Yesterday, Judge Gilstrap of the Eastern Division of Texas issued a preliminary injunction Order (an anti-antisuit-injunction or, more properly, an anti-interference injunction) designed to allow both the instant U.S. case filed by Ericsson and a parallel case filed by Samsung in China concerning contractual FRAND dispute on SEPs to proceed in parallel without either case interfering with the other.
This is an interesting procedural issue that we will see increased activity about as national courts from different countries seek to balance international comity–i.e., deference to the sovereignty and jurisdictional independence of another country–with enforcing national rights when parties in global disputes forum shop to file suits in perceived favorable countries. An important undertone in this case was that the China court’s procedure when enjoining Ericsson from enforcing its SEPs anywhere else in the world did not have the timely notice and opportunity for the sued party to respond that is provided and expected in U.S. courts. Further, Judge Gilstrap sought to limit interference with the China action and its procedures. For example, he did not preclude Samsung from proceeding in the China action or require Samsung to timely serve Ericsson documents filed in China (which is not provided for in the China court’s procedures). But he did Order that Samsung indemnify Ericsson if Ericsson is subject to any fines in the China action based on Ericsson proceeding in the instant U.S. case.
It will be interesting to see whether and to what extent the China court responds to Judge Gilstrap’s order, his effort to minimize interference with the China Action, and his statement that “Without hesitation this Court equally insists that it be permitted to adjudicate the issues raised here pursuant to its own legitimate jurisdiction and without interference.”
Ericsson and Samsung develop and make cellular products and both have substantial global portfolios of SEPs from many countries directed to 2G, 3G, 4G and 5G cellular standards. Samsung and Ericsson have entered cross-license agreements in the past, the most recent being in 2014 that expired at the end of 2020. The parties’ negotiations in the past year to renew their cross-licenses were not successful.
On December 7, 2020, Samsung filed a complaint in the Wuhan Intermediate People’s Court of Hubei Province (“the China Action”) asking the China court to set global licensing terms and rates on Ericsson’s 4G and 5G SEPs (note: Samsung unsuccessfully tried to file the Complaint on December 4). Unlike in the United States, the filings in the China Action only exist in paper form and are not available to the parties or the public to electronically download online; further, Samsung was not required to simultaneously provide a copy of its Complaint to the sued party, Ericsson.
On December 11, Ericsson filed the instant lawsuit and provided Samsung notice thereof that same day, unaware of Samsung’s China Action. Ericsson later amended its Complaint to allege both contract-based and patent infringement-based actions.
On December 14, Samsung filed in the China Action a “Behavior Preservation Application” seeking an anti-suit injunction to prevent Ericsson from seeking relief on its 4G and 5G SEPs anywhere else in the world. At the same time, Samsung also filed an “Application for Delaying Serving the Behavior Preservation Application” that asked the China Court not to inform Ericsson of the Behavior Preservation Application until after the China Court ruled on it so that Ericsson would not have the opportunity to file a lawsuit in another country (like the instant one) that could interfere with the China Court’s ruling. This Behavior Preservation Application is like a hybrid temporary restraining order/preliminary injunction in the U.S.: (1) like a temporary restraining order (TRO) in the U.S., the Behavior Preservation Application may seek relief ex parte, meaning without notice to the other party, but (2) unlike a temporary restraining order in the U.S. that is limited to 14 days, the Behavior Preservation Application is enforced throughout the entire China Action, like a preliminary injunction in the U.S.
On December 17, Samsung told Ericsson about the China Action, but did not provide Ericsson with any of the filings. Because the China Action is done solely on paper with no online documents available for download, Ericsson would not have access to the filings until they were provided by Samsung or the China court. On December 21, Samsung again asked the Chinese Court to enter the anti-suit injunction. On December 22, Samsung finally provided Ericsson with a copy of the Complaint in the China Action, but nothing else. On December 23, Samsung made filings in the China Action to provide for a bond as security for an anti-suit injunction.
