"Chinese companies, if they have a long-term policy of doing business in the US, need to deal with the situation, not just escape," said Guo Shizhan, former general counsel of Chinese telecoms company Huawei Technologies and now a partner of Han Kun Law Offices.
Section 337 actions are brought before the International Trade Commission (ITC) and are used to try to exclude patent infringing products from the US market. They are usually quicker and can often be more effective than patent litigation.
The ITC session at the forum was moderated by Wang Xiang, a partner of Orrick in Beijing. Orrick advised US technology company Cisco when it sued Huawei in 2003 for patent infringement as it tried to enter the US market.
Cisco filed its lawsuit in the Eastern District of Texas because Huawei had a subsidiary called Futurewei based there. The dispute ultimately settled out of court.
Although that particular case took place in Texas, "Chinese companies have become prime targets of ITC litigation," said Suzanne Chou, director of legal and technology division at Taiwanese company Nanya Technology.
Nanya Technology has been named as a defendant in two ITC cases in the past two years. She said that the speed of the cases was one of the most difficult things for a Chinese company to get used to.
"You have to make sure your teams work with each other internally so you can cooperate within a very short time frame," she said.
In response to questions from the floor about cost, Guo admitted that "a lawsuit in the US means a lot of money," but emphasised that businesses should not just accept a default judgment and abandon that particular market, which remain a common reaction to being sued in the US.
Chou agreed, but added that "in ITC actions you do have options," which include partnering with other businesses that may have been named as defendants in the case.
The panel discussion also looked at managing the deposition process and ways to defend ITC Section 337 cases.
Giving depositions during ITC litigation is very unusual for Chinese companies. "Those who give depositions in US section 337 cases come back and say that they hated it. But it’s a process that we all have to get familiar with," said Wang.
Wang said that when a company is the subject of a Section 337 action, it is important to begin looking quickly for ways to design around the patent you are accused of infringing. "Don’t wait until you lose – prepare for the worst."
"The ability to create a design around gives you the ability to negotiate. It’s as simple as that," added G Hopkins Guy, a partner in the Silicon Valley office of Orrick.
Chou said that, in Nanya Technology’s cases before the ITC, "design arounds didn’t help, but patent exhaustion did help us to minimise the risk".
The panel also considered the possibility of launching a counterclaim either using existing patents or by acquiring patents.
"You need to build you own patent portfolio, that is part of the strategy," he said, but warned: "The most expensive time to buy a patent is when you need it the most."
The inaugural China-International IP Forum was organised by Managing IP magazine and took place in Beijing on June 29 and 30. It was designed to help Chinese companies to register, protect and enforce their IP internationally and attracted more than 300 attendees.