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The Approach of Chinese Courts on SEPs/FRAND Disputes: Convergency or Divergency?

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In an effort to well resolve Standard Essential Patents (SEPs) licensing disputes, particularly raised by Fair, Reasonable and Non-Discriminatory (FRAND) commitment, China, after the Huawei/IDC case, has resorted to clarifying patent law by judicial interpretations of Supreme People’s Court, promulgating judicial policy by trial guidelines of higher people’s courts as well as making institutional adjustments by the National People’s Congress Standing Committee to request the SEPs litigations appealed to SPC only after the first trial. These endeavors are assumed to have the SEPs disputed resolved with certainty, predictability and consistency. However, whether these will result in convergency or divergency of judicial rules is yet to be proved. Despite the introduction of article 20 in the revised Patent Law adopted in 2020, the uncertainty as a result of applying good faith in the judicial process still needs to be addressed. Other than the CJEU Huawei/ZTE choreography, the stratified analysis of abuse of rights based on relevantly differentiate legal basis by courts of Japan and South Korea is worth noting. The first sentence of article 20 of Chinese Patent Law is more like an advocacy of importance of good faith rather than a specific rule with enforceability, while the last sentence as resorting to anti-monopoly law that needs to be self-restrictive and prudential still contains ambiguities in terms of the revising provisions by State Administration for Market Regulation. Given that, applying abuse of patent right as a buffer zone may be a way out. Despite new practice as deciding global licensing rate and issuing anti-suit injunctions (ASI) among others in recent cases, the approach of tackling issues of FRAND rate, injunctive relief as well as abuse of dominant market position is the main task for China to improve its judicial rules to make itself a favored venue of SEPs litigation globally.

Abstract

In an effort to well resolve Standard Essential Patents (SEPs) licensing disputes, particularly raised by Fair, Reasonable and Non-Discriminatory (FRAND) commitment, China, after the Huawei/IDC case, has resorted to clarifying patent law by judicial interpretations of Supreme People’s Court, promulgating judicial policy by trial guidelines of higher people’s courts as well as making institutional adjustments by the National People’s Congress Standing Committee to request the SEPs litigations appealed to SPC only after the first trial. These endeavors are assumed to have the SEPs disputed resolved with certainty, predictability and consistency. However, whether these will result in convergency or divergency of judicial rules is yet to be proved. Despite the introduction of article 20 in the revised Patent Law adopted in 2020, the uncertainty as a result of applying good faith in the judicial process still needs to be addressed. Other than the CJEU Huawei/ZTE choreography, the stratified analysis of abuse of rights based on relevantly differentiate legal basis by courts of Japan and South Korea is worth noting. The first sentence of article 20 of Chinese Patent Law is more like an advocacy of importance of good faith rather than a specific rule with enforceability, while the last sentence as resorting to anti-monopoly law that needs to be self-restrictive and prudential still contains ambiguities in terms of the revising provisions by State Administration for Market Regulation. Given that, applying abuse of patent right as a buffer zone may be a way out. Despite new practice as deciding global licensing rate and issuing anti-suit injunctions (ASI) among others in recent cases, the approach of tackling issues of FRAND rate, injunctive relief as well as abuse of dominant market position is the main task for China to improve its judicial rules to make itself a favored venue of SEPs litigation globally.

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