US Judge Tells Chinese Court This Patent World Is Big Enough for the Two of Us

Judge James Rodney Gilstrap, U.S. District Court for the Eastern District of TexasU.S. District Judge James Rodney Gilstrap of the Eastern District of Texas. Photo: Diego M. Radzinschi/ALM

U.S. District Judge Rodney Gilstrap is not going to step aside for the Wuhan Intermediate People’s Court of Hubei Province.

The Eastern District of Texas judge blocked Samsung Electronics Co. Ltd. on Monday from enforcing an order from the Chinese court that aims to halt Ericsson Inc.’s patent licensing action in Texas.

Absent appeal, the preliminary injunction for now brings to a quick close an international showdown over the valuation of Samsung’s and Ericsson’s 4G and 5G standard-essential patents.

Samsung had argued that Gilstrap should defer to the Chinese suit because it was filed four days earlier, and that failing to do so risks offending international comity. But Gilstrap ruled that, although both suits involve assessing fair, reasonable and non-discriminatory (FRAND) royalties, they’re not identical and can both proceed.

“International comity is not offended by the issuance of an anti-interference injunction which seeks to preserve the ability for litigation to proceed in parallel,” Gilstrap wrote. “No international public policy or issue is implicated by this case: Ericsson and Samsung are private parties engaged in a global commercial struggle.”

Plus, Samsung apparently has given up on the idea of Chinese exclusivity. On Jan. 7, the same day Gilstrap heard arguments on the injunction, Samsung sued Ericsson in the International Trade Commission over different patents. “If Samsung can seek redress of its claims through injunctive relief in the United States, it would be the height of inequity (and hypocrisy) to allow the [Wuhan order] to tie Ericsson’s hands from doing the same,” Gilstrap wrote.

Samsung offices in San Jose, California. Photo: Jason Doiy/ALM

Ericsson has also brought its own ITC action against Samsung.

Monday’s ruling orders Samsung to reimburse Ericsson for any fines the Chinese court imposes on Ericsson because of the Texas litigation. It’s a big win for an Ericsson team led by McKool Smith partner Theodore Stevenson III. Kirkland & Ellis partner Gregory Arovas argued for Samsung.

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, seeking a declaration that Samsung has breached its commitment to license on fair, reasonable and nondiscriminatory (FRAND) terms. But Samsung sued in Wuhan four days earlier without Ericsson’s knowledge, asking the court to set a worldwide FRAND rate for the two portfolios. It also obtained an anti-suit injunction that blocks Ericsson from litigating the SEPs in other jurisdictions until the Chinese court can rule. Ericsson is subject to potentially hefty fines for ignoring the order.

Ericsson and McKool asked Gilstrap on Jan. 7 to issue an anti-anti-suit injunction, also called an anti-interference injunction, to neutralize the Chinese order, arguing that Samsung had “taken direct aim at the heart of both Article III and the United States patent system.” Samsung argued that anti-suit injunctions are nothing new, and have been issued repeatedly by U.S. courts seeking to block foreign court interference.

Gilstrap’s order focused on the lack of notice to Ericsson or an opportunity to be heard until after the Chinese court issued its injunction. Samsung could have let Ericsson know about the proceedings, Gilstrap ruled.

And the two suits have different objectives, he wrote. “The Wuhan Court is asked to provide a number. This Court is asked to evaluate conduct. The legal questions presented to each Court are different,” Gilstrap wrote, though he acknowledged he could ultimately be asked to set a FRAND rate before the litigation is over.

Also on hand for Ericsson at last week’s hearing were McKool partners Samuel Baxter and Nicholas Matich and Robert Earle, Ericsson vice president for patent assertion and enforcement. Kirkland partner Ed Donovan and associate Karthik Ravishankar; Gillam & Smith partner Melissa Smith; and Anthony Kahng, senior patent counsel at Samsung, also attended.

Quinn Emanuel Urquhart & Sullivan and Axinn, Veltrop & Harkrider also provide counsel to Samsung, both in the Eastern District of Texas and at the International Trade Commission.

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