"We feel happy with the results that two corporations peacefully settling global patent disputes. This cross-licensing agreement once again demonstrates the value of OPPO's intellectual property rights." On October 8, OPPO's official website released a press announcement after reaching a patent license with Sharp.

On the same day, Sharp's official website also issued news that the two companies have reached a license, its management executive officer believed that the license has increased the value of Sharp's patent portfolio.

This article aims to discuss a case OPPO sued Sharp in China for standard patent licensing negotiations and licensing conditions among a series of lawsuits between the two corporations.

This case is the first time for the Supreme Court of China to make a judgment on the licensing conditions of the global patent portfolio. It affirmed that such cases are litigable in China and the Chinese courts have jurisdiction. Accordingly, the corresponding judgment points are worth studying.

1. Case Introduction

According to the public judgment document, OPPO's litigation request includes the following three points:

Confirm that Sharp’s behaviors in the negotiation, including unilateral initiation of litigation, violating FRAND’s obligations;

Determine the global licensing conditions for related patent portfolios of Sharp, involving determination of global rates by the courts;

Require Sharp to compensate OPPO for the losses caused to OPPO in violation of FRAND's obligations.

The Shenzhen Intermediate Court being the first instance, and the Supreme Court as the second instance, made a decision on the relevant content of the case in the jurisdictional objection procedure.

For the litigation request filed by OPPO, the Chinese court has identified the following issues of two aspects: the first is the issue of jurisdiction over the global standard patent portfolio license fee, the second is whether Sharp violated the FRAND principle without involving patent infringement and request for injunction.

Thereinto, the Supreme Court's view that Chinese courts can judge the licensing conditions of the global patent portfolio has given rise to widespread attention; meantime, the court also supported OPPO's request to judge Sharp's negotiation behavior that violates the FRAND principle. Compared with the adjudication fee rate, such requests may not have appeared in Chinese court cases before. It can be said that in this case, the Chinese courts showed a relatively positive judicial attitude in the judgment of standard patent licensing disputes.

2. Chinese referees on global license fees

The global patent portfolio usually contains patents granted in accordance with the laws of various countries. The British courts took the lead in adjudicating the global license fee in a case, causing many parties took the initiative to go to the UK for requesting a judgment on the global fee rate.

The opposite view is that the judgment of the entire patent portfolio by one country’s court is beyond the jurisdiction of that country’s law. Even though there are disputes, the existence of such claims and the behavior of the parties show that they have certain practical significance.

This time, the Chinese Supreme Court’s judgment in the case of OPPO and Sharp also showed the attitude of the Chinese courts at different levels, that is, the judgment of global license fees is actionable and jurisdictional in China.

In this case, the Supreme Court held that the negotiations between the two parties included global licensing conditions, negotiations have been arranged in China, most of the patents in the patent portfolio were also Chinese patents, and the implementation place of the implementer and source of income are also mainly in China, and there is enforceable property in China. Therefore, it is considered that Chinese courts may judge global rates.

3. About Chinese judges confirming violations of FRAND principles

In the case of OPPO and Sharp this time, the courts of the two instances made almost the same determination on the nature of such cases. Shenzhen Intermediate People's Court believed that such cases are neither typical contract disputes nor typical infringement disputes. The Supreme People's Court also basically agreed with the said determination and regarded it as "a special type of dispute with a relatively more contractual nature", combining with the characteristics of contract disputes and patent infringement disputes.

Based on the above-mentioned determination, the Shenzhen Intermediate People's Court defined the negotiating behavior in violation of the FRAND principle as liability for negligence in contracting the rules. The first-instance adjudication held that before the license was reached, the right holder had the pre-contract obligation due to the FRAND declaration, and the negotiating parties had a special trust relationship with each other, when the standard-essential patentee violated the FRAND/RAND principle and the principle of good faith, causing economic losses to the implementer of standard-essential patent, the plaintiff may request the said patentee to bear responsibility for negligence in contracting.

In the second instance of the jurisdictional objection procedure, Sharp did not make a targeted appeal on this point, accordingly, the Supreme Court did not state a corresponding argument.

4. Summary of the court decision

In the "Regulations on the Causes of Civil Cases" newly implemented from January 2021, the "disputes over standard essential patent royalty" has been listed as an independent cause. For the license fee for a standard patent judged by the court, whether it is a domestic patent portfolio or a global patent portfolio, there is no substantial difference in logic that whether it is judicable or not.

From IPRdaily

October 21st, 2021