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Chinese court rules to affirm jurisdiction to determine FRAND terms - China Legal News

Sat, 16 Jan 2021
Categories: China Legal Trends



Shenzhen Intermediate People's Court affirms its jurisdiction over global FRAND royalty rate for SEPs for the first time.


CJO Note: On 19 Aug. 2021, China’s Supreme People’s Court handed down the final decision (2020) Zui Gao Fa Zhi Min Xia Zhong No. 517 ((2020)最高法知民辖终517号), confirming that the trial court has jurisdiction to set global SEP rates.

Recently in the case of OPPO v. Sharp, Shenzhen Intermediate People’s Court rendered a ruling, (2020) Yue 03 Min Chu No. 689 ((2020)粤03民初689号) to dismiss Sharp’s objection to its jurisdiction, confirming for the first time the jurisdiction of Chinese courts over the global fair, reasonable, and non-discriminatory (FRAND) royalty rate of Standard Essential Patents (SEP) in the form of a written ruling.

Shenzhen Intermediate People’s Court clarifies that SEP licensing disputes do not fall into typical contract or infringement disputes, making it necessary to consider a wide range of factors when determining whether it has the jurisdiction. For example, it has to consider whether China is the place where the licensed patent is exploited, the place where a patent is implemented, and the place where a license agreement is signed and fulfilled, that is, whether there is adequate connection between the SEP licensing dispute and China.

The two plaintiffs in this case are Chinese companies and their manufacturing and R&D activities take place in China. In other words, the venue of the disputed patent exploitation is China. The two defendants in this case have property rights and interests in China, which is the place where the subject matter of the case is located and properties can be seized.

Therefore, there is adequate connection between the case and China, and the Chinese court has jurisdiction over the case.

After confirming that Chinese courts have jurisdiction over the case, Shenzhen Intermediate People’s Court, in comprehensive consideration of the negotiation intentions of both parties, the FRAND principle, the principle of closest connection for dispute resolution, the principle of efficiency and other factors, held that such a ruling on a global FRAND rate by Chinese courts can improve overall efficiency and the determination of Chinese patent licensing rates shall not be separated form the patent licensing conditions worldwide.

The global FRAND royalty rates in dispute involve not only the royalty rates for 3G and 4G SEPs, but also those of essential Wi-Fi patents. There is not yet any precedent to address global royalty rates dispute for essential Wi-Fi patents in the world. Therefore, it is also the first attempt to adjudicate global royalty rates for essential Wi-Fi patents.

The court has not yet reached a final judgment on the case.

Contributors: Yanru Chen 陈彦茹

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