table of contents
I. Introduction
II. The particularity of SEP licensing contract disputes
3. Feasibility of arbitration of disputes over SEP licensing contracts
4. Dilemmas or challenges in arbitration settlement of disputes over standard essential patent licensing contracts
5. Response to the dilemma or challenge of arbitration settlement of disputes over standard essential patent licensing contracts
VI. Conclusion
【Executive Summary】
In the 21st century, under the rapid development trend of 5G information and communication technology, AI artificial intelligence and the Internet of Things, the interconnection of "standards" has made technology transfer and knowledge innovation gain more opportunities and potential, and also indicates that a new round of global competition for standard formulation has opened the prelude to a new era. However, the increasing number of SEP licensing contract disputes over FRAND licensing fees has plunged stakeholders in the entire chain of the field into an extremely embarrassing litigation whirlpool, unable to adapt to the current dynamic competitive situation of rapid change. Therefore, it is necessary for the sustainable development of international intellectual property to explore alternative dispute resolution mechanisms with "arbitration" as the primary method, to examine the practical challenges faced by arbitration in resolving such disputes, and to actively provide countermeasures, so as to maximize the recognition of this path to a wider range.
【Keywords】
Standard Essential Patents, Contract Disputes, Dispute Resolution, Arbitration
I. Introduction
In recent years, various issues related to "Standard Essential Patents" (SEPs) in the field of intellectual property rights have become increasingly hotly discussed, and SEP disputes arising directly or indirectly from "licensing" have been emerging, and most of them are licensing contract disputes over whether the SEP license rate is in line with the FRAND principle. However, there is a growing trend of courts adjudicating on SEP's "global" licensing rates, with "long-arm jurisdiction" However, in view of the large differences in the adjudication strategies adopted by national courts and the determination of SEP license rates, it further stimulates SEP rights holders and implementers to file lawsuits in different countries based on their respective interests and litigation strategies, while national courts generally issue anti-suit injunctions or anti-anti-suit injunctions in accordance with the principle of jurisdiction to safeguard judicial sovereignty。 [1] In this context, the parallelization of international litigation is intensifying, court judgments are often difficult to enforce, and it is difficult to substantively solve the problem by resorting to "litigation", so "arbitration" has gradually become an option. However, compared with other common types of patents, SEP, which is both "private" and "public", makes the impact of such disputes on public rights and interests or public policies more profound, so whether the resolution of such disputes through arbitration can be proven in legal theory, and the challenges faced by this approach in practice and its response under the premise of proving can be further responded to and reflected.
II. The particularity of SEP licensing contract disputes
As a type of commercial contract, there is no problem in resolving SEP license contracts through arbitration in theory, but due to the particularity of SEP license contract disputes, it is difficult for the parties to this type of contract to resolve by consensus through "autonomy of will", which is very different from simple contract disputes caused by general "license contracts/agreements":
(1) Contract disputes are intertwined with tort, monopoly and validity disputes
SEP disputes often arise around the inability of the SEP right holder and the implementer to reach an agreement on the license fee and the corresponding license conditions, which is essentially a contract dispute arising around the "license". In the case of the sale and use of products or services containing the corresponding SEP, the implementer generally argues that the license fees and conditions proposed by the SEP right holder do not conform to the FRAND principle, and abuses the dominant market position to carry out monopolistic acts, or challenges the necessity and actual value of the SEP itself with the validity of the patent. For example, in a series of disputes between Xidian Jietong and Apple, the patent license agreement signed between the two companies in 2010 was related to the patent license fees incurred between 2010 and 2014, but Apple refused to pay when the contract expired, and after the negotiation failed, Xidian Jietong filed a lawsuit against Apple in April 2016 with the Shaanxi Provincial High Court, and Apple sued Xidian Jietong to the Beijing Intellectual Property Court in September and November 2016 on the grounds that the patent license rate was too high and the market dominant position was abused, during which Apple also sued the patent in question for lack of necessary technical featuresand filed a request for invalidation of the patent in question with the State Intellectual Property Office on the grounds of lack of novelty and inventive step, and the two also initiated more than 10 similar lawsuits or counterclaims on the grounds of trade secret infringement. Abroad, the "Microsoft v. Motorola" case handled by the U.S. court involved breach of license fees and infringement, and the "Infinite Planet v. Huawei" case handled by the U.S. court involved infringement, validity, abuse of market dominance, etc., but generally revolved around the issue of "license fees". It can be seen that although the core is a contract dispute where "the license fee cannot be negotiated", it indirectly raises the issues of infringement, monopoly and validity, so such disputes cannot simply be regarded as arbitrable license contract disputes.
