This month’s “CLIP” is a working paper by Igor Nikolic discussing the recent rise of anti-suit injunctions (ASIs) in litigation concerning standard essential patents (SEPs). Dr Nikolic addresses the potential downsides of courts granting overly broad ASIs and proposes three measures that, in his view, would better incentivise parties to focus on resolving SEP disputes through the determination of appropriate FRAND terms.
FRAND licensing disputes between SEP holders and those implementing their technology are typically global in nature. A trend that has been emerging in FRAND litigation in recent years is for parties to seek an ASI from the court in one jurisdiction to prevent the opposing party from commencing (or continuing) proceedings in other jurisdictions. In response, other courts may then grant an anti-anti-suit-injunction (AASI) (sometimes also known as an anti-interference injunction or AII) which prevents the first party from seeking or enforcing an ASI. Such disputes may escalate still further, with courts having granted AAASIs (also known as A3Sis) and even A4SIs. Another remedy that may be available is an anti-enforcement injunction (AEI), which stops a party from enforcing a foreign judgment in a foreign country.
Arguments in favour of ASIs include that they facilitate global disputes being heard by one court, thereby preventing parallel judgments and avoiding wasted time and costs incurred by parties litigating across different jurisdictions. This can be desirable in a FRAND context, particularly as there are a number of actions available to SEP owners and implementers which, if commenced in parallel, can make it more difficult to resolve disputes efficiently and fairly. For example, SEP owners may sue for damages and/or an injunction for patent infringement on national patents, as well as seeking a declaration that the SEP holder has offered FRAND licence terms. Implementers may bring patent invalidity proceedings or argue that the SEP owner has breached its FRAND obligation or infringed competition law by demanding supra-FRAND royalty rates. If different types of claim are filed in different jurisdictions they can impact each other and, in certain circumstances, force a party to settle all litigation where, for example, a settlement becomes necessary to avoid an injunction.
However, as Dr Nikolic notes, there may be circumstances in which the broad availability of ASIs could inhibit the efficient resolution of SEP disputes. Parties are potentially incentivised to focus on suing first in a jurisdiction they view as favourable to their cause and obtaining an ASI, rather than prioritising negotiating a licence in good faith. Non-compliance with ASIs/AASIs can result in monetary fines or even imprisonment for senior company employees.
Although European and US courts have generally been cautious about granting ASIs preventing parallel proceedings in other jurisdictions, European courts have shown greater willingness to grant AASIs to protect patent holders’ rights to enforce national patents and protect their jurisdictions. In the last couple of years the Chinese courts have also granted several ASIs, making China the forum of choice in a number of global SEP disputes. Going forward, Dr Nikolic cautions against the use of widely framed ASIs that impede parallel litigation, as such injunctions can contravene patent owners’ property rights, access to courts and international comity.
To resolve what he characterises as “harmful jurisdictional races in SEP disputes”, Dr Nikolic proposes three measures:
- Greater judicial restraint. Courts should revert to strict criteria for granting ASIs and use them only as an exceptional remedy, i.e. where they do not have a significant impact on international comity. In Dr Nikolic’s view, this will be hard to demonstrate in SEP disputes as an ASI may prevent the enforcement of national patents before the court in the country which granted those patents. There would then need to be strong public policy and other equitable reasons for a court to grant an ASI. The same degree of restraint may not be necessary for AEIs, although they should still be used conservatively. This is because AEIs have a narrower effect on comity as they do not inhibit foreign litigation, instead preventing the enforcement of a judgment from another jurisdiction until the case is resolved by the issuing court.
- Seeking an ASI as evidence of ‘unwillingness to license’. Companies that request ASIs could be regarded as either an unwilling licensee or an unwilling licensor under the Huawei v ZTE framework (as has been done by the Munich Regional Court). Under this proposal, implementers would risk facing an injunction in the EU if patent infringement is established without reference to the other Huawei v ZTE conditions. Dr Nikolic proposes to extend the principle to denying SEP owners injunctions if they seek ASIs in other jurisdictions.
- Greater emphasis on arbitration. Dr Nikolic suggests that FRAND licensing disputes could be resolved more quickly and cost effectively if courts encouraged parties to resolve their disputes through arbitration rather than global litigation. Another possible benefit of arbitration is that arbitrators may have greater experience in the valuation of intellectual property and be more willing to set licence terms than courts in some jurisdictions (e.g. Germany). An unjustified refusal to arbitrate could be seen as another sign of a party’s unwillingness to license under the Huawei v ZTE framework.
Courts around the world will need to consider how to react to the growing ASI trend and it remains to be seen whether different jurisdictions will continue to take diverging approaches to the granting of ASIs or whether they will become more aligned over time.
Whether or not other courts follow the approach of the Munich Regional Court in treating parties seeking these type of remedies as unwilling to license is likely to be particularly significant. In January 2021 the Munich Court, ruling on a dispute between InterDigital and Xiaomi, held that an application for an ASI could result in an implementer being classified as an unwilling licensee (as reported here). The Munich Court also decided that a truly willing implementer can be expected to declare not only its willingness to license after receipt of an infringement notice, but also that it will not seek an ASI so as to avoid unlawful interference with the SEP owner’s IP. Such judgments on the use of ASIs may create future challenges for implementers in defending SEP infringement proceedings, particularly if an implementer might lose the benefit of the FRAND defence in applying for such an injunction. While Dr Nikolic’s balanced approach commends itself, the fact that the patentee retains the choice in most cases as to where and when to start litigation suggests that true balance may continue to be hard to achieve.