WIPO ARBITRATION: A PROMISING SOLUTION TO THE INJUNCTION CHAOS OF FRAND DISPUTES.

Date01 April 2023
AuthorChen, Yi

INTRODUCTION

The legal battles in the telecommunications industry are fierce. The fact that no single industrial player is the single global leader in 5G technologies stimulates a sweeping wave of patent cross-licensing throughout the industry. (1) Standard-setting organizations and standard development organizations play important roles in developing 5G technical standards, which provide technical specifications for equipment by different manufacturers. (2) Many technologies included in industrial standards also "appear in granted patents or pending patent applications." (3) To help promote subsequent licensing transactions within the industry, especially to reduce the time of resolving patent enforcement disputes and conducting patent licensing negotiations for each jurisdiction, (4) standard-setting organizations urge their members to grant irrevocable licenses for such standard-essential patents (SEPs) with fair, reasonable, and nondiscriminatory (FRAND) terms. (5)

Despite patent prosecution and enforcement falling within national courts' exclusive jurisdiction, (6) patent licensing, as part of the commercialization of patent rights, is global. (7) The complex reality is, though standard-setting organizations ask their members to license patents on FRAND terms, out of antitrust concerns, the organizations also purposefully avert themselves from providing details on the definition of "fair, reasonable, and non-discriminatory." (8) Members are left to negotiate the licensing terms, especially licensing rates, on their own. As a result, major industrial players rush to courts of major markets and seek injunctive relief in order to add bargaining power in their FRAND term negotiations. (9) One particular type of injunction frequently sought is an anti-suit injunction (ASI), which is "issued by a court in one jurisdiction to prohibit a litigant from initiating or continuing parallel litigation in another jurisdiction." (10) Courts in the United States, United Kingdom, Germany, France, and China are among the major jurisdictions issuing ASIs in FRAND disputes. (11) ASIs in FRAND disputes lead to the concern that parties are motivated to file lawsuits in different jurisdictions while a FRAND negotiation is ongoing, which subverts the very purpose of establishing the FRAND term regime. (12)

But this is not the end of the game. On January 11, 2021, upon motion by Ericsson Inc., the United States District Court for the Eastern District of Texas granted a modified anti-interference injunction, enjoining Samsung Electronics Co., Ltd. and its affiliates from taking any action in a parallel case, filed in the Wuhan Intermediate People's Court of Hubei Province, China, that would interfere with the Texas court's jurisdiction over the breach of FRAND obligations. (13) The decision by the Eastern District of Texas marks the United States as a jurisdiction granting "anti-ASIs." (14) The prevalence of ASIs and anti-ASIs demonstrates the slippery slope of parties' forum shopping and initiating of vexatious litigations. On October 27, 2022, the Court of Appeal of England and Wales ruled that an SEP owner is entitled to an immediate injunction against an SEP implementer before a court decides on the FRAND terms, unless and until the implementer agrees to accept the FRAND terms to be determined. (15)

This Note proposes developing the World Intellectual Property Organization (WIPO) arbitration mechanism to resolve the chaos. Part II summarizes the background of FRAND terms. Part III introduces the rationales of courts of different jurisdictions in granting ASIs and ruling on global FRAND terms, examining the most recent decisions by U.K courts and Chinese courts in 2022. Part IV analyzes how the latest issuance of an anti-ASI by the Eastern District of Texas adds complexity that will frustrate the purpose of FRAND, and it summarizes the rationales of courts of different jurisdictions in their recent anti-ASI decisions. Part V analyzes why current proposals fail and proposes a WIPO arbitration mechanism. This Note delves into courts' detailed reasoning when issuing ASIs and anti-ASIs in different jurisdictions and proposes a dispute resolution mechanism outside the current territorial approach.

