Marshall, Texas, Versus Wuhan: Whose Court Gets to Decide Ericsson-Samsung IP Dispute?

McKool Smith’s Theodore Stevenson, left, and Kirkland & Ellis’ Gregory Arovas, right. Photos: Courtesy/David Handschuh/ALM

Ericsson and Samsung are bringing legal bazookas with them to a Thursday showdown over which court can adjudicate their 4G and 5G licensing dispute: the Eastern District of Texas or the Wuhan Intermediate Court of China.

Ericsson has lined up McKool Smith and has amicus backing from Paul Michel, a former chief judge of the U.S. Court of Appeals for the Federal Circuit. Samsung’s team includes Kirkland & Ellis; Quinn Emanuel Urquhart & Sullivan; Axinn, Veltrop & Harkrider; and Gillam & Smith. For good measure, Samsung has added a declaration from a different former Chief Judge, Randall Rader of the U.S. Court of Appeals for the Federal Circuit.

Ericsson and Samsung have been trying for nearly two years to negotiate a new five-year cross-license to each other’s global portfolio of patents essential to practicing the 4G and 5G wireless standards. Ericsson sued in Texas on Dec. 11, asking for a declaration that Samsung isn’t honoring its commitment to license on fair, reasonable and nondiscriminatory (FRAND) terms. But Samsung went to the Wuhan court four days earlier without Ericsson’s knowledge, and has since obtained an anti-suit injunction that aims to block Ericsson from litigating the SEPs in other jurisdictions—including Texas—until the Chinese court can rule.

Ericsson will ask Gilstrap on Thursday to issue an anti-anti-suit injunction that would neutralize the Chinese order. “Through its egregious conduct, Samsung has taken direct aim at the heart of both Article III and the United States patent system,” Ericsson argued in a motion signed by Dallas-based McKool partner Theodore Stevenson III. “Ericsson respectfully asks this Court to step in, stop the surprises, and issue a TRO” that will preserve the Texas court’s jurisdiction.

Samsung argues that anti-suit injunctions are nothing new, with U.S. courts in Washington state and California having issued them in the past to block companies from using foreign jurisdictions for collateral attacks. There’s no reason a Chinese court can’t do the same, Samsung argues in opposition signed by Melissa Smith of Marshall’s Gillam Smith.

The order Ericsson is seeking “would require this Court to find that the Chinese court is not a legitimate forum for the parties’ worldwide royalty dispute,” Smith writes, which would “raise serious international comity concerns.”

Other names on Samsung’s brief include Kirkland partner Gregory Arovas and Quinn Emanuel partner Kevin Hardy.

When parties dispute the same SEPs in different jurisdictions, courts often defer to the first-filed action—especially when accompanied by an anti-suit injunction. Samsung benefited from this dynamic in 2018, when it won an order from U.S. District Judge William Orrick III of the Northern District of California nullifying Chinese court injunctions that would have blocked Samsung from making and selling smartphones in that country. Samsung, represented by Quinn Emanuel in that case, settled on appeal after a Federal Circuit panel made noise during oral argument about whether Orrick had extended proper deference to Chinese courts.

Chinese courts appear to be growing more assertive with anti-suit injunctions recently. Last fall they ordered Conversant Wireless Licensing not to enforce German orders blocking Huawei and ZTE Corp. from selling phones in Germany. And according to Ericsson’s motion, Xiaomi obtained an order from the Wuhan court in September ordering InterDigital to dismiss a patent infringement suit it had filed against Xiaomi in India, and fining Interdigital $150,000 a day until it complied.

“Just like in InterDigital, neither Ericsson nor this Court was given notice that the Wuhan Court was preparing to paralyze a patent holder’s ability to protect its intellectual property rights outside of China,” Stevenson wrote in Ericsson’s motion.

The Ericsson-Samsung brawl has been years in the making. Both parties note in their filings that they needed litigation to reach agreement on their previous five-year cross-license in 2014. The parties began negotiating again in 2019 and Ericsson proposed binding arbitration last September, which it says Samsung rejected.