On December 25, the Chinese Court issued an anti-suit injunction (what Judge Gilstrap’s order refers to in shorthand as the “ASI”) that enjoined Ericsson from seeking relief in any court anywhere in the world regarding Ericsson’s 4G and 5G SEPs, where Ericsson was enjoined from:
- applying for any preliminary and permanent injunctive relief or administrative measures before any courts, customers offices, or administrative enforcement agencies either in China or other countries and regions or through any other procedures against [Samsung entities] and their affiliates, and other subjects which manufacture, use, offer to sell, sell or import Samsung telecommunications products, in terms of the 4G and 5G SEPs involved in this Case, and the Respondent and its affiliates shall immediately withdraw and suspend such claims that have already been filed;
- … applying for the enforcement of any preliminary and permanent injunctive relief or administrative measures or that has been granted or is likely to be granted by any courts, customs offices, or administrative enforcement agencies either in China or any other countries and regions or through any other procedures against [Samsung entities] and their affiliates, and other subjects which manufacture, use, offer to sell, sell or import Samsung telecommunications products, in terms of the 4G and 5G SEPs involved in this Case;
- … requesting any courts either in China or other countries and regions to adjudicate the licensing terms (including the royalty rate) or royalty amount in terms of the 4G and 5G SEPs involved in this Case and the Respondent and its affiliates shall immediately withdraw or suspend such claims that have already been filed;
- … initiating any legal proceedings requesting to determine whether the Respondent and its affiliates have fulfilled their FRAND obligations in terms of the present negotiations for licensing the 4G and 5G SEPs involved in this Case before any courts either in China or other countries and regions, and the Respondent and its affiliates shall immediately withdraw or suspend such claims that have already been filed;
- … requesting any courts either in China or other countries and regions to order [Samsung entities] to withdraw this application for behavior preservation or to prevent [Samsung entities] from applying for the enforcement of the behavior preservation ruling issued by this Court, and the Respondent and its affiliates shall immediately withdraw or suspend such claims that are likely to be filed or have already been filed.
The China court gave Ericsson notice of the anti-suit injunction on December 25, after the anti-suit injunction issued. The China anti-suit injunction is in effect for the entirety of the China Action and violation of it can lead to “punish[ment]” under Chinese procedural law, such as substantial fines.
On December 28, Ericsson sought and Judge Gilstrap granted an ex parte temporary restraining order (TRO) that prevented Samsung from using the China Action to interfere with the instant U.S. action or enforcing Ericsson’s U.S. patent rights (what’s often called an anti-antisuit injunction). The TRO proceeded ex parte–i.e., Samsung did not participate–and the TRO would expire 14 days later under U.S. procedural rules. This allowed time for the parties to brief and the U.S. court to issue a ruling on whether to enter a preliminary injunction that would last the duration of the case.
Because these are novel issues, we suggest that you also review the parties’ briefs on the issues, provided below:
- Ericsson TRO-Preliminary Injunction Brief (NOTE: Ericsson’s TRO brief also was treated as Ericsson’s opening preliminary injunction brief)
- Samsung Brief Opposing Preliminary Injunction
- Judge Rader Declaration Supporting Samsung
- Ericsson Reply Supporting Antisuit Injunction
- Amicus Brief of Judge Michel (retired from Fed. Cir.)
- Amicus Brief of Prof. Mossof
- Samsung’s Sur-Reply Brief Opposing Preliminary Injunction
Further, after the ruling, Samsung filed a request for clarification–somewhat an implied motion to reconsider–stating that Judge Gilstrap’s reliance on Samsung filing a patent Complaint in the U.S. International Trade Commission (ITC) against Ericsson products on Samsung 4G and 5G SEPs was not accurate, because the patents in that ITC litigation were not alleged to be standard essential patents (SEPs). Ericsson responded that the Ericsson products at issue were 4G and 5G products and that Samsung was not technically asking the Court to reconsider or modify its order. We provide those filings below:
Judge Gilstrap applied the Fifth Circuit’s Unterweser test on whether to enter an anti-suit injunction impacting litigation in a foreign court that rejects the approach of some other regional circuits that “elevate principles of international comity to the virtual exclusion of all other considerations,” but rather “notions of comity do not wholly dominate the analysis to the exclusion of these other concerns.” Although the Unterweser test was designed for an anti-suit injunction, he followed the standard in determining whether to issue an anti-antisuit injunction in this case. The Unterweser factors are as follows in determining whether “an injunction against the prosecution of a foreign lawsuit may be appropriate when the foreign litigation would”:
- “frustrate a policy of the forum issuing the injunction”
- “be vexatious or oppressive” based on the following factors:
- “the inequitable hardship resulting from the foreign suit”;
- “the foreign suit’s ability to frustrate and delay the speedy and efficient determination of the cause”; and
- “the extent to which the foreign suit is duplicative of the litigation in the United States” where the “duplicative factor is about legal, not factual, similarity” such as “where they involve the same or similar legal bases or identical claims.”
