How IWNCOMM v Apple set the benchmark for SEP injunctions

This article was written by Jiajia Gao from the China University of Political Science and Law. This is recommended by Xiaomi but Gao remains an independent academic. Opinions expressed in the article are solely the author’s personal opinions and do not express the views of Xiaomi.

Securing injunctions in SEP disputes is a recurring challenge around the world, as the prevailing legal rules are primarily derived from court precedents. In adjudicating on injunctive relief for SEPs, Chinese courts have historically assessed whether SEP holders and implementers have fulfilled their duties of good faith, as imposed by FRAND commitments. 

IWNCOMM v Apple – which was concluded by the Supreme People's Court in late 2022 and has since been selected by the court’s IP tribunal as one of 100 landmark cases in celebration of its five-year anniversary – has had a significant impact on the establishment of a more equitable framework for SEP injunctions in China and important implications for the industry globally (Supreme People's Court, Zuigaofa Zhi Min Zhong no 817, 30 December 2022). 

The decision in depth

In this case, the Supreme People’s Court adopted a comprehensive multi-factor analysis method to determine whether to grant an injunction and to allow conditional injunctions under certain circumstances, an approach that reflects trends in China’s approach to SEP injunctions. In addition to assessing the degree of subjective fault, the court’s holistic approach also emphasises evaluating whether:

• there is an imbalance of interests between parties;
• compensatory damages can fully make up for the losses incurred by SEP holders; and
• the injunction would have an impact on public interest. 

To conduct a rational analysis of the validity of these new factors, it is crucial to focus on the fundamental principles that govern SEP injunctions. Based on the inherent nature of an SEP injunction and its purpose of restriction, the underlying principles supporting these factors are to prohibit the abuse of rights and ensure proportionality. As a result, these abstract determinants can be further refined into more specific factors.

Imbalance between the parties

First, the degree-of-interest imbalance between both parties involved must be examined. This necessitates an investigation of two key factors: 

• Mandatory standards involved in SEPs – the indispensability of SEPs for implementing a certain standard makes it a threshold for entry into the standard technology market. Granting injunctions against SEPs related to mandatory standards would result in the complete withdrawal of the implementer from competition in the relevant market.
• The degree of complexity of SEP products – the highly integrated composite products encompass multiple standards, with each standard potentially involving thousands of SEPs. Granting an injunction could significantly disrupt the interests of both parties, as a single patent in a standard only represents one aspect of the alleged infringing technical solution. 

An implementer cannot avoid infringement caused by implementation of mandatory standards by changing the technical solution, especially if the patented technology is only part of the solution used by the end product as a whole. If the infringement is ordered to stop, this means the patentee's exercising of its rights could cause the implementer to withdraw from market competition. 

If a judgment results in an implementer withdrawing from the market, both parties might be affected, causing a significant imbalance of interests between them. Therefore, when hearing SEP infringement disputes involving mandatory standards, courts should be more cautious when considering ordering civil liability to stop the infringement; it is not advisable to simply order the infringement to cease simply because it constitutes infringement. 

In IWNCOMM, the court determined that including the implicated patent in the accused smartphones or tablets – as a mere fraction of their overall technical solution – had a relatively insignificant impact. Therefore, the court was acting prudently by issuing an injunction.

Sufficient damages awards

Sufficient compensation for losses incurred by SEP holders was considered in the Supreme People’s Court’s approach in IWNCOMM. In SEP disputes, if the injunction award may lead to significant imbalance between both parties but the SEP holder’s interests can be safeguarded through sufficient compensation, then a legal liability on the implementer to pay this can be imposed instead of an injunction. 

Following the determination of a licence fee in accordance with FRAND principles, there is potential for the continued fulfilment of the licensing contract or the implementer must bear the full compensation and other legal responsibilities, which can effectively alleviate the urgency to seek injunctive relief. In IWNCOMM, both parties successfully determined the FRAND rate through arbitration, thereby ensuring that the monetary compensation adequately safeguarded the patentee’s interests.

Impact on public interest

Further, the extent of damage to public interest resulting from injunctive relief should be considered (“Application of the Principle of Proportionality to Injunctive Relief for Patent Infringement in China”, Zhang Guangliang, Lv Lingrui, China patents & trademarks, No 46, 2022, pp 46-47). Whether or not an injunction is issued can have a significant impact on unspecified third parties. 

SEPs that are related to mandatory standards encompass a wider range of interests from market entities, necessitating more consideration for public interest than for recommended standards. Further, in areas such as environmental resource conservation and public health and safety, where an SEP and the associated public interests are intertwined with matters of life, health or human dignity, these should take priority (see Article 148 of Guidelines of Beijing High People’s Court for Patent Infringement Determination, issued on 20 April 2017). Consequently, there is little tolerance for any harm inflicted upon these interests.

Another lower-priority interest is known as “public interest based on market logic”, where the implementation of SEPs affects technological innovation and industry market dynamics (“On the Idea of Public Interest about Intellectual Property Law”, Jinan Journal (Philosophy and Social Sciences), YAN Yong-he, Vol 38, No 5, 2016, pp102-103). If issuing an injunction causes damage to public interest in such cases, it may be tolerated to a relatively greater extent.

Key takeaways

Courts should consider these factors to varying extents depending on the specific case. The resulting conclusion should not be perceived as a binary choice between satisfaction or dissatisfaction, but rather as a flexible assessment of the degree of satisfaction. Considering the unique nature of SEPs, conditional injunctions can be issued as judicial rulings. The attached conditions may include “granting a reasonable grace period for modifying technical solutions” or “paying adequate compensatory damages or licensing fees in accordance with FRAND principle”, as stated by the court in IWNCOMM. Thanks to recent developments in Chinese judicial practice, the rule governing SEP injunctions is more moderate and balanced and benefits all three parties: SEP holders, implementers and the general public.

This article was written by Jiajia Gao. This is recommended by Xiaomi but Gao remains an independent academic. Opinions expressed in the article are solely the author’s personal opinions and do not express the views of Xiaomi.