The National Law Journal
n what some might consider a breach of several countries’ sovereignty, on August 19, 2021, the Intellectual Property Tribunal of the Supreme People’s Court affirmed a lower court ruling setting global licensing rates for standard essential patents (SEPs) including in the U.S., Germany and Japan. The Supreme People’s Court ruled in Sharp Corporation v. OPPO et al. in (2020) ???????517 ? that in SEP licensing disputes, Chinese courts can adjudicate royalty rates worldwide based on 1. whether the parties are willing to reach a worldwide license and have negotiated this; and 2. there is a close nexus to China.
On July 10, 2018, Sharp sent a licensing letter to OPPO listing SEPs for 3G, 4G, WiFi, and HEVC standards and in February 2019 held licensing talks in Shenzhen, China with OPPO seeking to license OPPO worldwide. Then, from January through April 2020, Sharp filed patent infringement lawsuits against OPPO entities in Japan, Germany, and Taiwan Island for infringing WiFi and LTE technology patents. On March 25, 2020, OPPO filed a lawsuit seeking a ruling that 1. Sharp violated Fair and Reasonable Non-Discriminatory (FRAND) licensing obligations; 2. the Court should set a global royalty rate for the SEPs; and 3. Sharp should pay compensation of 30 million RMB due to violation of FRAND obligations. The Court of First Instance ruled in favor of OPPO and set worldwide licensing rates for the SEPs.
On Appeal, the Supreme People’s Court considered the following factors:
1. The scope of the parties’ willingness when negotiating the licensing of the SEPs involved.
During the negotiation of the standard-essential patent license involved in this case, the overall preferred structure of the license proposed by Sharp Co., Ltd. is a 5-year license for 3G, 4G, WiFi and HEVC SEPs, and the scope of the license is a global non-exclusive license.
2 . The country and distribution ratio of the standard-essential patent rights involved in the licensing negotiation.
According to the preliminary evidence provided by the parties, there are many standard-essential patents involved in this case, most of which are Chinese patents, but there are also patents from the United States, Japan and other countries.
3. The main place of implementation or source of revenue for the SEPs.
The main place of business of OPPO Company and OPPO Shenzhen Company is in China, and the manufacturing place and main sales area of ??the smart terminal products involved in the case are in China. As of December 31, 2019, OPPO’s sales in China accounted for 71. 08% of total sales, sales in Europe accounted for 0.21%, and sales in Japan accounted for 0.07%. Based on the analysis of the above data, the proportion of sales of OPPO’s smart terminal products in China is much higher than that of other countries such as Germany and Japan.
4. The place of negotiation for patent license of the parties.
OPPO and Sharp have conducted license negotiations in Shenzhen, Guangdong Province, where the OPPO Shenzhen company is located.
5. The location of the property that is available for seizure or enforcement by the parties.
OPPO Company and OPPO Shenzhen Company, which are the parties requesting the patent license, have assets available for seizure or enforcement in China.
The Supreme People’s Court reasoned,
Based on the above facts, it can be seen that, first of all, the parties in this case have the willingness to reach a global license for the standard essential patents involved, and have conducted licensing negotiations on this…. Secondly, the standard-essential patent licensing dispute in this case is obviously more closely related to China. The specific manifestations are as follows: In this case, most of the standard-essential patents involved in the licensing negotiations of the parties are Chinese patents; China is the main place of implementation, main place of business or main source of revenue for the implementers of the involved standard-essential patents; China is the party’s patent licensing negotiation place; China is also the location of where property that can be seized or enforced by the requesting party is located.
A full copy of the ruling (Chinese only) is available here (2020) ???????517 ? courtesy of ???????.
This decisions follows prior Chinese rulings awarding anti-suit injunctions preventing the enforcement of foreign rulings against Chinese companies, such as the Huawei – Conversant patent litigation in Germany. As summarized by the Supreme People’s Court in their Top 10 IP Cases of 2020 Release:
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