- “threaten the issuing court’s in rem or quasi in rem jurisdiction” (e.g., court’s jurisdiction over property within its geographical reach, as opposed to a person or entity)
- “cause prejudice or offend other equitable principles”
Frustration of a Policy of the Forum Issuing the Injunction (E.D. Tex. here)
Judge Gilstrap ruled that the “public interest strongly supports” and the court itself has a “compelling interest in ensuring that litigation within its legitimate jurisdiction proceed in this forum.” Judge Gilstrap did not consider dispositive the fact that the first-filed action was the China Action. He also found the issues presented in both courts to be different. He concluded that allowing the China Action order to preclude proceeding in this case “would frustrate the ‘virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.'”
Vexatious or Oppressive
Because the standard for an anti-interference suit has not been addressed by the Fifth Circuit, Judge Gilstrap considered whether both litigations are “vexatious or oppressive from the posture of both jurisdictions” for purposes of this anti-interference injunction even though this factor is decided from the view point of only the U.S. court if considering whether to enjoin a foreign action in an anti-suit injunction.
Judge Gilstrap ruled that not proceeding in the U.S. action based on the China Action order would “impose an inequitable hardship on Ericsson because it will unfairly deprive Ericsson of the right to bring claims it is entitled to bring under United States law.” He rejected Samsung’s argument that the China Action order was akin to a U.S. TRO, stating it was more like an “ex parte preliminary injunction” because it is entered without the other party’s knowledge (like a U.S. TRO can be) but does not expire in 14 days (like U.S. TROs). Rather, the China Action anti-suit injunction lasts throughout the case like a U.S. preliminary injunction, but without the notice and opportunity to be heard as provided for a U.S. preliminary injunction. Judge Gilstrap found it was important here that, in the China Action and resultant anti-suit injunction, “Ericsson had none of the opportunities afforded to Samsung” in the instant U.S. case before entry of the anti-interference injunction. Further, he “did not disagree” with Ericsson’s assertion that Samsung sought to use the China Action anti-suit injunction to “unfairly but necessarily put Ericsson in a weaker negotiating position when it comes to cross licensing its 4G and 5G SEPs to both Samsung and others.”
Further, Samsung’s counsel had agreed that “parallel actions are inevitable” and that Ericsson’s U.S. case was not vexatious or oppressive. Further, the U.S. is both Ericsson’s and Samsung’s largest market and both have large offices in the U.S. that include personnel involved in the licensing negotiations.
Judge Gilstrap ruled that permitting the China Action anti-suit injunction to preclude proceeding in the U.S. would frustrate the speedy and efficient determination of legitimate causes of action in this court. In contrast, the U.S. actions “have no implication on the speedy and efficient determination of the issues raised before the [China] Wuhan Court”:
The Wuhan Court can continue to adjudicate the claims that Samsung has brought before it, pursuant to its laws and its rules of civil procedure. This Court does not intend–nor does it wish–to frustrate or delay the speedy and efficient determination of the case brought in Wuhan. Without hesitation this Court equally insists that it be permitted to adjudicate the issues raised here pursuant to its own legitimate jurisdiction and without interference.
Judge Gilstrap ruled that the U.S. and China actions were not duplicative. Even though they may be factually similar, they involve “very separate legal questions”:
Samsung asks the Wuhan Court to determine the global licensing terms, including the FRAND royalty rates applicable for Samsung’s communication products implementing all of Ericsson’s 4G and 5G SEPs. Ericsson, on the other hand, asks this Court to look at the parties’ pre-suit negotiation conduct and determine whether the parties breached or complied with their mutual FRAND obligations. The Wuhan Court is asked to provide a number. This Court is asked to evaluate conduct. The legal questions presented to each Court are different.
Judge Gilstrap had two important footnotes on the foregoing. In footnote 9, he indicates that he currently is not being asked to set a global FRAND rate, and he makes no comment on whether the court would or would not be willing to do so if asked to later in the case. Further, in footnote 10, he indicates that the issues raised by Ericsson in this U.S. case concerns negotiating a cross-license on Samsung’s SEPs, because Ericsson’s FRAND commitment includes a condition that the prospective licensee Samsung grant a reciprocal license on its SEPs. But the China Action concerns only unilateral relief to Samsung of a royalty on Ericsson’s SEPs.
Threaten the Issuing Court’s In Rem or Quasi In Rem Jurisdiction
Judge Gilstrap found that this Unterweser factor did not apply because the China contract action and the U.S. contract and patent actions are in personam actions (against a person or entity), rather than in rem or quasi in rem (against property).
