CCPIT PATENT AND TRADEMARK LAW OFFICE 1 Risks of Enforcement of Standard Patent ----Update of a Recent Litigation Case Relating to Standard Patent in China © 2013 CCPIT Patent and Trademark Law Office Guoxu Yang April, 2013

CCPIT PATENT AND TRADEMARK LAW OFFICE 2 Background Introduction Supreme Court Interpretation (proposed in 2003, but not come into force) If a patentee participated in the creation of a standard, and failed to indicate the relevant technical content is covered by its patent before the publication of a standard, then it would be deemed the patentee has granted an implied free license for a third party to use the patent in order to implement the standard. The third party’s implementation of the standard is not an infringement activity National Standard Committee Drafter of a standard has duty to disclose (article 5), free license if failed to disclose (article 8) ” © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 3 Background Introduction Case 1. Tiangong Co, Ltd. v. Yongjiang Co, Ltd., (Guang Xi High Court, 15 December 2007), ((2007) Guiminsanzhongzi No. 46). Guang Xi High Court made a judgment that the Tiangong Co. Ltd. stopped the infringing behaviors and paid a compensation of RMB 400,000. © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 4 Background Introduction Case 2. Ji Qiang, Liu Hui Vs. Chaoyang Xing Nuo Construction Company (2007) Liaominsizhizhongzi No Ji Qiang and Liu Hui were the patentees and the patent thereof was incorporated into the industry standard “The Specification of Designing complex carrier ramming expanded pile” issued by the Ministry of Construction of China. The Chaoyang Xing Nuo Construction Company made constructions according to the above standard. Then, Ji Qiang and Liu Hui sued Chaoyang Xing Nuo Construction Company for patent infringement. © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 5 Background Introduction Supreme Court in response to the Liaoning Province High Court Request for Guidance, (July 8, 2008), ((2008) Minsantazi No. 4). Since the Chinese Standard Definition Organization has yet not established a process of public disclosure and usage of standard related patents, if a patentee participated in the creation of a standard, or if the patentee agreed to include the patented technology as part of a national, industry or local standard, the patentee is deemed to have granted implied license for a third party to use the patent in order to implement the standard. The third party’s implementation of the standard is not an infringement activity.The patentee has the right to require certain amount of license fee from the 3rd party who implements the standard. But the license fee should be significantly lower than ordinary license fee. If the patentee has pleaded royalty free license of its IP, the plead should be honored.” ” © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 6 Risk of Enforcement of Standard Patent Case 3 Huawei v. InterDigital (first instance, Feb. 4, 2013) Plaintiff: Huawei Technology Co. Ltd Defendants: 1. InterDigital Technology Company 2. InterDigital Communication Technology Co. Ltd. 3. InterDigital Company (parent company of 1 and 2) ” © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 7 Risk of Enforcement of Standard Patent Huawei filed a suit against InterDigital regarding the excessive royalty requests for both essential patents and non-essential patents, on Dec. 2011, in Shenzhen Intermediate court, claiming the damage of around 3.2 million USD based on Anti-Monopoly Law of China © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 8 Risk of Enforcement of Standard Patent The Shenzhen Intermediate court decided that InterDigital had violated the Chinese Anti-Monopoly Law by (i) making proposals for royalties from Huawei that the court believed were excessive, (item 1 in Article 17, Selling products at unfairly high prices or buying products at unfairly low prices) (ii) tying the licensing of essential patents to the licensing of non- essential patents, (item 5 in Article 17, Implementing tie-in sales ) (iii) requesting as part of its licensing proposals that Huawei provide a grant-back of certain patent rights to InterDigital. (item 4 in Article 17, Restricting trading party ), and (iv) commencing an ITC action against Huawei while still in discussions with Huawei for a license ( item 3 in article 17,. Refusing to trade with a trading party without any justifiable causes © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 9 Risk of Enforcement of Standard Patent The Shenzhen Intermediate court ordered InterDigital to (i) cease the alleged excessive pricing and alleged improper bundling of Interdigital's Chinese essential and non-essential patents, and (ii) pay Huawei approximately 3.2 million USD in damages related to attorneys fees and other charges © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 10 CCPIT PATENT AND TRADEMARK LAW OFFICE Risk of Enforcement of Standard Patent Huawei asks the court to determine the FRAND rate for licensing essential Chinese patents to Huawei and also seeks compensation for its costs associated with this matter Evidence: downloaded annual report of InterDigital, declared Essential patents to ETSI etc. Shenzhen Intermediate court decided: InterDigital's license offers to Huawei should be evaluated under Chinese law, the offers did not comply with FRAND condition, the royalties to be paid by Huawei for InterDigital's 2G, 3G and 4G essential Chinese patents under Chinese law should not exceed 0.019% of the actual sales price of each Huawei product © 2013 CCPIT Patent and Trademark Law Office

CCPIT PATENT AND TRADEMARK LAW OFFICE 11 CCPIT PATENT AND TRADEMARK LAW OFFICE Thank you! Contact us: CCPIT Patent and Trademark Law Office 10/F, Ocean Plaza 158 Fuxingmennei Street Beijing China Tel: Fax: © 2013 CCPIT Patent and Trademark Law Office