[00:00:00] Speaker 03:
1979 Huawei Technologies versus Samsung.

[00:01:02] Speaker 04:
We're ready when you are.

[00:01:07] Speaker 02:
Good morning.

[00:01:08] Speaker 02:
May it please the court?

[00:01:10] Speaker 02:
In rare cases, a federal court can enter an anti-suit injunction in order that bars a party from taking some action in a foreign court.

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Because an anti-suit injunction, although nominally directed to a party, in fact operates to restrict what the court of a foreign sovereign can do.

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I hate to interrupt you in your line of thinking, but I just have some process

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court of questions to start off with.

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I know both sides responded timely, and I appreciate that, to any decision on appeal from the Chinese court.

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Any other updates?

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There's so much litigation pending in China or whatever.

[00:01:45] Speaker 03:
Any other updates in terms of the timing, whether anyone has decided it?

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And the second part of the question is, I know you don't know, but is there any sense for how these Chinese courts operate when one might get a decision on appeal?

[00:02:00] Speaker 02:
Well, let me take the second

[00:02:02] Speaker 02:
The last question first.

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The honest answer is nobody knows for sure.

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I'm told that it's usually a matter of a few months after the oral hearing.

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Which was when?

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In June?

[00:02:17] Speaker 02:
No, no, no.

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It was October 30 to November 1 was the oral hearing in the appeal or what's called the second instance proceeding.

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And so it can be a matter of some months after that.

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But just as with decisions from this court or any court, you can say, well, the average is three months after argument.

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But as you know, the range is quite expansive.

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And I'm told that in rare cases, the second instance court can, in fact, call for a second hearing if, I imagine, if something comes up in their deliberations.

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So the answer is nobody knows.

[00:02:49] Speaker 04:
And then there's still another court above it.

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Well, except that there is.

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But that's discretionary review.

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That's like a cert process.

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And it does not affect.

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the finality or enforceability of the Chinese injunctions.

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On that issue, it was a little unclear whether or not there was a request for a stay that was then granted or whether the stay is automatic.

[00:03:12] Speaker 02:
The stay is automatic when there's this appeal to the second instance proceeding.

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But if it would go up to the Supreme People's Court in Beijing, is that the right name for it?

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I think that's correct.

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there would be the right to have a stay if it was sought.

[00:03:31] Speaker 02:
Perhaps.

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Perhaps.

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But it's certainly not automatic.

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And the injunction absent some sort of extraordinary order like that would be enforceable at that point.

[00:03:42] Speaker 02:
As to the other Chinese litigation, Your Honor, the different cases are in different stages.

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There are so many because the rule in China is you can only file one patent per case.

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So if you have 20 patents, you have 20 cases.

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And there are parallel invalidity proceedings.

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Invalidity is not decided in the infringement case, as in some other countries.

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There's sort of an administrative, sort of seems like a reexam or IPR type process that evaluates validity in China.

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And all of those proceedings are at various stages involving different other patents than the two that were decided here.

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The other update, I suppose, is that the

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In the US case, the briefs reported that the trial was to be in December this month.

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It's not going to be in December.

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The earliest possible date is April 1st, and that's contingent on another case set for trial settling before then.

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Otherwise, the trial date will be September 3rd.

[00:04:42] Speaker 03:
So let me ask you, just getting down to this case.

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Sure.

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What is left before the district court to decide?

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Because there was some intervening event where somebody withdrew the request that the district court determine the actual rate.

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So what is the expectation about what will be tried and what will be decided by the district court?

[00:05:05] Speaker 02:
The issues that remain for trial are both sides have alleged infringement of certain US patents by the other sides.

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You basically have a standard infringement type case.

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Then both sides have also alleged breach of contract by the other party for failing to comply with their friend obligations.

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And that's sort of a yes or no proposition at this point.

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Either your conduct violated your friend obligation or your conduct didn't violate your friend obligation.

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Huawei's original complaint asked for it, it actually sort of paralleled the Microsoft case in the sense that it asked for

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essentially asked for a friend license.

