THE LATEST DEVELOPMENT IN TRIAL OF IP CASES BY PRC COURTS —— IP-related anti-monopoly judicial review DING WENLIAN Shanghai High People’s Court

A Few Important Changes in Trial of IP Cases  Patent Cases: more consideration is now given to patent claims  Trade Mark Cases: taking a more and more strict approach in prohibiting trademark confusion  Copyright Cases: be more concerned about the new issues arising out of new technologies and new business models

Another Equaling Important Change  IP-related anti-monopoly dispute is an emerging and growing issue in PRC courts.

Three Cases  Dexian v. Sony  Jingdiao v. Naikai  Huawei v. InterDigital

Dexian v. Sony  Does the defendant’s act constitute illegal tie-in sale ？

 the court adopted the test in the anti-monopoly law about the legality check on tie-in sale: even if the defendants successfully realized tie-in sale between the digital devices and batteries through their patent and technology secret, such tie-in sale cannot be further reviewed for its legality unless the defendant has dominance in the relevant market Dexian v. Sony

Jingdiao v. Naikai  Does the defendant’s act constitute infringement of copyright ？

a carving software named “JD-paint”a digital control systemA carving machine Jingdiao v. Naikai

work flow running the JD- Paint program to make a design creating a Eng format file reading the Eng format file turning it into machine instructions receiving the machine instructions executing the machine instructions (carving)

 If such technical measure is protected by court, then the plaintiff’s benefits associated with its software copyright will be inappropriately expanded to cover its machines, and hence such protection would exceed the boundaries of software copyright. Therefore, the technical measure taken by the plaintiff is different from the technical measures as protected under the copyright law, and the defendant’s decoding accordingly does not constitute copyright infringement. Jingdiao v. Naikai

 from copyright law perspective: whether the defendant’s developing its own software for decoding the Eng format files is within the contral of the plaintiff’s software copyright;  from competition law perspective: whether the plaintiff’s technical measure, if protected by the court, will restrict free competition in the carving machine market. Jingdiao v. Naikai

Huawei v. InterDigital  The plaintiff accused that: 1) high pricing and discriminatory pricing; 2) unreasonable trading condition; 3) tie-in sale; 4) denial of transaction.

 The court held that each of the standard essential patents as owned by the defendant is unique and irreplaceable, and hence the license market for each standard essential patent constitutes an independent relevant market. The relevant product market in this case is actually a cluster of all relevant markets of patent licenses. The Definition of Relevant Market

Dominant Position  The defendant has full market share in each of these standard essential patent license markets, and is capable of impeding or influencing access to the relevant market by other business operators. The court therefore recognized that the defendant has dominant position in the relevant market.

Determining the Defendant’s Act  High pricing: the royalty fee for the plaintiff charged by the defendant is much higher than those for Samsung and Apple, and in addition to that, the defendant also required the plaintiff to license all of its patents to the defendant for free  Tie-in sale: bundling licenses of essential patents and non-essential ones

 license of patents package including 3G standard essential patents, 4G ones, and its globally-owned patents, such practice is widely accepted in the market and hence does not constitute tie-in sale under market dominance abusing.  the lawsuits brought by the defendant in the US do not constitute denial of transaction. Determining the Defendant’s Act

Judgement  the court ruled that the defendant immediately cease its inappropriately high and discriminative pricing targeting the plaintiff, as well as its tie-in sale of bundling licenses of essential patents and non-essential ones, and compensate the plaintiff 20 million Yuan for its losses, while the remaining claims be rejected.

Attempts in This Trial  on the issue of relevant market definition, the court defined the license market for each standard essential patent as one independent relevant market based on the irreplaceability of such patent;  on whether the royalty fee for the plaintiff is inappropriately high and discriminative, the court made a reference to the obligation of equality, reasonableness and non-discrimination as required by the European Telecommunications Standards Institute (ETSI) to which both parties are members, and also made a comparison between the terms and conditions on the defendant’s license of its patents to the plaintiff and those for Samsung and Apple, and considered the inequality in patent cross-licensing between the two parties.

Inspirations of the Three Cases  two perspectives  to clarify the boundaries between justifiable exercise of IP rights and restriction on competition (to protect free competition in technologies)  to build the analytical framework

THANK YOU FOR YOUR PATIENCE! DING WENLIAN Shanghai High People’s Court