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Article: April 2018: QE Obtains Order Enjoining Huawei from Enforcing Injunctions Against Samsung In China

April 01, 2018
Business Litigation Reports

In Huawei Technologies, Co., et al. v. Samsung Electronics Co., et al., Case No.
3:16-cv-02787 (N.D. Cal. Apr. 13, 2018), Judge William H. Orrick issued an antisuit injunction barring Huawei from enforcing two injunction orders issued by a Chinese court against our client Samsung. The Intermediate People’s Court of Shenzhen had found Samsung infringed two Chinese patents that Huawei declared potentially essential (“SEPs”) to the 4G LTE standard, and enjoined Samsung from manufacturing or selling its 4G LTE smartphones anywhere in China. Given that Huawei and Samsung had both asked the Northern District of California court to decide whether either party was entitled to injunctive relief on their 3G and 4G SEPs in light of their competing breach of FRAND contract claims, Judge Orrick concluded that the Shenzhen injunctions, if enforced, might render meaningless the proceedings before him, and pose a serious risk of harm to Samsung’s Chinese operations.

Samsung and Huawei both own global portfolios of 4G LTE SEPs and agree they are contractually bound to license each other under them on fair, reasonable, and non-discriminatory (“FRAND”) terms and conditions. In 2011, the parties began discussing a cross-license for their respective patent portfolios, but disagreed on the scope and potential terms for those licenses. On May 24, 2016, while negotiations were ongoing, Huawei sued Samsung in the District Court for Northern District of California asserting Samsung infringed eleven SEPs, breached its contractual FRAND commitments, and asking for the terms and conditions of a worldwide FRAND cross-license to be set. Huawei also asked the Court to restrain Samsung from seeking injunctions on its SEPs anywhere in the world. Samsung answered and filed counterclaims, including claims for infringement of its own SEPs and a competing breach of FRAND contract claim with a request that Huawei be restrained from seeking injunctions on its SEPs.

One day later, without alerting Samsung, Huawei filed eleven separate actions in China, including ten in its home court in Shenzhen, with eight seeking only injunctive relief for alleged infringement of Huawei SEPs. The Shenzhen court issued injunction orders in two of the SEP cases on January 11, 2018. On February 1, Samsung moved for an antisuit injunction in California to enjoin Huawei from enforcing the Shenzhen injunction orders.

Microsoft v. Motorola
Before addressing the merits of Samsung’s motion, the Court summarized the Ninth Circuit’s decision in Microsoft Corp. v. Motorola, Inc., 696 F.3d 872 (9th Cir. 2012), which the Court applied. Microsoft had filed a breach of FRAND contract action against Motorola in the Western District of Washington based on the terms offered for a FRAND license to video coding SEPs, and then obtained an antisuit injunction when Motorola obtained injunctions in Germany on patents within the same portfolios. The Ninth Circuit affirmed.

Gallo Analysis
Judge Orrick relied on the Microsoft decision throughout his order, finding that all
factors under the applicable Ninth Circuit Gallo test favor Samsung. The Gallo test looks at (1) whether the parties and the issues are the same in both actions, and the US action will therefore dispose of the foreign action; (2) whether any one of the Unterweser factors applies; and (3) whether the impact on international comity would be tolerable.

With no dispute that the parties were functionally the same, the Court agreed with Samsung that the “contractual umbrella” over the US claims would necessarily dispose of the question of whether Huawei could pursue injunctions in China.

The Court also agreed with Samsung that the first Unterweser factor—violation of US public policy—was present. Finding a threat to its “ability to determine the propriety of injunctive relief in the first instance,” the Court noted it might later conclude Huawei is not entitled to seek injunction relief anywhere in the world, contrary to the Shenzhen orders, and agreed that Samsung will face imminent business harms across the world and might be forced to accept whatever royalty terms Huawei demands if the Shenzhen orders are enforced.

As for the final factor, comity, the Court agreed that granting the antisuit injunction would have a “negligible” effect on comity, since the California case was filed first, and because the scope of the injunction would be narrow, merely enjoining Huawei from enforcing injunctive relief on two patents for a time period “estimated to last less than six months.”

The Court granted Samsung’s motion, noting: “Samsung’s motion to enjoin Huawei from enforcing the injunction orders issued by the Shenzhen court is GRANTED. Huawei should not seek to enforce those orders until I have the ability to determine the breach of contract claim it chose to present in this action prior to filing the Chinese actions.”