On 14 February 2022, the European Commission opened its public consultation and call for evidence for an impact assessment on standard essential patents (SEPs). After recent consultations by the US Department of Justice, the British UKIPO, and Japan’s METI, it is now the EU’s turn to invite interested stakeholders to share their views on SEP-licensing and -enforcement until 9 May 2022. In the age of the Internet of Things, SEP-licensing certainly is relevant beyond the classic telecommunications industry. The new legal framework that the European Commission seeks to set up for Europe will affect many industries, from automotive machinery, health and consumer goods, to essentially all industries manufacturing and marketing ‘connected’ devices.
In its call for evidence, the European Commission and the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, once again emphasise what the European Commission has pointed out several times in the past: SEP-licensing currently does not work seamlessly. Rather, some users have found the existing system for licensing SEPs neither to be transparent, predictable nor efficient. One issue that affects both SEP-holders and SEP-implementers according to the European Commission in its call for evidence is forum shopping as a result of SEP-related licencing disputes usually affecting many more than one jurisdiction. Once negotiations between a SEP-holder and a company using standardised technology break down, this can result in a run to the courts. Given the lack of a worldwide-forum, parties sometimes engage in a race to file first as both sides try to secure their preferred forum.
Therefore, it is interesting to hear what the European Commission said about forum shopping in SEP-litigation in a different context. Back in July 2021 the EU requested information on certain developments in SEP-case law from China at the World Trade Organization (WTO). As China provided what many perceived to be a ‘non-answer’, the EU went one step further and filed an official request for consultations with China at the WTO in February 2022. In short, the EU is accusing China of violating the international Agreement on Trade-Related Aspects of Intellectual Property Rights as Chinese courts have recently granted a number of so-called anti-suit-injunctions (ASIs) in SEP-disputes. ASIs are generally well-known in many common, rather than civil, law jurisdictions. They are a regular tool to stop a party to legal proceedings from bringing a second case in a different (foreign) court, if that second case is deemed vexatious or oppressive, and interferes with the first case. In the context of SEPs, ASIs seek to prevent SEP-holders from enforcing their patent rights in other jurisdictions, if a rate-setting case seeking to adjudicate license terms is already pending elsewhere.
Looking at the press release and the EU’s request for consultations, the primary issue here for the European Commission appears to be patent enforcement: ‘European high-tech companies [are] at a significant disadvantage when fighting for their rights. Chinese manufacturers request these anti-suit injunctions to benefit from cheaper or even free access to European technology.’ The interplay between rate-setting proceedings and injunctions for SEPs being subject to a F/FRAND-undertaking, parallel litigation in multiple jurisdictions and forum shopping more generally, appear secondary issues at best for the European Commission in this context.
Third parties might have joined consultations between the EU and China until early March 2022. In particular, US courts have taken a very different position on anti-suit injunctions in the SEP-context, claiming that anti-suit injunctions are legitimate under certain circumstances. For example, the Western District Court of Washington ruled, and the US Court of Appeals for the Ninth Circuit confirmed in Microsoft v Motorola that a court-adjudicated license would necessarily dispose of requests for injunctions in other jurisdictions, which ultimately warranted an ASI in that particular case. Similarly, in December 2021, the District Court of The Hague indicated that ASIs could be necessary and justified in certain cases in SEP-disputes once a party already a priori restricted its fundamental right to enforce its patent in court. This at first sight certainly contradicts the EU’s general condemnation of ASIs.
Looking ahead, it will be very interesting to see, how this case at the WTO progresses. Given that consultations are confidential, however, we will depend on the parties informing the public if a solution is reached. And even if the case proceeds to the panel stage, which in effect is an arbitration, we will likely only learn about the progress through the EU’s submissions once they are published. In any event, this case will shape the global framework for anti-suit injunctions in IP‑related matters, and thus will have a larger impact beyond China and the EU.