Chinese Courts Confirm Jurisdiction to Set Global FRAND Terms

By Greg Ward, Senior Associate

The court judgement for the UK Supreme Court landmark Standard Essential Patent (SEP) and global FRAND (Fair, Reasonable And Non-Discriminatory) licensing case Unwired Planet v Huawei was handed down in the Autumn of 2020 (see here for additional discussion of this decision). In the decision, the UK Supreme Court confirmed the ability of the UK courts to set terms for global FRAND licenses; at the time, the UK courts were the only courts that had determined this ability.

The Unwired Planet v Huawei decision considered a number of issues, one of which was whether the UK courts were a suitable forum to hear the case; arguments against the use of the UK courts relied upon the nature of both parties on one side of the dispute, Huawei and ZTE. Both Huawei and ZTE were Chinese companies with the bulk of their respective turnovers originating in China. An element of the reasoning behind the determination that the UK courts were the proper forum for the dispute was that the alternative forum proposed by Huawei and ZTE, the Chinese courts, had not established their jurisdiction to set terms of global FRAND licenses.

At the time the Unwired Planet v Huawei decision was handed down, there was much speculation that the Chinese courts would soon determine that they, like the UK courts, were able to set terms for global FRAND licenses. This speculation proved to be correct; at the end of 2020, the Shenzhen Intermediate People’s Court ruled in Guangdong OPPO Mobile Telecommunications Co Ltd v. Sharp Corp (Oppo v Sharp) that they did indeed have the jurisdiction to set terms for global FRAND licenses. The decision of the intermediate level court was open to appeal, and indeed an appeal was subsequently filed by Sharp.

An ultimate decision in the case was handed down in August 2021, when the Supreme People’s Court (Intellectual Property Tribune) confirmed the ruling of the lower court. The Supreme People’s Court determined that the Chinese courts may determine terms for a global license where the parties have demonstrated willingness to agree a global license, and where the relevant party or parties have links to China. With specific reference to Oppo v Sharp, the court determined that based on prior licensing negotiations, the parties had demonstrated a willingness to reach a global license. The court further determined that as: most of the SEPs involved in the licensing negotiations were Chinese patents; China was the main sales location for the relevant products; the licensing negotiations were conducted in China (where Oppo were located); and the party requesting the license (Oppo) had assets in China, the requirement for links to China was also satisfied.

As a consequence of the decision from the Supreme People’s Court, the Chinese courts have joined the UK courts among the ranks of courts able to determine global FRAND licensing terms. Given the prevalence of Chinese companies in the ranks of both SEP patent holders and SEP patent implementers, the prominence of the Chinese courts in global FRAND licensing disputes seems likely only to increase.

This is for general information only and does not constitute legal advice. Should you require advice on this or any other topic then please contact hlk@hlk-ip.com or your usual Haseltine Lake Kempner advisor.