Whether standard essential patents holders (hereinafter “SEP holders”) who have made commitments to license the patents on fair, reasonable and non-discriminatory terms (“FRAND commitments”) to standard-setting organizations should be granted injunctive relief and in what situation the granting of the injunctive relief should be restricted are hot topics in the intersection between competition law and intellectual property law in recent years. The United States Department of Justice and the United States Patent and Trademark Office jointly issued Policy Statement on Remedies for Standards-essential Patents Subject to Voluntary F/RAND Commitments in January, 2013, stating that SEP holders might try to exploit the injunction to pressure an implementer of a standard to accept more onerous licensing terms than the SEP holder would be entitled to receive consistent with the F/RAND commitment, which would violate F/RAND commitments made by SEP holders and may harm public interests; therefore, the statement advised that injunctive relief should not be given unless under certain circumstances, such as where the putative licensee is unable or refuses to take a F/RAND license and is acting outside the scope of the SEP holder’s commitment to license on F/RAND terms. Although the statement above issued by DOJ and USPTO is not binding legally, it indicates basic attitudes of these two authorities, which is also consistent with the principles of granting injunctive relief set in eBay case by the US Supreme Court. Generally speaking, the US practices in granting injunctive relief are from the perspective of patent infringement and by balancing the hardship of both sides.
Compared to the US approach, the EU prefers to solve the problem under the context of competition law. If the injunction seeking activity is deemed as an abuse of dominance conduct in violation of TFEU 102, the SEP at issue would be subject to mandatory license. On July 16, 2015, the Court of Justice of the European Union (CJEU) ruled in response to questions raised by the German court regarding circumstances in which the bringing of an action for injunctive relief, by an undertaking in a dominant position and holding an SEP, which has given FRAND commitments to the standardization body, is to be regarded as constituting an abuse contrary to Article 102 TFEU. CJEU noted that SEP holders cannot, without infringing Article 102 of TFEU, apply for injunctive relief against the alleged infringer without notice or prior consultation with the alleged infringer, even if the SEP has already been used by the alleged infringer. Specifically, CJEU required that the SEP holder shall, prior to the application of injunctive relief, alert the alleged infringer and provide a specific written offer, while the licensee shall respond in time, make counter offers and provide appropriate security. Such ruling provides the SEP licensors and licensees with guidance on their rights and obligations before the application of injunctive relief.
The development of the injunctive relief for SEP holders has always been a heated topic in competition law and intellectual property law in China, and it has been discussed actively, but with no clear conclusion. Recently, the Supreme People’s Court has provided certain clarifications in this regard in its newly issued Interpretation (II) of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases (hereinafter the “Interpretation (II)”), which could be regarded as a breakthrough step in this area.
According to Article 24 of Interpretation (II), under the following conditions, the court would generally not support the explicitly disclosed and FRAND-encumbered SEP holder’s application of injunctive relief: (i) when the SEP holder and the alleged infringer conduct negotiation on the licensing terms, the SEP holder intentionally violates its FRAND commitment, which results in the failure to conclude a patent licensing contract, and (ii) the alleged infringer is not obviously at fault in the process of negotiation.
Interpretation (II) has come into force on 1st April, 2016. In fact, the above mentioned provisions are set from patent law and tort law perspectives, which is similar to the US approach, in determining whether to grant injunctive relief, rather than by examining whether the seeking of injunction constitutes an abuse of dominant position. The Supreme People’s Court is of the view that since standards could be widely adopted, once the patent becomes a standard-essential patent, the dispute will then go beyond the scope of traditional IP infringement disputes. Thus, different from ordinary patent infringement where the subjective fault will not be considered, for an SEP infringement, it should consider subjective state when the defendants are making defenses. That is to say, when the SEP holder is at fault while the alleged infringer is not, the court may not support the injunctive relief.
As a summary of judicial practices, the above mentioned provisions of the Interpretation (II) only provide the guidance where consensus has been reached, while leaving other areas intact. For instance, the Interpretation (II) only mentions about recommended standards, but not mandatory standards; only about explicitly disclosed SEPs, but not undisclosed patents; only about the circumstances where SEP holders are at fault, but not where both parties are at fault. The Chief Justice of the Third Civil Chamber of the Supreme People’s Court stated that, at a press conference, “considering that SEP related issues are very complicated, the Interpretation (II) abandoned the idea of trying to cover relevant issue “comprehensively” when drafting the Interpretation (II). Therefore, the Supreme People’s Court only provided clarifications on the typical issues where there is consensus, while not touching upon those controversial issues. In particular, in December of 2013, the Standardization Administration of the People’s Republic of China and the State Intellectual Property Office jointly issued the Interim Provisions on the Administration of National Standards Involving Patents (the “Interim Provisions”), which clarifies that patents involved in the national standards should be essential patents. In order to keep consistent with the above mentioned Interim Provisions, the Interpretation (II) only stipulates provisions in relation to recommended standards and relevant essential patents explicitly disclosed. For the issues that are not mentioned by the Interim Provisions, such as undisclosed patents, mandatory standards and international standards, etc., they will be left to the following judicial practices.”
Despite all this, the Interpretation (II) can to some extent prevent SEP holders from taking advantages of using injunction relief to impose unfair licensing terms, which in turn may reduce the possibility of “patent hold-up”. On the other hand, the Interpretation (II) also raises requirements to the implementer of the standard during the negotiation of licensing terms in order to qualify as willing licensee who is not obviously at fault in the process of negotiation, which could in turn reduce the possibility of “patent hold-out”. The above provisions have provided certain restrictions to the application of the injunctive relief, which to some extent reflect the tendency of making the conditions of applying injunction stricter in various countries in recent years.
However, from the perspective of competition law, the Interpretation (II) does not touch upon whether and how the SEP holders’ seeking of injunction should be regulated by antimonopoly law. According to Article 17 of Anti-monopoly Law (the “AML”) and relevant practices in other jurisdictions, there could be two ways of regulating the abuse of injunction by SEP holders: first, similar to the EU approach, the abuse of injunction itself could be treated as an abusive conduct, which can be prohibited by the “catch all” provision of article 17(7) of AML; the second way is to regulate abuse of injunction only when the injunction is used as a tool by the SEP holders to compel the licensees to accept unfair licensing terms prohibited by Article 17 of the AML, such as excessive pricing, refusal to deal, exclusive dealing, tying or discrimination, etc. According to the released draft IP guidelines drafted by the NDRC and SAIC, the abuse of injunction by SEP holders is also an issue that will be regulated thereunder. Based on the language of relevant provisions, we understand that both NDRC and SAIC take the second approach mentioned above. However, how the Anti-monopoly Commission under the State Council treats the abuse of injunction by SEP holders in its final version of the IP guidelines and how relevant provision would be applied in practice remain to be tested and deserve continuous attention by antitrust field and IP industry.