Cause Prejudice or Offend Other Equitable Principles
Judge Gilstrap also discussed his understanding that Samsung had filed an ITC Complaint in the U.S. ITC “seeking injunctive relief against Ericsson for Ericsson’s 4G and 5G compliant products based on alleged infringement of Samsung’s 4G and 5G SEPs.” He ruled that, in such a situation, “[i]f Samsung can seek redress of its claims through injunctive relief in the United States, it would be the height of inequity (and hypocrisy) to allow the ASI [i.e., China Action anti-suit injunction] to tie Ericsson’s hands from doing the same.” Judge Gilstrap also found inequitable disparities based on the financial penalties that Ericsson would suffer from the China Action anti-suit injunction, but Samsung can proceed freely in the China Action and in the ITC. The actions should be “resolved on the merits and not based on unfair economic leverage gained through litigious gamesmanship” and “[e]quity demands no less.” As discussed above, after this order was entered, Samsung filed a paper stating that the ITC action does not include 4G and 5G SEPs, and Ericsson responded that the ITC action still concerned Ericsson 4G and 5G products. It is not clear this would make a significant difference in Judge Gilstrap’s determination of inequitable disparity or his overall decision, but we will see if he decides to issue a revised ruling.
Judge Gilstrap also ruled that his order of an anti-interference injunction “in no way threatens notions of international comity” because it “preserve[s] the ability for litigation to proceed in parallel” in both the U.S. and China:
No international public policy or issue is implicated by this case: Ericsson and Samsung are private parties engaged in a global commercial struggle. This Court is not instructing Samsung that it cannot continue to prosecute its claims in the Wuhan Court nor is this Court seeking to enjoin the furtherance of that proceeding. This Court believes it must act for the targeted purpose of allowing both suits to proceed without interference.
Given his focus on proceeding in a way in which neither the U.S. nor the China actions interfered with each other, Judge Gilstrap did not grant the full relief that Ericsson had sought:
- Judge Gilstrap did not order Samsung to “promptly send documents filed in the Chinese Action to Ericsson,” because he was not going to interfere with the China court’s procedure.
- Judge Gilstrap did not order Samsung to “withdraw the ASI [anti-suit injunction] as to the U.S.” or “bar Samsung from participating any further in the Chinese Action unless and until any fine related to the ASI is lifted”.
Judge Gilstrap ordered that Samsung indemnify Ericsson if Ericsson were penalized because of the instant U.S. action. This seems a creative way to signal that the U.S. court is trying to minimize its interference with the China Action while providing some practical deterrent on Samsung exercising its rights under the China anti-suit injunction that would interfere with the U.S. action. He explained this tailored remedy as follows:
[T]his Court affirmatively finds that a tailored indemnification provision will adequately address this Court’s concern that Samsung may seek the imposition of substantial fines in the Chinese Action for the purpose of creating economic leverage against Ericsson to achieve practically what it may not be able to obtain legally. This Court finds that a narrowly focused indemnification provision will ensure that both proceedings can progress on the merits without the risk of unbalanced economic pressure being imposed by one party on another.
Judge Gilstrap therefore entered the following preliminary injunction (an anti-antisuit injunction or, more accurately, an anti-interference injunction) effective until final judgment is entered in the U.S. case and without requiring a Rule 65(c) bond (as is often required when granting preliminary injunctions as security against harm to the enjoined party if the injunction were improperly entered), where Samsung is Order to:
- Take no action in the Chinese Action that would interfere with this Court’s jurisdiction to determine whether Ericsson or Samsung have met or breached their FRAND obligations as they relate to both Ericsson and Samsung’s 4G and 5G SEPs, or that would interfere with any other cause of action before this Court;
- Take no action in the Chinese Action that would deprive Ericsson or all of its corporate parents, subsidiaries, and affiliates of their rights to assert the full scope of their U.S. patent rights before any Article III Court, customs office, or administrative agency in the United States; and
- Jointly and severally indemnify Ericsson from and against any and all fines or other penal assessments levied against and actually incurred by Ericsson pursuant to the enforcement of the ASI [anti-suit injunction], either on the motion of Samsung, sua sponte by the Wuhan Court [i.e., on its own initiative], or otherwise, as such pertains, and only as such pertains, to actions Ericsson has take or takes in the future in the United States to lawfully litigate or adjudicate claims relating to the 4G and 5G SEPs identified or involved in this case.