Ericsson then sued in the Eastern District on Dec. 11. It says in its complaint, and Samsung does not appear to dispute, that the parties are agreeable to a global cross-license, with Samsung paying Ericsson a sum of money to offset the greater royalties that could be expected from Ericsson’s portfolio. The sticking point is the amount of the payment. Neither side is saying what’s been offered, but it’s clear the sides are far apart.

Ericsson argues the Eastern District of Texas is “a natural forum to resolve this dispute.” Though its corporate parent is based in Sweden, Ericsson’s U.S. HQ is in the Eastern District. Licensing negotiations were conducted in the Eastern District, where Samsung has a cellular R&D operation. And the United States is the largest product market for both companies, Ericsson says.

Samsung, meanwhile, had already initiated proceedings in Wuhan on Dec. 7. Ericsson didn’t know about them at first—“the Wuhan Court does not have an electronic docket and filings are made in paper form,” according to Ericsson—and Samsung didn’t notify Ericsson until Dec. 17. Then on Christmas Day, the Wuhan court emailed Ericsson its anti-suit injunction. It bars Ericsson from seeking a FRAND adjudication or injunctive relief on 4G and 5G SEPs anywhere other than Wuhan, and from seeking an anti-anti-suit injunction—the order Ericsson is now asking Gilstrap to issue.

“Samsung and the Wuhan Court did not give Ericsson (or this Court) notice or any indication that the motion had been filed or was under consideration,” Stevenson writes in Ericsson’s motion.

Samsung argues Wuhan provides “a natural choice” to adjudicate the FRAND dispute. China is both the world’s largest consumer market for mobile handsets and a major manufacturing hub for much of the mobile industry. There’s nothing special about Texas for resolving a contractual dispute between Swedish and Korean companies that’s governed by French law, Samsung argues. And unlike U.S. courts, the Chinese courts are willing to set a worldwide SEP license rate. Ericsson itself argued that country by country adjudication is “needlessly inefficient” in the Unwired Planet case, Samsung says.

“Chinese courts have been a world center for IP dispute resolution, offering sophisticated courts known for their quality and fairness,” Smith writes for Samsung. And Samsung fully complied with Chinese procedures, she says. “To be sure, those rules differ from typical U.S. procedures,” she adds. “In China, the Court—not Samsung—serves Ericsson with relevant filings.”

The rules also includes the opportunity to object after being served. Instead of taking that opportunity, Ericsson directed its U.S. subsidiary to ask Gilstrap for an injunction, supporting its request “by disparaging the Chinese courts.” (Ericsson argues that Samsung explicitly asked the Wuhan court to keep Ericsson in the dark through a “hold service” request.)

Rader, the former chief judge of the Federal Circuit who resigned from the court under an ethical cloud in 2014, is backing Samsung. Rader is an honorary law professor at Tsinghua University in Beijing and says he spearheaded the first amicus brief ever accepted by a Chinese court. “In my view, there is no reason to give the Chinese court handling this global FRAND dispute any less deference than similar courts in the United States,” Rader states in his declaration. “China’s court system in the IP area is led by experienced and sophisticated judges who will provide a full and fair opportunity to be heard.”

Rader’s predecessor as chief judge, Michel, is encouraging Gilstrap in his amicus brief to consider factors beyond who filed first. “The Wuhan court’s procedures appear designed to empower a party to obtain a world-wide injunction with no meaningful opportunity to be heard,” Michel’s amicus states. “And it is unclear if a party so enjoined has any meaningful opportunity to have such an injunction reconsidered or vacated, whether by the issuing court or an appellate court.”

Matthew Dowd of Washington, D.C.’s Dowd Scheffel and Peter Corcoran of Texarkana’s Corcoran IP Law are listed as co-authors of Michel’s amicus brief.

In the end, Michel argues, Samsung’s nondisclosure of its lawsuit for 10 days could be a relevant factor for Gilstrap to consider in issuing an anti-anti-suit injunction. “Injunctive relief, after all, is a question of equity,” his brief argues.

Rader, meanwhile, says the parties can trust the Chinese IP courts, which even include “a ‘Federal Circuit-style’ central appeal court” for IP disputes. “Having visited many of these courts,” he writes, “I can personally attest that their processes often grant faster and more complete access to the adjudication process than even some U.S. courts.”

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