Offence Or Defence? China’s New Legal “Weapon” Against Intellectual Property Theft Claims and The US’ Response

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Shawn Dhue is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School. 

 

The US has started a worldwide complaint about China’s new legal strategy against intellectual property (IP) theft claims. Since the beginning of 2020, four claims of IP theft have gone to Chinese courts. Three of these claims were against some of China’s largest telecom companies: Huawei Technologies Co., Xiaomi Inc., and BBK Electronics. Ericsson AB, one of Sweden’s most prominent tech corporations, brought a fourth claim against Samsung Electronics, a South Korean telecom company. These claims have ended with the Chinese courts granting the Asian telecom companies anti-suit injunctions against their complainants.

These developments came after Beijing promised to develop a better relationship with the US during their 2020 trade deal talks. Beijing said that it would “strictly enforce patent and copyright laws.” However, the US is now concerned that Chinese courts will not fulfill these promises.

The Decision that Turned Heads: Xiaomi Communication Technology Co LTD v Inter Digital Inc

In September 2020, the Hubei Province Wuhan Intermediate People’s Court of the People’s Republic of China released the first decision in the four major cases. Xiaomi is the world’s largest smartphone producer, selling millions of devices since 2013. However, Xiaomi has been using a patent by InterDigital Inc. (InterDigital) to produce those devices. InterDigital, based in Delaware, USA, holds multiple patents for digital technology used in smartphones across the world.

When Xiaomi and InterDigital began to sever ties around July 2020, InterDigital took Xiaomi to court for patent infringement. In retaliation, Xiaomi applied for an anti-suit injunction in Wuhan. The Wuhan Court granted Xiaomi an injunction, prohibiting InterDigital from taking Xiaomi to any court. The consequence of breaking this injunction is near $1 million per week for the Delaware-based company. The world, especially the US, was shocked as this decision was the first outcome for an IP theft claim between the US and China. Little did they know that this would become the first of many.

Competing Perspectives

The US is unsurprisingly the leading complainant about China’s legal strategy. In an article describing China’s anti-suit injunctions as a “new legal weapon,” Charles Boustany, Member of the Commission on the Theft of Intellectual Property in the US, states: “China’s growth and development strategy depends on Intellectual property theft and forced technology transfer.” Importantly, the anti-suit injunction is neither new nor a legal strategy that China has created recently. The US and the UK commonly issue anti-suit injunctions. These injunctions help prevent identical intellectual property thefts in multiple jurisdictions.

Brian Pomper, a partner at Akin Gump Strauss Hauer & Feld LLP, says: “What the Chinese are doing is using this legal tool, the anti-suit injunction, to make it so Chinese courts—really the Chinese government—and nobody else decides how valuable intellectual property is.” The Chinese Embassy in the US has not responded to these comments. Many are now looking to China to respond in the wake of these actions, which conflict with Beijing’s promises mentioned above in the 2020 US-China trade deal. Beijing made these promises on behalf of political trades, speaking on behalf of the Chinese economic market without considering what private entities may do in the future. Chinese courts seem to have different plans in mind to protect the country’s flourishing technology sector.

 Importance

Concluding the war between Xiaomi and InterDigital, the two companies have reached settlements. These settlements come after InterDigital brought claims to courts in Delhi, India and Munich, Germany. Both courts agreed that Xiaomi’s anti-suit injunction was inconsistent with the law and overturned the Wuhan ruling. However, these settlements don’t change the outcome in the Wuhan court, nor the outcomes in the three other anti-suit injunction applications in different Chinese courts.

China has always departed from standard Western practices. Nevertheless, anti-suit injunctions are commonly used around the world. Therefore, the question remains of whether the US and UK using anti-suit injunctions are any different from China using them. It is important to recognize that a country may use these injunctions to protect against IP theft claims. However, if it is common in one jurisdiction, it should be allowed in others. The complaints are valid as it is a new strategy. But time is better spent thinking of new legal strategies against China’s “weapon” than trying to ban a whole country from using a typical legal claim.

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