Xi’an Iwncomm Radio Network Co. Ltd. v. Sony Mobile Communications (China) Co. Ltd.

Civil Case

Invention Patent

–Standards Essential Patent (SEP); FRAND Terms

[Headnotes]

In conducting licensing negotiations with an implementer, an SEP patentee shall commit to the (FRAND) terms that is "fair, reasonable, and non-discriminatory" so to giving the implementer a reasonable anticipation in possible licensing ensuing negotiations and to limit the exploitation of the SEPs. It is why SEPs are different from ordinary patents in finding of infringement and the liabilities therefor.

[Synopsis]

Appellant (Defendant in original instance): Sony Mobile Communications (China) Co., Ltd. (Sony)

Appellee (Plaintiff in original instance): Xi’an Iwncomm Radio Network Co., Ltd. (Iwncomm)

First Instance: (2015) JingZhiMinChuZi No. 1194

Second Instance: (2017) JingMinZhong No. 454

Titled as "a method for the secure access of Wireless Local Area Network(WLAN) mobile terminal and for secure data communication via wireless link" under patent No. ZL92139508.X, the patent in dispute was owned by Iwncomm. On May 12, 2003, the General Administration of Quality Supervision, Inspection and Quarantine of China(the Administration) issued a standard No. GB15629.11-2003 of Information Technology–Telecommunications and Information Exchange between Systems–Local and Metropolitan Area Networks–Specific Requirements–Part 11: WLAN Medium Access Control (Mac) and Physical Layer (Phy) Specifications. On January 7, 2006, the Administration and the Standardization Administration jointly issued another standard under No. GB15629.11-2003/XG1-2006 (the above two standards are collectively referred to as the Standards),  modifying the portion of the aforementioned national standard relating to WLAN security. On January 7, 2003, Iwncomm filed a "Declaration on the Patent Rights that may be Involved in Two National Standards" to China National Information Techonology Standardization Committee, , making the commitment to negotiations within its cope of patent rights, for licensing authorization to any applicant for their use of the SEPs under FRAND terms. Yet Iwncomm’s negotiations and communications with Sony between March 2009 and March 2015,were to no avail. Iwncomm filed a lawsuit against Sony for making and selling mobile phones that infringed its patents, and seeking injunction for such infringing manufacture and sales by Sony, with damages and expenses in the amount of over 33 million yuan.

Beijing Intellectual Property Court at first instance decreed for the injunction against Sony, and compensation of 9.1 million Yuan, with which Sony appealed.

At second instance trial, the Beijing High People’s Court found the accused technical solution was covered by claim 1 of the patent at issue. Sony at least exploited the entire patented technical solution without permission at the design/development or sample testing stages, and work exploited the asserted patent at issue without permission in the manufacturing process for the accused products, thereby infringing Iwncomm’s patents. As to Sony’s infringing activities of making and selling the infringing products, Sony did not commit contributory infringement without the existence of direct implementers, since Sony merely provided mobile terminals with built-in WAPI function modules without the devices of AP and AS for a direct infringer. The parties ought to conduct the SEP negotiations in good faith, but Sony was at fault for delaying from entering into the formal patent licensing negotiation, for which it should bear the civil liability for infringement. Therefore, the court of second instance rejected the appeal and affirmed the original decision.

[Typical Significance]

This case is the first in China that a SEP implementer was ruled on infringement by final judgment and was imposed a permanent injunction by the court, and one of few cases in which the SEP patentee is a Chinese corporation ultimately won the lawsuit. It actively explored the trial rules and the bearing of liabilities in cases of SEP infringement, especially in respect of infringement comparison, the issuance of injunctive relief, determination of fault as well as contributory infringement.