China’s Supreme People’s Court Again Affirms Right to Set Global FRAND Rates in Standard Essential Patents in Nokia/OPPO Case

In a decision released on September 18, 2022 by 知识产权那点事 (not yet available on the Supreme People’s Court website or China Judgements Online), China’s Supreme People’s Court (SPC) affirmed the right for Chinese courts to set global FRAND licensing rates for standard essential patents based on a nexus to China. OPPO had sued Nokia in Chongqing asking the People’s Court to set global licensing rates for Nokia’s standard essential patents (SEPs), which it did. On appeal, the SPC affirmed the right for Chinese People’s Courts to set global SEP licensing rates in a decision that tracks the earlier Sharp/OPPO case. Note OPPO suffered a defeat earlier in Europe over Nokia’s SEPs and this SPC ruling might effectively negate it by allowing for a relatively low licensing rate.

Factors relevant in the decision included OPPO is a Chinese company, a large percentage of the patents are Chinese, China will be the main source of revenue, China was location of the license negotiations, and China is where there is property that can be used for enforcement.

The SPC explained there were three issues: (1) Whether the Chinese court has jurisdiction over this case; (2) Whether it is appropriate for the original court to exercise jurisdiction over the case; and (3) As to whether the court of first instance is appropriate in this case to make a judgment on the global licensing conditions of the standard-essential patents involved.

(1) Whether the Chinese court has jurisdiction over this case

The disputed matters in this case are mainly based on the SEPs arising from OPPO’s request from Nokia to set licensing conditions (including but not limited to China’s global license rates) in accordance with the principle of fairness, reasonableness, and non-discrimination (FRAND).  OPPO is the implementer of the SEPs involved in the case, which is a  Chinese company; the counterparty, the Nokia Beijing company, a subsidiary of Nokia , is also a Chinese company. There used to be a patent licensing agreement between OPPO and Nokia. The two parties negotiated the renewal of the agreement and the licensing of some new standard essential patents when the previous licensing agreement expired. The main negotiation site is in China, and Nokia Beijing also participated in the negotiation. The statement provided by Nokia to OPPO in the process of filing a jurisdictional objection indicated that Chinese patents accounted for 46% of the SEP family involved. Based on the FRAND license commitment made by Nokia for the SEPs involved, if OPPO insists on requesting Nokia to grant a license on FRAND terms, it can be reasonably foreseen that the place of performance of the contract between the two parties will be mainly in China. Therefore, China is the main place of authorization for the standard essential patents involved in this case, the place for negotiating the license agreement, the place for the performance of a reasonably foreseeable contract after conclusion of the contract, and the principal place for the implementation of a license, and has extremely close geographical connection with the dispute in this case, so the Chinese court has the undisputed jurisdiction over this case. Nokia Corporation claims that this case does not fall within the jurisdiction of the Chinese court has no factual and legal basis. Therefore, the Supreme People’s Court refused to support it.

(2) Whether it is appropriate for the original court to exercise jurisdiction over the case

Once the patentee of a standard essential patent makes a FRAND license commitment, the licensing choice it faces is no longer a question of whether to license the implementer’s use in principle, but a question of specifically licensing the implementer’s use under what conditions. The dispute is mainly about the negotiation and conclusion of the standard-essential patent licensing contract, that is, a contracting dispute. In principle, licensing disputes are contract disputes; at the same time, in such disputes, the patentee may claim that the implementer’s unlicensed implementation of the patent constitutes infringement, which has some characteristics of infringement disputes. As mentioned above, as the patentee of the involved SEPs, Nokia Corporation has the obligation to negotiate with the good-faith implementer on reasonable terms based on its FRAND license commitment. The evidence provided by OPPO initially shows that OPPO Chongqing is located in Yubei District, Chongqing, and develops, manufactures, uses and sells mobile phone products in Chongqing. Chongqing is one of the main implementation places of the involved standard essential patents. As the people’s court where the patent involved was mainly enforced, the court of first instance had an appropriate connection with the dispute in this case, and it was not inappropriate to exercise jurisdiction over this case accordingly. Nokia argued lack of jurisdiction of the original court, claiming that the case should be transferred to the Beijing Intellectual Property Court, which lacks factual and legal basis, and the Supreme People’s Court does not support it.

(3) As to whether the court of first instance is appropriate in this case to make a judgment on the global licensing conditions of the standard-essential patents involved

The evidence in this case preliminarily shows that both parties have negotiated the global licensing terms for the involved standard-essential patents, and both parties have the will to reach a licensing agreement, which constitutes the factual basis for this case to determine the global licensing conditions for the involved standard-essential patents. Moreover, the evidence in this case also preliminarily shows that Chinese patents account for a large proportion of the standard-essential patents involved, and China is the main place where the standard-essential patents involved and the main source of revenue, and where the parties negotiate the licensing conditions of the patents involved. It is also the location where the patent license requester, namely OPPO, can provide property preservation or enforceable property. Accordingly, the SEP licensing dispute in this case is obviously more closely related to China. It is not only more helpful for OPPO to have a Chinese court set out the licensing terms, but also to facilitate the enforcement of the case judgment. In principle, the court of first instance has jurisdiction over this case, that is, it has the right to hear the disputes in this case and make judgments on the disputed issues in this case. Nokia’s claim that the court of first instance is not suitable for adjudicating the civil dispute in this case, that is, the licensing terms of the SEPs involved in the case on a global scale, lacks factual and legal basis, and the Supreme People’s Court does not support it.

The decisions (court of first instance and on appeal) are:

重庆市第一中级人民法院（2021）渝01民初1232号民事裁定书

最高人民法院（2022）最高法知民辖终167号民事裁定书

The text of the opinion from 知识产权那点事 can be found here (Chinese only).

 

 

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