(2) The ambiguity of the FRAND principle and the difference in the calculation of the license fee
How to determine the SEP license fee is always the most critical issue in SEP disputes, and it is closely related to the FRAND principle and the way the license fee is calculated. The main reason for the FRAND principle is that once the patent owned by the patentee is included in the standard system and becomes SEP, it is naturally endowed with strong dominance in the relevant market, and in order to avoid the patentee abusing its dominant market position to carry out "patent hijacking" or proposing unreasonable license fees and licensing conditions, the standardization organization generally refers to "Fair, Reasonable, and Non-discriminatory" The commitment is incorporated into the IP licensing policy, that is, the SEP right holder is obliged to grant FRAND authorization to each bona fide licensee, and at the same time, it is also necessary to ensure that the license granted is exactly the same, and the licensee under the same conditions gives the same license treatment. Unfortunately, however, there are no standardization organizations or national laws that have unified provisions on the specific connotation of the FRAND principle, what constitutes "equivalent conditions", what constitutes "discrimination", and what kind of license fee calculation method meets the "FRAND" requirements,[2] As a result, the core disputes of SEP disputes cannot be handled according to relatively uniform principles and methods, especially under the different ambiguous interpretations of different national courts and standardization organizations, and this inherent tension and conflict makes such disputes more difficult to resolve.
Further, for SEP license contract disputes, the calculation method around the license fee is also different from that of general license contract disputes. In practice, the hypothetical negotiation method, the incremental value method, the comparable agreement method, the top-down method, and the patent pool comparison method all exist, and not only the calculation method itself has a high degree of professionalism, but also the patent value, contribution rate, cost, and There are great differences in factors such as market demand, but there is no universally agreed quantifiable way to calculate SEP license fees in accordance with FRAND principles. Therefore, from an international perspective, the fact that SEP is open to all potential bona fide licensees around the world but lacks a unified method for calculating royalties seems to indicate that the reasonableness and legality of handling such disputes are controversial.
(3) The SEP itself has an impact on public rights and interests
Different from general patents, "Standard" itself is a public good and has the nature of public welfare, and it seems that it is suspected of "fake public benefit" to produce SEP by incorporating "patents" that are generally recognized as private rights into public standards through public power. On the one hand, in order to produce and manufacture related products that meet the standards and have interoperability on a larger scale, stimulate market vitality, and incorporate patented technologies into the standard system with "public" characteristics and promote the implementation, it is the historical inevitable trend of technology patenting, patent standardization and standard internationalization. However, on the other hand, SEP is generally produced in the fields of information technology, biomedicine, etc., especially in the context of the rapid development of artificial intelligence, the Internet, the Internet of Things, etc., the groups and objects affected by SEP continue to extend to every consumer in the world, and the degree is different in different countries, so that SEP rights holders can easily obtain a monopoly or dominant position in the relevant market, which will also have an indelible and profound impact on social public interests and public policies. Furthermore, on the surface, the contractual disputes between the SEP rights holder and the implementer may affect the stable development of the entire national economy due to the huge value of the parties involved and the SEP itself, especially in the current situation of increasingly fierce international competition, which may be associated with major national development strategies, resulting in such disputes often being filled with conflicts and games between multiple stakeholders, which will have a greater or lesser impact on the broader public rights and interests.
