Huawei Technologies Co., Ltd. v. InterDigital, Inc.

“Standard-essential patents must be licensed fairly, not used as weapons.”

SHORT DESCRIPTION

The decision in Huawei Technologies Co., Ltd. v. InterDigital, Inc. is a landmark ruling on the licensing of Standard-Essential Patents (SEPs) and the application of FRAND principles (Fair, Reasonable, and Non-Discriminatory). The Supreme People’s Court of China clarified the obligations of SEP holders and strengthened judicial oversight to prevent abuse of dominant market position. This case has global importance for telecommunications, patent licensing, and competition law.

FACTS OF THE CASE

InterDigital, Inc., a US-based patent licensing company, owned several Standard-Essential Patents relating to 3G, 4G, and wireless communication technologies. These patents were essential for manufacturers like Huawei Technologies Co., Ltd. to comply with international communication standards.

Negotiations between Huawei and InterDigital for licensing these patents broke down. InterDigital demanded royalty rates that Huawei considered excessive and discriminatory. InterDigital also initiated litigation in foreign jurisdictions, seeking injunctions and higher royalties. Huawei filed proceedings in China, alleging abuse of dominance and seeking a judicial determination of FRAND-compliant royalty rates.

ISSUES INVOLVED

The key issues before the Court were whether InterDigital had abused its dominant market position by demanding unreasonable royalty rates and whether Chinese courts had jurisdiction to determine global FRAND licensing terms. The Court also examined how SEP licensing disputes should balance patent rights with fair market competition.

ARGUMENTS OF THE PARTIES

Huawei argued that InterDigital’s royalty demands were excessive, discriminatory, and inconsistent with FRAND commitments. It contended that seeking injunctions while negotiating in bad faith constituted an abuse of market dominance.

InterDigital argued that as a patent owner, it was entitled to seek appropriate compensation and legal remedies. It challenged the jurisdiction of Chinese courts to determine global licensing rates and denied any abuse of dominance.

FINDINGS AND OBSERVATIONS OF THE COURT

The Supreme People’s Court ruled largely in favour of Huawei. It held that SEP holders must strictly comply with FRAND obligations and that demanding excessive royalties or using litigation pressure can amount to abuse of dominant position. The Court affirmed that Chinese courts have jurisdiction to set FRAND-compliant royalty rates, even with international implications.

The Court emphasized that SEPs carry special responsibilities because they are indispensable for implementing industry standards.

SUGGESTION / PRACTICAL TAKEAWAY

This case provides strong guidance for SEP holders and implementers. Patent owners must negotiate in good faith and avoid coercive tactics. Technology companies should document negotiations carefully and seek judicial intervention when FRAND principles are violated.

JUDGMENT

Year: 2021

The Supreme People’s Court of China held that InterDigital abused its dominant market position and upheld the determination of FRAND-compliant royalty rates in favour of Huawei.