China’s Practice of Anti-Suit Injunctions in SEP Litigation: Transplant or False Friend?

In 2020, China abruptly became the largest grantor of anti-suit injunctions (ASIs), which are court orders that prevent the opposing party from beginning or continuing a proceeding in another jurisdiction. China’s use of ASIs, which were used to address patent litigation initiated in a foreign country, was explicitly supported by Party Secretary Xi Jinping in a leading publication of the Congress of the Communist Party of China (CPC).  Cases where ASIs were granted were recognized by the Chinese courts as being significant, and established potential precedents for subsequent cases.

But unlike ASIs used in common law countries, these ASIs had no domestic counterpart in China. They were directed exclusively to overseas patent litigation with no impact on parallel cases arising in China’s highly complex IP environment. Several of these ASIs were also directed to foreign global litigation campaigns and appeared to be an effort by China to silence overseas litigation and centralize, within its borders, the determination of global royalties for patents that are essential to practice industry standards. Two of the more aggressive cases were from Wuhan, a jurisdiction that previously has not been well known for patent litigation. Furthermore, cases were initially decided on an ex parte basis, meaning that they were decided with little or no notice to the affected parties, and often prescribed significant penalties for ASI violation.

Unsurprisingly, China’s use of ASIs has elicited strong reactions from its developed-country trading partners, many of whom license to Chinese manufacturers. In July 2021, the European Union (EU) filed a complaint with the World Trade Organization (WTO) seeking to force China to publish the underlying cases on the basis that (a) these cases directly affected European interests including the conduct of European courts, and (b) China has an obligation to publish cases of “general application” as part of its commitments to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The US, Canada, and Japan subsequently joined the EU’s complaint, and legislation has been introduced in the US Congress to restrict China’s use of ASIs against US litigants. In addition, judges from India to Texas reacted strongly to Chinese judicial efforts to restrict access to their courts by local litigants or rightsholders, typically by issuing a counter-remedy, such as an anti-ASI.

But could one argue that China’s use of ASIs is not so exceptional? Don’t other countries grant ASI as well? If so, does China’s use of ASIs imply a “legal transplant” similar to that of other countries that have long dealt with parallel litigation? Or is China’s use of ASIs somewhat different?

The former appears to be the dominant academic perspective.  However, there are several differences between ASIs granted in China and those granted in other jurisdictions. One difference is the strong senior political support in China for ASIs that has politicized their introduction and application in the Chinese legal landscape, especially with respect to comity, or the respect courts often show for court decisions made in a foreign jurisdiction.  Another difference is the exclusive extraterritorial reach of Chinese ASIs and their primary focus on extraterritorial setting activities. Yet another is that China’s ASI practices appear to be a new development in a long line of legal procedures that primarily affect foreigners, thereby prompting concerns regarding national treatment under the TRIPS Agreement and international conventions.

Another revealing difference between China’s and other foreign jurisdictions’ ASIs is the limited, or controlled, transparency that exists around China’s publication of ASI decisions. China already publishes only a small cohort of its cases related to patents that are essential to practicing a standard or standard essential patents (SEP) cases, and rarely publishes interim measures such as ASIs. Controlled transparency provides opportunities for Chinese courts to praise or hide the cases that they believe would be helpful for the development of China’s judicial and national interests. This seems to be particularly the case in the context of ASI; relying on Chinese case publications can lead to incomplete assessments of legal developments.

For example, a decision in the dispute Lenovo v. Nokia, in which a significant court in Shenzhen denied a Chinese party’s motion for an ASI in January 2021, was not published. This Shenzhen case has been published recently on the Supreme People’s Court website as a free-standing opinion, and yet was not obtainable on databases that I searched. Also, China did not mention this case in its submissions to the WTO regarding the EU request, nor has this case appeared prominently in Chinese judicial documents discussing the use of ASIs to address foreign SEP assertions.

In short, China’s ASI regime is distinct from those of common law systems in many aspects. Furthermore, whether or not the legal regime is a transplant, it is not exempt from justified criticism, particularly if the transplant precipitates such undesirable consequences as not providing adequate respect to the jurisdictional priorities of other courts, limiting access by the public to key decisions, inducing attorneys to deceive their colleagues or a tribunal, or potentially depriving parties of adequate due process.  Due to the continuing lack of transparency, it may be several years before we fully understand the impact of this particular transplant on China’s legal system, as well as the impact on the global ecosystem for licensing of SEPs.

This summary is derived from my forthcoming article in 5G and Beyond: Intellectual Property and Competition Policy in the Internet of Things (eds. Jonathan M. Barnett and Sean M. O’Connor, Cambridge University Press, forthcoming 2023).  A preview may be viewed here.

Mark Cohen – Contributor

 

 

 

 

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