3. Feasibility of arbitration of disputes over SEP licensing contracts
In view of the controversy over whether monopoly disputes and patent validity disputes can be arbitrated, only the feasibility of arbitration in SEP licensing contract disputes will be discussed here. First, as mentioned earlier, SEP licensing contract disputes may involve monopoly or validity issues in practice, but the current SEP disputes are mainly based on infringement and contract disputes, and whether it is a monopoly or validity issue, the core dispute still revolves around "licensing", that is, regardless of whether it constitutes a monopoly or whether the patent is valid, regardless of whether the infringement is or not, the final issue to be resolved is still the issue of "license fee" or compensation for economic losses, so that the parties "cannot avoid it" It is necessary to return to the equal private subject relationship based on the principle of privity of contract. Second, the granting of patents by public rights does not conceal the essential attributes of their private rights, and the protection of public rights and interests through the protection of private rights does not mean that the protection of public rights and interests is placed under private rights, so the "monopoly" of SEP is not equal to "monopoly rights", but should be "exclusive rights", and the way in which officially authorized rights are obtained does not affect the essential attributes of private rights based on property rights,[3] and the so-called "public rights" or "public policies" may not be affected by the negation of public rights, so it cannot simply be due to its "public nature". ", and excluded it from the scope of arbitration. Third, since SEP is a private property right, it is itself an important part of the transaction and investment of civil and commercial entities in the world, and the benefits are mainly obtained through licensing, so the direct impact of such disputes is still on civil and commercial entities, and most of the disputes over SEP licensing contracts arise from the inability to reach an agreement on the license fee in accordance with the FRAND principle, and its ultimate claim is generally to compensate for losses or determine the rate and other property interests, and will not directly derogate from public power or affect the protection of public rights and interests. Therefore, it is not difficult to conclude that SEP license contract disputes are arbitrable.
Furthermore, the settlement of SEP licensing contract disputes around licensing fees through arbitration can not only alleviate the jurisdictional conflicts caused by litigation, but also create more opportunities for win-win cooperation between the parties and provide more valuable time for technological innovation through arbitration, which has been advocated and supported by major national and international institutions, and there is no lack of successful practice. For example, a 2014 order issued by the U.S. Federal Trade Commission in dealing with unfair competition between Google and its subsidiary Motorola indicated that the licensee could be brought to arbitration before negotiations break down and injunctive relief is sought in court. In 2015, the Court of Justice of the European Union expressed a similar recommendation in Huawei v. ZTE, that is, "if the parties are still unable to agree on a FRAND license for SEP after negotiations, an independent third party can be requested to rule on the terms of the FRAND license through an agreement". In addition, the WIPO Arbitration and Mediation Center adopted the Guidelines on FRAND Alternative Dispute Resolution in 2017, and the German Patent and Trademark Office published the Guidelines on Case Management of FRAND Alternative Dispute Resolution Mechanisms in 2018, both of which provide detailed guidance for the arbitration and resolution of SEP licensing contract disputes.
4. Dilemmas or challenges in arbitration settlement of disputes over standard essential patent licensing contracts
Although there is not much controversy about the arbitrability of SEP licensing contract disputes, in view of the particularity of this type of dispute, "arbitration" is still only used as an alternative dispute resolution method at present, while litigation is still regarded as the first choice despite its limitations, which shows that there are still many practical dilemmas or challenges in the arbitration path that need to be solved urgently.
