South china morning post
China is testing the long arm of its law in the international patent battles between Xiaomi and Huawei
A growing conflict between courts in China and western countries that want to make decisions across borders could escalate, legal experts warned after a local Chinese court issued an injunction over a dispute between smartphone giant Xiaomi and a US company. The case, an example of the increased efforts of the Chinese judiciary to enforce long-standing jurisdiction under Beijing’s guideline, may throw international lawsuits into uncharted waters, analysts say. It began last June when Xiaomi went to the Wuhan People’s Court to seek a ruling on the royalty dispute with US technology patent company InterDigital. Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform for curated content with explanations, FAQs, analysis and infographics brought to you by our award-winning team. Around the same time, InterDigital was suing Xiaomi in a court in Delhi, India, asking the Wuhan court to issue an injunction preventing the US company from taking the case outside of China, or fined 1 million daily Risking yuan ($ 152,000). An objection from InterDigital was rejected. Undeterred by the injunction, InterDigital was pursuing the case overseas anyway and eventually won a judgment in India that forbade Xiaomi from enforcing Chinese court ordinance. The German district court in Munich received a similar injunction, which paved the way for the company to file a patent infringement suit in the country. The case has raised the alarm among legal experts and is concerned about its potentially far-reaching implications. The situation could turn into “total mess” if there is still no sign of “leniency among judicial authorities around the world,” British Supreme Court Justice James Mellor said in a recent interview with UK legal news website Managing IP. The latest development underscores the increasingly assertive approach of Chinese tribunals who ultimately respond to the ruling Communist Party to defend the interests of Chinese companies, said Henry Gao, professor of commercial law at Singapore Management University. “[The Xiaomi-InterDigital case] has the potential to become a major precedent for courts in China as they seek to obey President Xi [Jinping]Call for a coordinated push to promote the rule of law in China and abroad to protect national sovereignty, dignity and core interests, ”Gao said. As tensions between China and Western countries escalate over Beijing’s actions in Xinjiang and the US is imposing sanctions on Chinese companies it accuses of human rights abuses, the Chinese government has tried to fight back through legal means. In January, the Chinese Ministry of Commerce introduced new rules that would penalize global companies for complying with tightened US restrictions on Chinese companies. Authorities said the rules were created to counter foreign laws that “unfairly prohibit or restrict” Chinese persons or entities from doing normal business, highlighting the need to protect China’s national sovereignty and security. During the annual parliamentary assembly in China last month, Chairman of the Standing Committee of the National People’s Congress Li Zhanshu said that one of China’s legislative priorities is to pass laws against foreign sanctions, interference and long-standing jurisdiction. The Wuhan court is not the only one following Beijing’s demands to protect the interests of Chinese companies in cross-border disputes. Last August, the Supreme People’s Court issued an injunction preventing Conversant, a US intellectual property management company, from enforcing a German court ruling against Chinese telecommunications giant Huawei Technologies Co before a simultaneous trial in China ends. The case was welcomed by the Chinese judiciary as the first Chinese court injunction in an intellectual property case. The ruling will help China protect the “legitimate rights” of its innovative companies, Beihang University law professor Long Weiqiu was quoted in a report on the People’s Court News. Huawei is the global leader in wireless patents in 2020 At the center of the litigation between Huawei and Xiaomi against patent holders overseas is the question of who can set the license fees for so-called standards-based patents. These are patents that protect inventions that are applied to broader technologies used by the entire industry, such as: B. 5G. In most countries around the world, owners who license these patents are required to collect fees based on FRAND or “fair, reasonable and non-discriminatory”. However, due to the importance of the Chinese market, it has long been possible for Chinese smartphone manufacturers to broker a lower tariff. Huawei, for example, has been able to get a special discount from InterDigital and Conversant for years. The pressure on Chinese companies to change practices has increased. Last August, the UK Supreme Court issued a historic ruling on three cases involving Huawei and ZTE, another Chinese telecommunications company. The ruling effectively requires that Chinese companies accept the more expensive global tariff if they want to continue using two patents from Conversant and US tech company Unwired Planet on products sold in the UK. The ruling has also given a renewed sense of urgency to the Chinese judiciary to defend Xiaomi in the fight against InterDigital as the UK case is viewed by the UK judiciary as a step towards establishing itself as the global authority for setting patent rates, Doug said Clark, Global Dispute Resolution Director for intellectual property consultancy Rouse & Co and Associate Professor of Law at the University of Hong Kong. “Chinese dishes say,” Well, if you want to set prices, so can we because all of the manufacturing is in China and we’re where the market is, “said Clark.” Part of that reflects the frustration on the Chinese side Foreign corporations use foreign courts to obtain injunctions, persecute people and demand what they believe are unfairly high royalties. “However, the Wuhan Court’s ruling raised eyebrows. Angela Zhang, Associate Professor for Law at the University of Hong Kong, said the Wuhan Court’s injunction was highly unusual and controversial. “There is a risk that the court’s widespread application of the injunction may be viewed as inconsistent with international comity doctrine said Zhang. “It’s an extraordinary arrangement. It’s extremely wide,” said Clark of Rouse & Co. “The Wuhan court is basically trying to be the only court in the world that can set the global interest rate.” Huawei has 56,492 patents – and it’s not afraid to use them. The situation is becoming “very ugly,” said Clark, and the case could eventually escalate into an international dispute between China and the US. “Ultimately, the only real solution will be a World Trade Organization (WTO) complaint or an investment treaty from one country to another,” he said. Xiaomi did not respond to inquiries from the South China Morning Post. Eeva Hakoranta, InterDigital’s chief licensing officer, said the company will use whatever means necessary to protect its interests. She said Xiaomi has refused to pay InterDigital sufficient license fees for years and the US company is ready to enter a WTO process if there is no solution. “China does not obey the rules of a level playing field, they create their own rules, and they use their judicial system to oppress others,” Hakoranta said. “It is very sad to see this happen.” More from the South China Morning Post: Chinese President Xi Jinping says protecting intellectual property is an integral part of the country’s development plans. 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