In late October, the Guangdong High Court
affirmed two decisions of the Shenzhen People’s
Intermediate Court in the FRAND licensing dispute between
Huawei and American NPE InterDigital. The trial court found
that InterDigital violated the Anti-Monopoly Law (AML) as well
as its obligations to license out its standards-essential
patents out on FRAND terms. The cases have been closely watched
for a number of reasons, one being that they are the first
decisions out of China involving the licensing of standards
Unfortunately, many of the details of the cases have not
been divulged. Zhao Ye of King & Wood Mallesons,
who represented Huawei, told Managing IP that because of the
amount of trade secrets involved on both sides, many of the
important details could not be shared. Neither decision has
been published, which has led to considerable speculation about
the specifics of the ruling.
President and CEO of InterDigital, said that the NDRC
said that it could not guarantee the safety of
An ominous turn
The uncertainty increased in December when
China’s National Development and Reform Commission
said that it could not "guarantee the safety of"
InterDigital’s executives. The statement came
during a discussion when the NDRC, who has broad authority to
investigate a wide range of matters, including antitrust
issues, requested that InterDigital’s CEO William
Merritt come to China for a meeting.
Neither InterDigital nor Fangda Partners, its lawyers in
China, responded to a request to comment for this piece.
Not surprisingly, there were considerable concerns among
international companies and government officials. What exactly
was said in this meeting? Did the AML have criminal provisions
to justify arrests? What level of authority did the NDRC have
in such matters?
Speculation was rampant among the international IP
community. One China-based observer said he heard the threat
was made after Merritt offered to send lower level executives
in his place, as a means to pressure him to show up personally
(as his safety presumably could be
A foreign government official suggested that the threat was
made under provisions of the Civil Law, which he said allows
the NDRC to ensure that parties being investigated in civil
matters to be present for the investigation. One lawyer
suggested that the NDRC believed that InterDigital had received
threats of violence from various companies it had angered, thus
the inability to guarantee the safety of its executives. And
several wondered if the NDRC was taking an aggressive stance on
behalf of a favoured Chinese company.
A simple misunderstanding?
The wide variety of interpretations is unsurprising given
the lack of information about both the case and the NDRC.
However, one person involved in the matter told Managing IP
that the situation is considerably more pedestrian.
"The NDRC’s statement was one of those made in
the heat of the moment," he says. "Both sides said the sort of
things that they probably later regret. I don’t
think that the NDRC meant to make arrests, but it came out that
He argues that the concern is warranted from
InterDigital’s perspective, given the
NDRC’s broad authority.
"It’s a huge agency with many different
branches," he points out. "When they make a threat you have to
take it seriously."
Moving toward clarity
China’s IP system has made considerable strides
to increasing transparency and making procedures more open.
Customs and law enforcement are often praised for being
quite responsive to rights holders seeking information and
clarity, and starting this year,
all court cases in China will be published. However, the
Huawei-InterDigital dispute illustrates that the lack of
available information is still a problem for rights holders in
China. And perhaps more importantly, the opacity of these
proceedings serves to detract from the progress China has made
and reinforces its reputation as a place unfriendly to
UPDATE: According to Amy Gao of Huawei, Huawei
had requested that the court decisions be published with the
trade secret information redacted, but the judges sided with
InterDigital and declined to do so.