Samsung says Huawei's Chinese SEP injunction should be barred pending US litigation

12 February 2018 9:52am

2 February 2018. By Joshua Sisco

Samsung has asked a US judge to delay an injunction on two standard-essential patents Huawei won in China that the South Korean conglomerate said could cripple its business in the country and force it to accept an onerous licensing deal.

In January, a Chinese court ruled Samsung infringed two of Huawei’s SEPs involving 4G wireless standards and failed to comply with obligations to negotiate on fair, reasonable and non-discriminatory, or Frand, terms. The Shenzhen Intermediate People’s Court also awarded Huawei injunctions and ordered Samsung to cease its infringements of Huawei’s two SEPs immediately in its products.

Samsung’s request is the last move in a years-long negotiation and legal battle over licensing deals for the two smartphone makers' portfolios of SEPs. The companies are suing each in multiple Chinese courts and federal court in San Francisco.

In a court filing Thursday, Samsung asked US District Judge William Orrick to delay Huawei’s enforcement of the Chinese injunction while the two companies fight it out in his courtroom.

The injunction, though, is already on hold, with the Chinese judges who issued it electing to delay enforcement so the companies can continue negotiations. Samsung is also appealing the ruling, providing a separate basis for a temporary hold.

In May 2016, Huawei sued Samsung in US and Chinese courts, claiming infringement of its SEPs for 4G cellular communications technology, operating systems and software. Huawei said Samsung refused good faith negotiations for a license on Frand terms.

Samsung then filed its own infringement and antitrust counterclaims in the US, accusing Huawei of breaching its commitments license its SEPs at Frand rates in order to monopolize the market for commonly used cellular technologies.

In Thursday’s court filing, Samsung argues Huawei doesn’t actually want to force it out of China — which it says the injunction will do — but rather simply wants leverage to extract an unfair royalty rate for its global SEP portfolio.

Samsung says Ding Jianxin, Huawei’s global head of intellectual property, acknowledged just that in a 2016 speech, where he said “Even if [an] injunction order were to be enforced, does Huawei really want to kick Samsung out of China? Is it possible? Of course not…. At the end of the day, your purpose is to get the royalties in return, while using legal action as a bargaining chip.” Samsung does not specify what is cut out of the quote.

Samsung said that because of its extensive Chinese operations for manufacturing and sales, if Huawei’s injunction is upheld it “could compel an abrupt settlement of [the US case].”

Both companies are accusing the other of violating Frand principles in licensing negotiations, and both are looking to the US court to set favorable licensing terms and for orders saying the other side violated their Frand commitments.

A key part of Samsung’s argument is that Huawei’s engagement in patent hold-up — where SEP holders refuse to give licenses until their demands are met — violates US antitrust law. US antitrust and IP authorities “have all recognized the dangers of patent “hold up,” and have specifically identified injunctive relief for SEPs as abusive and anticompetitive,” Samsung writes in its filing from Thursday.

Huawei itself has made the same argument in defending itself against Interdigital in patent litigation, Samsung argues.

Recently though, US antitrust agencies made a high-profile about-face in their thinking, with Makan Delrahim, the new antitrust head at the Department of Justice, saying the bigger problem is patent “hold-out,” where technology users who license others’ inventions may threaten to withhold their investment in a new technology standard until they receive favorable royalty rates.

In a dispute between two of the world’s largest smartphone makers, how Orrick comes out on the hold-out versus hold-up issue will be of great interest to US regulators.

A spokesman for Huawei in the US did not immediately respond for comment