases and the hardship that might be imposed on an industry if the preliminary injunction was improperly granted.  For example, in the US, traditionally the likelihood of winning of a plaintiff winning in a patent case were 51.45%, versus 85% in trademarks and 75% in copyright.  Patent cases are also generally more complex to adjudicate, making them less amenable to preliminary injunctive relief.  According to one database, patent cases last 417 days on average, compared to 265 for trademark and 331 for copyright.  Because of the significant potential impact on an industry if a patent injunction were granted, injunction rates for final judgments were 30% for patents, versus 48% for trademarks and 21% for copyright (this data was based of FY 2000 data, from a now-defunct database run by Cornell University).  The mean award for patents is $1,759,345, while that of trademark cases is $484,428 and copyright was $837,525.

This U.S. data shows that patents, copyright, and trademark cases are not equal in damages, the length of time to adjudicate or availability of injunctive relief. In China, based on data from http://www.Ciela.cn, in 2008, the average damage award for patent, copyright, and trademark cases were 402,277 RMB, 17,912 RMB, and 88,444 RMB respectively; the duration for the respective types of cases were 8 months, 5 months and 6 months; injunction rates were 74%, 69%, and 85%.  Taken together, these indicate that there are major differences in damages and relief based on right and type of right at stake, which is to be predicted based on the nature of the right and the experience of other countries such as the United States.

It is likely that all types of provisional evidence and asset preservation measures for trademarks and copyrights should be higher, particularly as a remedy to dealing with commercial scale or willful infringement in China, and also because of the difficulties parties have in otherwise obtaining evidence from their adversary due to an absence of discovery-type procedures.  Unfortunately, China often comingles provisional measure data for all rights, making it impossible to determine if China is more readily granting those forms of relief in cases where it is more necessary, or more easily adjudicated.   This lack of distinction adds to the difficulties of evaluating the opaque CFD.

Preliminary evidence preservation measures can be especially critical when evidence is ephemeral, such as in the on-line environment.  Considering the rapid increase of civil copyright cases, the high incidence of on-line copyright cases in China today, as well as the lack of discovery type procedures for all civil cases in China, one would expect a very high incidence of preliminary evidence preservation measure requests and grants.

Apart from the opacity of the case establish division, there are potentially other explanations. Victims wanting a quick remedy, including preservation of evidence, may file administrative trademark or copyright cases.  Administrative agencies can also issue orders stopping infringement, which are enforceable in their administrative district.  These administrative remedies may decrease the burden on the civil courts to seize assets.  In the United States, first amendment rights may also limit the desire of courts to grant injunctions, and instead favor higher damage awards.  Another explanation is that the unclear division in China between when civil and criminal remedies may also drive rights holders to use criminal remedies in appropriate circumstances, as the police can seize evidence even more effectively than the courts. This has been the developing trend in trade secret cases, where lack of discovery proceedings and the need for expeditious action, frequently drive rights holders to use a criminal remedy when a civil remedy might have been adequate for similar actions in the United States.

Another observation that may be drawn from this data is that IPR cases offer a useful window with which to view other general rule of law developments in China.  The transparency and enforcement obligations in TRIPS and other agreements can especially help to drive reform in other areas as well.  Where civil IPR remedies and the enforcement obligations in TRIPS help to establish international standards for their fair and equitable adjudication, such standards might help lift to the standard for all litigants.

Updated: June 29, 2018 with minor typographical changes.


[1] Nanping Liu & 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)