(1) There are certain difficulties in reaching an arbitration agreement between the parties
The premise of initiating arbitration is that the parties naturally presuppose the starting point of the parties' joint efforts to resolve the dispute based on their genuine agreement, but the more important the interests and complex disputes involved, the more difficult it is for the parties to reach an agreement. [4] In the SEP license contract dispute, the reason for this is that, on the one hand, as the SEP right holder, initiates a lawsuit and applies for an injunction and other measures on a global scale, and the court has the highest coercive power in the promulgation and enforcement of the injunction measures, which can directly achieve the purpose of rights protection and pressure, and can force the implementer to accept the license conditions set by it in disguise; Market changes and other factors increase bargaining chips to achieve the purpose of underpayment, late payment or even non-payment of license fees, and even file counterclaims on the grounds that SEP rights holders abuse their dominant market position to implement monopoly, etc., so they are often more inclined to choose litigation rather than arbitration, but from the perspective of the two choice of litigation, it is difficult to escape the result of "losing both" in the end. Furthermore, the "finality" nature of arbitration itself also makes it difficult for any party to rashly accept the possible risk of the arbitral award being unfavorable to itself, and the parties need to reach an agreement on the scope of the arbitration, the core issues in dispute and the applicable law.
(2) There is a dispute over the arbitrability of disputes involving public rights and interests
Although SEP license contract disputes over license fees are arbitrable, once monopoly issues or patent validity issues arise in the course of disputes, arbitration is difficult to apply or has no right to apply the corresponding law to resolve them. At the same time, the basic requirements of anti-monopoly for transparency are contrary to the strict confidentiality of arbitration, and as a matter of confirmation of the rights of the state administrative or judicial organs, no other institution, including the arbitral tribunal, has the right to legally determine the validity of the patent, let alone deny, revoke or deprive the patentee of the legal rights granted by the state organs. Therefore, in the process of resolving SEP license contract disputes, if the parties file a lawsuit on the grounds of monopoly or patent validity, it will inevitably affect the final calculation and determination of the license fee, making it difficult to completely resolve such complex disputes through arbitration. Of course, there is controversy in the international community about the arbitrability of disputes involving public rights and interests, and it generally depends on the understanding and application of the so-called "public interests" or "public policy" categories by the judicial organs of various countries. [5]
In addition, if it is assumed that such disputes can be arbitrated, the following problems will still be faced: first, the definition of res judicata of arbitral awards, that is, although theoretically the award is only relative, in reality, in view of the need for SEP licensing to comply with the FRAND principle, and the selective disclosure of the parties to the arbitral award under strict confidentiality, especially the issue of patent validity, the potential licensee or SEP implementer as an outsider is still more likely to be affected by the arbitration effect, and its res judicata will also be difficult to define. Second, there is a conflict between the arbitral award and the outcome of the ruling of the administrative authority, because in practice, SEP disputes are dealt with through various dispute resolution channels such as litigation, negotiation and arbitration, but the relativity of the arbitral award is not universally binding, while the determination made by the public authority has universal effect and universality, so once the arbitral award contradicts it, it will become a new question as to which determination the parties shall prevail.
(3) The recognition and enforcement of an arbitral award still requires the assistance of the court
As a supranational platform, arbitration can greatly promote the international recognition and enforcement of arbitral awards, and can avoid the impact of enforcement due to disputes such as litigation jurisdiction, which is one of the main reasons why parties choose arbitration. However, as a non-public dispute resolution method, arbitration itself is relatively lacking in coercive power when requiring or prohibiting the parties from continuing certain acts through coercive means, or its binding force is not completely mandatory, so the arbitral award still needs to be appropriately assisted by national courts, and in most cases, it needs to apply independently in accordance with certain procedures, especially when the parties refuse to perform or apply for setting aside the award, the court's coercive intervention is indispensable. Although there are currently disputes over substantive examination and formal examination,[6] in any case, this supervision and review process indicates that once there is a problem with the arbitral award, it will eventually have to resort to the court, so the effective connection between the arbitration path of SEP licensing contract disputes and the courts, administrative agencies and relevant systems needs to be strengthened urgently.