This and other cases as well as comments by others raise several considerations that may come into play as national courts decide whether and to what extent to issue rulings that impact the sovereignty and jurisdiction of courts/agencies in other countries enforcing their own national patent rights. To some extent this may be similar to forum selection standards common in U.S. courts to determine whether an action filed in a district court in one geographic region of the U.S. should be transferred to another district court in another U.S. geographic region based on the interests of a geographic region in the subject matter of the case, location of witnesses and documents available for discovery, if one court has more expertise in the subject matter of the case than another court, etc.
Some issues that might be considered in SEP international forum selection might include balancing some of the following considerations:
SEP Value In Each Country. Court’s might consider the value of SEP rights granted in one country as compared to the value of SEP rights granted in another country in the context of the instant dispute. For example, if 95% of the SEPs in a global portfolio are U.S. patents and 95% of the infringing/licensed activity is in the U.S., that might counsel deferring to U.S. court resolution because U.S. rights might have an overwhelming practical impact on the dispute. But it gets murkier for cases that do not have such extremes and depending on the specific blend of national patents in a portfolio or location of infringed/licensed activity. For example, some courts have held that Chinese patents have half the value of U.S. or European patents, raising the issue of how much weight to give the Chinese patent portion of a global portfolio.
Procedural Due Process In Each Country. Court’s might consider whether and to what extent each country provides procedural safeguards during their process toward resolution. For example, in this case there appears to be significant differences in the China court and U.S. court provision of notice and opportunity to be respond to requests for relief. And there may be further procedural differences. For example, the U.S. has the broadest provisions in the world for obtaining documents and witness testimony from parties and non-parties. Further, U.S. federal courts provide online access to parties and the public to court filings at the time they are filed (unless sealed for confidentiality reasons). Any procedural due process concerns also may be tempered depending on the national patent rights at issue. For example, a U.S. court may have less concern about a China court’s procedures when dealing with Chinese patents in a portfolio as compared to U.S. patents in that portfolio.
Nature of Lawsuit. SEP lawsuits generally are those that (1) seek a determination of infringement/noninfringement of SEPs, (2) seek determination of contractual rights under a commitment to a standards organizations, such as a commitment to license SEPs on FRAND terms or (3) seek to assert antitrust law against SEP enforcement activities. The latter–antitrust lawsuits–are falling out of favor in the U.S. as recent court decisions appear more inclined to dismiss antitrust complaints and apply traditional patent and contract law to SEP disputes. Whether an SEP is valid or infringed is an issue of national law, which might counsel toward resolution of such issues in the corresponding national court. Determining contractual rights is somewhat of a mixed bag because it involves applying contract principles of the country governing the operative standards licensing commitment based on underlying national patent rights. For example, a commitment made under U.S. contract law would seem to counsel resolution in the U.S. But the law of the country governing the licensing commitment so far has not seemed determinative–e.g., ETSI 4G and 5G technology FRAND commitments made under French law are routinely litigated in the U.S., U.K. and China, rather than France.
Further, the nature of the contract remedy sought may matter. In this case, Judge Gilstrap found that the remedies sought were not conflicting: The China Action sought a court determination of a specific FRAND royalty, and the instant U.S. action sought a determination of whether either party breached contractual obligations under the FRAND commitment. The specific contractual relief sought might impact the consequences of any error in a court’s considering foreign patent rights and values. For example, there might be a larger impact of such error when a court determines a specific FRAND royalty as compared to when a court determines a breach of contract issue of whether a party’s licensing offer fell within a FRAND range in compliance with a commitment to offer FRAND licenses.
Tailoring Relief. A court might consider its ability to tailor relief in a manner that minimizes interference with the jurisdiction of foreign courts. In this case, Judge Gilstrap made this an important part of the relief granted to create an anti-interference injunction to prevent the Chinese Action from interfering with the U.S. case, rather than an anti-suit injunction that would exercise broader control of the China proceedings.
The U.K. Supreme Court’s Unwired Planet decision that enjoined a party from selling infringing products in the U.K. absent a global license to SEPs on terms determined by the court also had several safety valves and limits to respect international comity, such as: the global royalty could be modified later if a national court of another country assesses a different value for patents of that country; and a party can preserve the right to adjust the global royalty if significantly valuable patents are later determined by a national court to be invalid, not infringed or not essential.
As we are used to in the SEP area of law, we will await further court decisions here and abroad to see how these issues are developed.