  1. STANDARD-SETTING ORGANIZATIONS AND FRAND TERMS

    Standard-setting organizations and standard development organizations (collectively SSOs) (16) are "industry groups that set common standards in a variety of significant areas." (17) Many SSOs create bylaws intended as enforceable contracts to bind member companies, (18) or incorporate the bylaws by reference in SSO contracts. (19) "Patents covering technology necessary to comply with a standard are 'standard-essential patents.'" (20) The Institute of Electrical and Electronics Engineers (IEEE), with its Standards Association, develops standards in industries including wired and wireless communications, power electronics, and computer technology. (21) Many IEEE standards require the implementation of technologies patented by IEEE's members. (22) When other members need to "implement either a mandatory or optional portion of a normative clause" in IEEE's standards, usually there are "no commercially and technically feasible non-infringing alternative" unpatented technical solutions. (23) As a result, IEEE requests that its members commit to licensing patented or to-be-patented "Essential Patent Claim." (24) Such licensing assurances shall either provide "[a] general disclaimer to the effect that the [patent holder would] not enforce any present or future Essential Patent Claims against" other members or "make available a license" for such claims globally, "without compensation or under Reasonable Rates." (25)

    Another major standard-setting organization is the European Telecommunications Standards Institute (ETSI), which "produces globally-applicable standards for Information and Communications Technologies." (26) Recognized by the European Union, ETSI has more than 900 members worldwide, including Apple and Qualcomm and their affiliates. (27) Like IEEE, ETSI also requires SEP holders to give an irrevocable written commitment to grant irrevocable licenses on FRAND terms and to set conditions for the "manufacture," sale, "lease, or otherwise disposal of equipment" using their SEPs. (28)

    FRAND terms aim to balance the need to reward inventors' efforts in developing SEPs and the need to make such patents available for public use. (29) First, FRAND terms serve to prevent patent "hold ups" and "hold outs." (30) A "hold up" refers to the situation where after an industrial standard incorporates an SEP, the SEP owner "use[s] the threat of an injunction to restrain infringement to extract licence terms" and royalty rates "exceed[ing] the reasonable market value." (31) A "hold out" refers to the situation where an implementer of an SEP "implement[s] a technical solution covered by a[n] SEP without paying the reasonable market value for a licence." (32) Therefore, FRAND terms serve to reduce costs for market participants. Second, FRAND aims to save both parties time otherwise spent arguing over the merits of the validity of every single patent in a licensing portfolio. (33) In addition to reasonable monetary compensation, SEP holders may also require reciprocal licensing so that the SEP holders can access any other SEPs held by licensees. (34)

    The proliferation of information and communication technology drives stakeholders to file patent applications, giving rise to rapid growth in the number of SEPs in recent years. (35) Despite standard-setting organizations' role in publishing standards and requiring commitment from SEP holders, out of antitrust concerns the specific licensing conditions are left to parties' separate and confidential negotiations. (36) As a result, due to the lack of detailed FRAND rate-setting guidance, disputes over FRAND terms arise in multiple jurisdictions. (37)

  2. JURISDICTION COMPETITION: ANTI-SUIT INJUNCTIONS AND JUSTIFICATIONS

    1. Justification for Anti-Suit Injunctions

      Courts of multiple jurisdictions, including but not limited to the United Kingdom, the United States, China, Japan, India, and Germany, are frequently involved in anti-suit injunctions or seek to exclusively rule in global FRAND dispute cases to prohibit parties from initiating or continuing parallel litigations in another foreign jurisdiction. (38)

      An ASI against a foreign lawsuit functions to prohibit the parties from bringing a relevant claim in other jurisdictions pending judgment by the order-issuing court. (39) The different standards among jurisdictions for securing an ASI produce an incentive for FRAND dispute parties to forum shop. (40) Therefore, it is necessary first to overview the different standards adopted by major jurisdictions for granting an AST

      1. The United States

        In the United States, in the absence of the Supreme Court's decision on a similar issue, circuit courts are split on the standard for granting ASIs. (41) This Part briefly introduces the standards adopted by the Ninth Circuit and Fifth Circuit, which are believed to be among "the best forums" for seeking ASIs in the United States. (42)

        The Ninth Circuit articulated its standard for granting an ASI in E. & J. Gallo Winery v. Andina Licores S.A. (43) Gallo, a California-based winery, filed suit in California against its distributor, Andina, seeking injunctive relief from a claim Andina had filed in an Ecuadorian court. (44) Gallo alleged that Andina had disregarded a forum selection clause in the distributorship agreement. (45) The Ecuadorian suit was still pending when Gallo petitioned for an ASI in California. (46)

        The Ninth Circuit lays out three issues when granting an ASI: First, a court should decide "whether or not the parties and the issues" of each litigation "are the same," and "whether or not the first action is dispositive of the action to be enjoined." (47) Second, based on In re Unterweser Reederei GmbH...

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