5. Response to the dilemma or challenge of arbitration settlement of disputes over standard essential patent licensing contracts
Based on the analysis above, we believe that there are the following specific measures to deal with the above challenges:
(1) The licensees of the SEP license contract shall make every effort to persuade the licensors to agree to resolve their disputes through arbitration
The preferred solution to this challenge may still be to actively encourage SEP licensees to try to persuade the licensor to agree to resolve disputes through arbitration, because fundamentally speaking, such contracts are still commercial contracts, but in the case of cross-licensing, there are also cases of mutual persuasion in practice, and the most important way to persuade is to contrast the efficiency and positive significance of arbitration resolution through big data of cases such as long-term delay in resolution and high cost of international parallel litigation. For example, in a series of disputes between Nokia and OPPO, the two parties signed a patent license agreement in 2018, but when the agreement expired in 2021, they failed to reach an agreement on the license fee and disputes arose. In order to resolve the dispute as soon as possible, Nokia proposed to the Delhi High Court in India on February 6, 2023 to resolve the dispute by arbitration, but OPPO finally rejected the arbitration proposal on the basis of unreasonable provisions and non-bona fide acts such as Nokia still applying for an injunction against OPPO in a Brazilian court when India requested arbitration. However, on January 24, 2024, OPPO announced that it had signed a 5G patent cross-licensing agreement with Nokia, and the two parties also ended the pending litigation in various jurisdictions around the world. In addition, Huawei and Xiaomi, Huawei and Ericsson, Motorola and Sharp have all signed patent cross-licensing agreements, which shows that despite the disputes between them, they still choose to cooperate, which reflects that in the current context of international technology transfer and patent internationalization, communication and cooperation, mutual benefit and win-win results are the main theme.
(2) It is recommended that the standard-setting body propose a "dispute resolution policy" at the same time when formulating the standard
Second, when the International Organization for Standardization (ISO) or a relevant standard-setting body writes its own patent into a standard, the patent should be deemed to be in the quasi-public domain, and such a body can propose a policy similar to the three IP policies for incorporating patented technologies into the standard,[7] It is not allowed to include the technology in the standard if it requires that future disputes arising from the SEP license contract be resolved through arbitration rather than just negotiations, or that the licensor and the licensee must enter into an arbitration agreement in advance for disputes that may arise outside the license agreement. However, this approach should still be applied with caution at present, or it can only be adapted to the extent of advising, advocating or supporting the settlement of disputes through arbitration, because requiring relevant stakeholders to choose arbitration too coercively is itself contrary to its intrinsic value concept of "autonomy of will", but to some extent, compulsory arbitration is indeed one of the optional measures to efficiently handle SEP licensing contract disputes.
(3) In international economic and trade agreements, it is clarified that arbitration is the main method of dispute resolution for SEP licensing agreements
Thirdly, the provisions on intellectual property rights in relevant international treaties, especially economic and trade agreements, can impose the settlement of SEP license agreement disputes through arbitration as a treaty obligation on the members, and then enable the members to effectively implement them through domestic law. Otherwise, dispute resolution over SEP licensing agreements will remain a difficult issue to resolve. Specifically, the intellectual property dispute settlement mechanism under the WTO framework is widely accepted, and the TRIPS Agreement has also been incorporated into the General Agreement on Tariffs and Trade, but with the rapid development of international investment, it is difficult to achieve regional international treaties with high-level intellectual property protection obligations such as the USMCA Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) under the global framework of the WTO. The standard is higher, which provides more opportunities and support for the arbitration and resolution of SEP license contract disputes. In this context, it can be seen that it is feasible to write the settlement of SEP license contract disputes through arbitration into relevant international treaties or economic and trade agreements.
