The Wuhan Submarine surfaces at Christmas, to be met by a Texan TRO

In the second half of 2020, the standard operating handbook for FRAND negotiation acquired a new chapter: the “Wuhan Submarine”. Some time ago the Italian torpedo was the defensive tactic most discussed: a process of asking the slower Italian courts to rule on infringement of patents from faster European countries, thereby preventing an infringement action on those patents. In Germany, a party fearing suit might file, and periodically renew, “protective letters” to prevent an injunction in the German courts. Other implementers adopted pre-emptive strikes in the UK, seeking invalidation or a declarations of non-essentiality: Nokia used such a tactic against Interdigital and IPCom, and HTC deployed a similar approach against Nokia, also seeking expedition to get to trial in the UK before Germany. More recently, the West Coast of the US has become a good location for a first strike, with HTC, then Apple, and most recently Continental, using it against Nokia. But the downside of all such public pre-emptive actions is that they cause negotiations to come to a halt, and kick off a long period of expensive litigation before talks might resume.

Wuhan’s willingness to accept actions, and grant anti-suit injunctions (ASI) without notice and in secret gives it an edge over previous tactics: as a submarine jurisdiction, it remains hidden until needed. When the submarine surfaces, the torpedo has already struck.

Mark Cohen reported in yesterday’s China IPR [1] that the IP judiciary started to discuss ASI’s in mid-January of 2020. Chinese judges noted that their Civil Procedure rules (Article IX, Sec. 100 [2]) regarding “action preservation” would encompass anti-suit injunctions, and recommended that ASI’s should be issued by the Chinese courts. An ASI was issued by a Wuhan court in the Xiaomi v. Interdigital case, to be met by an AASI from the Delhi High Court in India.

In December, Ericsson (represented by McKool Smith) filed and served a FRAND action against Samsung in the Eastern District of Texas. It seems that Samsung (represented by Lifang & Partners) filed a suit against Ericsson in Wuhan. There is some uncertainty about which filed first: actions in Wuhan are not public in the same way that they are in the US. But before disclosing the existence of the Wuhan action, Samsung also sought an ex-parte ASI from Wuhan against Ericsson’s Texas action.

Whilst the Wuhan court might be an expected jurisdiction for a Chinese handset maker, it is not such an obvious choice for a dispute between Ericsson and Samsung. Samsung has filed the action through a local subsidiary, established in 2011 for the sale of handsets in the area. But China is no longer the market for cellular devices that it once was for Samsung: it now sells more devices in Poland than in China. Douglas Clark has noted a view amongst Chinese courts that the UK’s Unwired Planet decision has opened the door for national courts to determine FRAND [3] Whilst that may be true, it is a misunderstanding of the UK Supreme Court’s decision. It is one thing to determine FRAND as part of a decision whether to grant a national injunction on a national patent, or in resolving a contractual dispute. But in the absence of such a cause of action, it is not clear why any national court would have jurisdiction to set FRAND. Samsung itself has previously taken the position that Chinese courts are not the right place to determine international FRAND for its own portfolio [4].

On Christmas morning, the Wuhan Court issued a broad antisuit injunction preventing Ericsson from prosecuting its US action or seeking injunctive relief on its 4G and 5G patents. The Wuhan court’s reasoning appears to depend on the Wuhan case being first filed. Interestingly, the Wuhan court’s order against Ericsson purports to be effective immediately, i.e. even before service. In the Xiaomi case, the order required InterDigital to withdraw or stay the applications in India only upon service of the ASI order. However the penalty clause is toned down to be an open end “in accordance with civil procedure laws” rather than the RMB 1 million daily fine imposed in the Xiaomi case.

Ericsson reacted quickly. Yesterday was not a public holiday in the US, and they filed for and obtained a broad temporary restraining order and an anti-interference injunction. It is not specific to the injunction issued in Wuhan: it covers any action that might prevent Ericsson asserting its U.S. patents against Samsung.

Ericsson also asked for and obtained an indemnity in case the Wuhan Court fines Ericsson for participating in its US case or asserting its United States patent rights for the amount of the fine. Because this was ex parte, there is to be a follow up inter partes hearing on 7 January.

It appears that a Wuhan submarine will be, for now, a standard procedural step in FRAND disputes, closely followed by anti-anti-suit injunctions elsewhere.

[1] Wuhan and Anti-Suit Injunctions | China IPR - Intellectual Property Developments in China

[2] http://cicc.court.gov.cn/html/1/219/199/200/644.html

[3] https://rouse.com/insights/news/2020/after-unwired-planet-why-it-s-now-over-to-china-s-courts-to-set-global-frand-rates-1

[4] Case 2:20-cv-00380-JRG Document 11 pages 1 and 2