Sony Mobile injunction, damages upheld by Beijing high court in landmark Chinese SEP case

4 April 2018 10:13am
China Flag

3 April 2018. Analysis by Eliot Gao.

The Beijing High People’s Court has handed down an appeal ruling finding that Sony Mobile Communications (China) infringed a patent on national mandatory wired-encryption standards owned by domestic technology firm Xi'an Iwncomm, in what is the country's first ever case in which an injunction involving standard-essential patents, or SEPs, was issued. In addition, the appeals court affirmed an award of damages to the Chinese patent holder.

In the verdict issued on March 28 and made public today, the high court affirmed a decision made by the Beijing Intellectual Property Court last March that Sony Mobile infringed Iwncomm's Wired Authentication and Privacy Infrastructure, or WAPI, standard.

The Beijing High Court also affirmed a landmark injunction by the first-instance court that the Japanese tech company must cease infringements and pay play the plaintiff's claim for damages of 9.1 million yuan ($1.3 million), triple the licensing fees involved.

As reported by MLex last March, the Beijing IP Court issued its ruling after a hearing chaired by the court's president, Judge Su Chi.

After that ruling, local legal observers said the case was one of the first standard-essential patent lawsuits involving a national mandatory standard, and that the triple-damage penalty showed the court's increasing willingness to strengthen protection of intellectual property rights.

It is not immediately clear whether Sony Mobile will seek a retrial hearing of the case at the Supreme People's Court. 

Infringing a national mandatory standard

The Beijing High Court ruled that because the disputed patents are still valid, and Sony Mobile had implemented testing of the WAPI function in the design of devices, its behavior constituted patent infringement.

The court dismissed Sony Mobile’s argument that its use of the SEPs did not constitute patent infringement because the disputed patent was included in national mandatory standards, and that Iwncomm has signed commitments to license its patents on fair, reasonable and non-discriminatory, or Frand, terms. It also argued that the market value of the patents was very low.

In August 2015, Iwncomm, a leading Chinese supplier of Internet and information-infrastructure security technology, filed a lawsuit against Sony Mobile, claiming that the Japanese firm had infringed its WAPI patents in the production and sale of 35 types of smartphones.

Iwncomm asked for an injunction to force Sony to cease the production and sale of these devices and claimed compensation of 33 million yuan.

SEP injunctions

The high court said SEP infringement disputes should be handled differently from ordinary cases, because the patent holders are committed to licensing their patents on Frand terms.

“When the patent is included in the technical standard, and the standard is widely used, so that the patent has a ‘lock-in effect,’ it has certain public-interest attributes,” High Court Judge Jiao Yan said in the ruling.

Both companies were involved in patent negotiations from 2009 to 2015, but in that five-year process, they failed to reach licensing agreements. The court said Sony Mobile has obvious fault for delaying the negotiations.

The court also supported the first-instance court’s injunction, ordering Sony Mobile to immediately cease infringement of Iwncomm’s SEPs found in 35 of its mobile devices.

ABA 2019