(4) Other measures
In addition to some of the above-mentioned measures, considering that the "contract" has always been the embodiment of the will of the "strong", when the SEP license agreement involves the field of public interest, it is also necessary to further strengthen the effective connection and standardization of arbitration with the courts and administrative agencies through the adjustment and optimization of relevant domestic laws and regulations, especially in the preservation system, temporary injunction measures system, etc., so as to ensure the smooth progress of arbitration and the effective recognition and enforcement of the award to the greatest extent. For example, the preservation procedures are more streamlined, with a clearer list of materials and a timely adjustment feedback mechanism, while in the case of injunctive measures, the case is urgent, and the failure to issue an injunction may cause irreversible serious consequences. In order to balance the interests of both parties and provide appropriate guarantees, the arbitral tribunal will be given the power to grant specific permissions, as well as for issues involving public interest or public policy, strengthen the uniformity of the procedures and methodological standards for the determination of relevant concepts and specific acts by different parties, and promote communication and cooperation, which will be of great benefit to the real resolution of SEP licensing contract disputes.
VI. Conclusion
Although it is true that the handling of SEP licensing contract disputes through arbitration is indeed facing severe challenges, the above dilemma still needs to be viewed dialectically, and there are two sides to the influencing factors behind it, and more importantly, the crux and difficulty of the current arbitration path are excavated from the problem itself, so as to provide a direction for optimization and improvement. Further, although the current SEP field is an international hot topic, it is still necessary to form an objective, rational and dialectical correct cognition of SEP, and the discussion of over-focusing on the problem itself will also be far away from the essence behind the phenomenon, forming a convergent misunderstanding of the connotation conflict and essential legal relationship between SEP and proprietary technology, and failing to see that the core high-tech technology in the current international competition background is the real killer feature, which is likely to lead to indirect neglect of enterprise innovation drive, improve the strength of scientific and technological software and hardware, There is an urgent need to participate in the formulation of international standards and other core competitiveness.
Annotations (scroll up and down to view)
[1] See Ruan Kaixin, "Territorial Restrictions on Jurisdiction in Foreign-related Intellectual Property Litigation - Taking the Jurisdictional Conflict of Standard Essential Patent Disputes as the Entry Point", Tsinghua Law Science, No. 1, 2023, pp. 165-169.
[2] See Li Zhanshuo, ""Non-Discrimination" Patent Licensing and Interpretation of the Anti-Monopoly Law - Rethinking the Case of Huawei v. IDC", Application of Law, No. 24, 2019, p. 32.
[3] See Liu Jin, "On the Understanding Misunderstanding of Intellectual Property Validity Arbitration and the Reshaping of the Related Relief System", Intellectual Property, No. 11, 2016, pp. 37-38.
[4] See Zhang Huibin and Liu Shilei, "Jurisdictional Disputes and Strategic Choices in Standard Essential Patent Licensing Disputes", Journal of International Economic Law, No. 4, 2023, pp. 85-87.
[5] See Ni Jing, Research on the Diversified Resolution Mechanism of Intellectual Property Disputes, Law Press, 2015, p. 216.
[6] See Wang Yaping, "Research on the Arbitrability of Monopoly Disputes", Shanghai Legal Research, Vol. 14, 2022, p. 214.
[7] In order to curb the expansion of private rights by patentees and balance the interests of the public, the International Organization for Standardization (ISO) proposes intellectual property policies when formulating standards for the inclusion of patents. Upon request, most ISO organizations may require the relevant patentee to make a declaration in one of three cases, if the relevant patent information has been disclosed during the development of the standard: 1. The patentee is willing to negotiate a free license with other parties on reasonable terms on a non-discriminatory basis; Outside of the International Electrotechnical Commission (IEC). 2. The patentee is willing to negotiate a license with other parties on reasonable terms on a non-discriminatory basis; 3. If the right holder is unwilling to comply with either of the above two provisions, in which case the standard should not contain any provisions that rely on the patent. And in all cases, the patent holder must submit a written statement to ITU-TSB, ITU-BR or ISO or the Office of the Chief Executive Officer, respectively, using the appropriate "Patent Claims and License Declarations" form, or any other exclusions beyond those set out in the corresponding boxes of the form. See Common Patent Policy for ITU-T/ITU-R/ISO/IEC，https://www.itu.int/en/ITU-T/ipr/Pages/policy.aspx.
Author: Ma Zhongfa Zeng Xinkun
编辑：Eleven