Samsung Electronics Co., Ltd & Anor v ZTE Corporation & Ors

In a global FRAND dispute, a SEP holder acts in bad faith where it uses a coordinated wave of unnecessary foreign injunction proceedings, backed by an interim licence offer, to pressure the other party to accept the holder’s preferred forum for determining global FRAND terms.

The court may grant interim licence declarations where there is a high degree of assurance that the relief is justified. The assessment concerns the merits and the risk of injustice, rather than a heightened standard of proof. The relief may serve a useful and legitimate purpose by encouraging agreement and reducing duplicative litigation. It is not contrary to comity merely because another court is also seised of parallel FRAND proceedings.

Samsung sought interim declarations requiring ZTE to enter into a cross-licence covering the parties’ standard-essential patents, pending determination of global FRAND terms in the English proceedings. Samsung proposed adjustment by reference to the eventual English FRAND determination. ZTE offered an interim licence but required prospective and retrospective adjustment by reference to the Chongqing Proceedings, where ZTE had commenced parallel proceedings seeking global FRAND terms.

The dispute arose against extensive infringement proceedings commenced by ZTE in Brazil, Germany, the UPC and Hangzhou, followed by retaliatory proceedings by Samsung. The central issues were whether ZTE had negotiated in good faith, whether the declarations would serve a useful purpose, whether they would offend comity, and what interim terms were FRAND.

1. Relief granted. Interim declaratory relief was granted. The parties were asked to agree an order giving effect to the judgment.
2. The court adopted the approach in Panasonic v Xiaomi and Lenovo v Ericsson. Although the application was not governed by a different standard of proof, the court required a high degree of assurance because the declarations would determine the position pending trial. That assurance was present because the interim licence would hold the ring and payments would be adjusted when final FRAND terms were determined.
3. The relevant comparison was with the conduct of a willing licensor. A willing licensor faced with an action seeking global FRAND terms would engage with that action and proceed to trial. It would not commence a wave of unnecessary injunction proceedings in multiple jurisdictions to pressure the implementer into accepting a preferred forum.
4. ZTE’s conduct, considered as a whole, constituted bad faith. Its interim offers were materially improved, but they remained directed to sidelining or displacing the jurisdiction of the English court by requiring adjustment according to the Chongqing determination. The parties’ positions were not mirror images because Samsung’s foreign proceedings were retaliatory and protective in the circumstances found.
5. The declarations would serve a useful and legitimate purpose. They could induce ZTE to reconsider its position and provide a route towards ending duplicative litigation, even if there was no certainty that ZTE would change its mind.
6. Comity was not offended. The declaration did not determine what the Chongqing court should do, nor did it question the competence of Chinese courts. Both courts had jurisdiction over the proceedings before them. The English court was entitled to exercise the jurisdiction accepted by ZTE, while recognising the risk of inconsistent determinations.