Context: A few years ago, Chinese courts started to set global FRAND rates in bilateral disputes (most recently, Nokia-OPPO) at implementers’ requests, and the country’s Supreme People’s Court (SPC) affirmed that they had jurisdiction over such matters. In the Western world, the FRAND rates of patent pools only play a role in bilateral disputes, with pool administrators at most intervening, but not being parties to FRAND disputes (June 26, 2024 ip fray article).
What’s new: Huang Xiaoying of the Chinese Enterprise Patent Observatory blog reports (June 26, 2024 EPO blog post (in Chinese)) that pool administrator Access Advance lost an appeal in the SPC against consumer electronics giant TCL. China’s top court held that Chinese courts can set global FRAND rates for SEP pools if implementers request such determination.
Direct impact: In this case, a court in Guangzhou will now resume its proceedings and set a global FRAND rate for an Access Advance video codec patent pool (unless the parties settle before).
Wider ramifications: This latest development has three implications for the EU, which has not acted very cleverly in this wider context. First, it shows that Chinese judges don’t take the EU’s WTO complaint seriously. Instead of backing down on bilateral FRAND determinatoins and the related antisuit injunctions, they’ve just doubled down. Second, the European Commission’s Directorate-General for the Internal Market (DG GROW) and the European Parliament must ask themselves whether their EU SEP Regulation proposal has actually emboldened China with respect to aggregate royalty rates. The EU used to be pro-patent pools, but has changed mind apart from DG TRADE with its WTO complaint. Third, this new development in China may give Chinese automakers as well as others with major Chinese manufacturing operations a strategic advantage over Western automakers, who without a strong connection with China will not meet the requirements for obtaining a global FRAND determination from a Chinese court. The EU has started an automotive trade war with China but hasn’t accomplished anything useful so far.
ip fray has great respect for China’s Enterprise Patent Observatory blog, despite taking more centrist positions than the latter’s consistently implementer-friendly views.
The Enterprise Patent Observatory blog refers to a press conference held by the SPC to provide an update on the application of Chinese antitrust law and landmark decisions that now represent controlling case law.
TCL brought two parallel actions against Access Advance in China: an abuse-of-dominance case (presumably seeking damages and possibly other remedies) as well as a FRAND determination case. Access Advance disputed that the Guangzhou court had jurisdiction over a FRAND rate, and appealed that question further to the SPC, which then held that Chinese courts can set global FRAND rates for entire patent pools at the request of implementers of the relevant standards.
The SPC gave China’s lower courts jurisdiction over global FRAND rates in bilateral disputes in a few other cases. In particular, OPPO has been successful with such FRAND actions against Sharp (settled), Nokia (settled) and InterDigital (ongoing). The TCL v. Access Advance decision breaks new ground, however.
SEP enforcement (including the adjudication of FRAND disputes) has now become an even bigger item on the geopolitical agenda, also in light of what USPTO Director Kathi Vidal indicated yesterday (June 27, 2024 ip fray article).