As the world’s largest implementation country for standard essential patents (“SEPs”), China has become a hotspot for litigation over cross-border standard essential patent royalty disputes in recent years. On 4 September 2023, China’s Supreme People’s Court (“SPC”) made a final civil ruling that China is entitled to set global licensing rates for SEPs for the appeal case between Inter Digital Inc., and Inter Digital Holdings Inc. (“InterDigital”) v. Guangdong Oppo Mobile Telecommunications Corp., Ltd, and Shenzhen Branch of Guangdong Oppo Mobile Telecommunications Corp., Ltd (“Oppo”) (2023) SPC IP Civil Judgement of final instance No. 282.
In January 2022, OPPO filed a lawsuit with the Guangzhou Intellectual Property Court (“Guangzhou Court”), requesting confirmation that the SEPs held by Interdigital or to which Interdigital are entitled to license for OPPO are in line with the global licensing conditions of the global fair, reasonable and non-discriminatory principles (“FRAND principle”). The Guangzhou Court accepted the case on 17 January 2022. Interdigital raised jurisdictional objections during the defence period.
The Guangzhou Court issued a ruling rejecting Interdigital’s jurisdictional objection (2022) Yue 73 Civil Judgement of the first instance No. 195 on 13 January 2023. The Guangzhou Court held that based on the findings such as the subject matter of the license involved several Chinese patents and the implementation of the patents by OPPO occurred in China, the Chinese court, as the court where the patent right was granted, the court where the patent was implemented, and the court where the license was negotiated, had jurisdiction over this case. Furthermore, it considered itself to have jurisdiction over this case based on a conclusion that its location Dongguan City in Guangdong Province of China is the implementation place of the main patents because Dongguan City is the main R&D and manufacturing place of OPPO. Finally, it held that this case didn’t constitute duplicative litigation as it obviously differs from overseas patent infringement litigations.
Interdigital was dissatisfied with the first instance ruling and appealed to the SPC. The SPC rejected Interdigital’s appeal and upheld the first instance ruling. The SPC held that in terms of jurisdiction over standard essential patent royalty disputes, the place where the patent right is granted, the place where the patent license is implemented, the place where the patent license contract is negotiated, and the location of the property available for seizure or execution can all constitute the geographical connection point for the jurisdiction of the dispute. In this case, OPPO manufactured the subject matter of the license in China. It is reasonably foreseeable that after the two parties reach a licensing agreement, the main place of performance of the agreement will also be in China. Therefore, China is the place where the patent right is granted, the place of implementation, the place where the standard essential patent license involved in the case is negotiated and the place where the contract is reasonably foreseeable to be performed. As a result, the Chinese court has jurisdiction over this case. Although Interdigital has submitted patent infringement lawsuits against OPPO and its affiliated companies to courts in the UK and other countries, the SPC considered that its evidence is insufficient to prove that both parties have reached an agreement on the global rate determined by the UK court.
In addition, the SPC considered that the court of the first instance exercised jurisdiction over this case appropriately because Dongguan City, where the court of first instance is located, is the main R&D and production place for OPPO, which is the main place of patent implementation and the place of reasonably foreseeable contract performance. As the court of first instance has jurisdiction over the case and has accepted it following the law, the SPC does not support Interdigital’s request to transfer the case to the jurisdiction of the Beijing Intellectual Property Court.
Regarding the issue of whether the court of first instance is appropriate to rule on the global licensing conditions of the standard essential patent involved, the SPC held that this case has the factual basis to determine this issue because the two parties have negotiated on the global licensing conditions for the standard essential patent involved, and both parties are willing to reach a global licensing agreement. Moreover, OPPO is a Chinese enterprise, and China is its main implementation place and main place of business for implementing the standard essential patent involved in the case, China is also the location where the patent license requester’s property can be seized or enforced. Therefore, in this case, the dispute over standard essential patent royalties has a closer connection with China.
From 2011 to 2023, Chinese courts accepted hundreds of litigation cases involving legal disputes over SEPs and accumulated considerable judicial trial experience. Following disputes such as OPPO v. Sharp and OPPO v. Nokia over global licensing rates for SEPs, the SPC once again made a ruling, clarifying that Chinese courts have jurisdiction. This shows that more and more standard essential patent licensing disputes involving Chinese companies will be heard in Chinese courts.