Huawei Patent Case Shows Chinese Courts’ Rising Appeal for IP Disputes

June 12, 2018 Updated: June 12, 2018    

A smartphone patent fight between Chinese telecom firm Huawei and South Korean firm Samsung Electronics could reach a global resolution through a ruling by a Chinese court, a development that reflects the trend of corporations turning to China’s opaque legal system as a quick way of winning intellectual property disputes.

The size of the U.S. market and the strength of the country’s independent judiciary have historically given its courts the final say in most big cross-border patent disputes.

But this case is being closely watched because it has set up a clash between China and the United States’ judicial systems, with a U.S. judge instructing Huawei not to enforce a ruling the company won against Samsung in China, said Erick Robinson, a Beijing lawyer who previously was the Asia patent director of U.S. chipmaker Qualcomm.

“This has never happened before, at least not on this scale,” Robinson said in a recent interview.

Huawei filed lawsuits in both the United States and China in 2016, alleging Samsung used its cellular communications technology without authorization and has unreasonably delayed entering into a licensing agreement. Samsung has denied the allegations and accused Huawei of seeking “grossly” inflated licensing fees.

A man holds a Samsung S9+ smartphone at the Mobile World Congress (MWC), the world’s biggest mobile fair in Barcelona, Spain on Feb. 26, 2018. (Pau Barrena/AFP/Getty Images)

In January, the Intermediate People’s Court of Shenzhen, China, outpaced a federal court in San Francisco, ruling for Huawei and issuing an order to block Samsung’s Chinese affiliates from manufacturing and selling 4G LTE smartphones in China.

If the order goes into effect, Samsung would face great pressure to settle because it has large plants in China and has sold millions of phones there, said Robinson.

Huawei and Samsung both declined to comment.

Quick Judgments

The judge hearing the parallel U.S. case in April ordered Huawei not to enforce the Shenzhen court’s ban because it would essentially force Samsung to accept Huawei’s demands for licensing fees, “with impacts percolating around world.”

But several legal experts said that Chinese courts could ultimately enforce the ban against Samsung directly.

Both the Shenzhen and San Francisco decisions are under appeal, so a direct conflict between the two judicial systems could still be averted.

China‘s courts are under Communist Party control, and Gaston Kroub, a patent lawyer in New York, said the lack of judicial independence is still the biggest obstacle to Chinese courts’ broader acceptance. Some could see bias in the Shenzhen court’s decision to rule in favor of Huawei, which is headquartered in the southern Chinese city.

But speed is a big advantage of Chinese courts, which, unlike their U.S. counterparts, sharply limit the volume of documents parties can seek from each other.

“You get a really quick adjudication of claims and they do it in a really smart way,” said David Pridham, chief executive of Texas-based patent consultancy Dominion Harbor.

Kroub said Chinese courts are also more willing to issue harsh injunctions like the one the Shenzhen court handed down in the Huawei-Samsung case, whereas U.S. courts prefer to award damages. Such powerful relief could appeal to companies under certain circumstances, he said.

For example, “I could cripple competitors by shutting down their manufacturing,” said Kroub.

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