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It said, declare the terms.

[00:05:46] Speaker 03:
OK, here's my question.

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What I don't necessarily understand is, even if the court is not asked to come up with a specific rate, in order to do a fulsome breach of contract analysis, which requires determining whether, in this case, each party had submitted fair and reasonable offers, there has to be some sort of number that the district court or some sort of range that the district court comes up with

[00:06:12] Speaker 03:
in order to make that assessment, even if the parties aren't asking for a specific rate.

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Am I right about that?

[00:06:17] Speaker 02:
I'm not sure that's right, Your Honor, because I think, and French law governs the terms of the Etsy contract, if you will.

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And I think, and I believe Samsung has actually steadfastly refused having the district court determine what would be a franned rate or a range of franned rates

[00:06:37] Speaker 03:
And instead, the focus is on... My question is, how does the district court go about deciding whether there's been a violation of the Fran obligations without having some notion of what a reasonable offer is or is not?

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Well, I think the overriding question is, has there been a good faith attempt, good faith negotiations to try to arrive at a license?

[00:06:59] Speaker 02:
No, I think you're right.

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There has to be some notion.

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If you come in and you say, okay, my rate is a million dollars per phone,

[00:07:06] Speaker 03:
Well, I was reasonable because I went down $20 each time.

[00:07:09] Speaker 02:
Exactly.

[00:07:10] Speaker 02:
So clearly, the district court has to have some sort of a notion.

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And district courts have been resolving cases here.

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I'm sorry, say that again.

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District courts have resolved cases.

[00:07:20] Speaker 02:
Yes, absolutely.

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Microsoft's an example.

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There are other examples, to be sure.

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Microsoft was a little bit different because there the court was asked, determine Fran terms, not just determine whether there has been

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A breach.

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Right.

[00:07:32] Speaker 04:
Now, and if in fact there was a finding of infringement, say, of Wally's patents, and that there would have to then be a damages assessment.

[00:07:42] Speaker 04:
Correct.

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Right?

[00:07:43] Speaker 04:
Correct.

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Or an assessment as to whether an injunction were appropriate.

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And as a defense to those positions, then there would be the right to assert violation of the FRAND obligations, correct?

[00:07:55] Speaker 02:
Well, I think certainly with focusing on the U.S.

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case and U.S.

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patents, if you sought an injunction, I think a defense that you failed to comply with, Frand, would be a defense to that.

[00:08:08] Speaker 02:
As to damages, I think

[00:08:10] Speaker 04:
the fran comes into the damages aspect not as a defense so much but as as kind of the measure as a measure right so right i mean that's what i'm confused you've got your friend on the other side arguing that no one's ever allowed to no third party can decide what the fran number is because it's too complicated and yet this would seem to leave it in the hands of a jury

[00:08:32] Speaker 02:
Well, obviously, we don't disagree with that position.

[00:08:36] Speaker 02:
It's our position that- We don't disagree with what position?

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With the position that Domello said?

[00:08:41] Speaker 02:
Oh, no.

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With the position that no court or jury can decide on a friend rate or friend terms.

[00:08:47] Speaker 02:
We don't agree with that.

[00:08:49] Speaker 02:
OK.

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It's our position.

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Courts have been doing it.

[00:08:51] Speaker 03:
But is there a difference?

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I mean, everybody's throwing words around.

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Is there a difference between the two sides in terms of what the scope of the arbitration would be?

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And second part.

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Is there a difference between saying that a court is going to come up with a fran rate or assess the reasonableness of a fran rate and the cross-license issues that are at stake?

[00:09:12] Speaker 02:
I think on that one, there's clearly a difference between, in the abstract, there's a difference between setting a rate and all the other terms you might have.

[00:09:24] Speaker 02:
But there's really no issue about other terms here.

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You know, which patents are going to be licensed?

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What are the ones where you've declared that they're standard essential?

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What products are covered?

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Is there any dispute over essentiality?

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I believe that Samsung has challenged whether particular patents are, in fact, essential.

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And in fact, I think their view is that you go patent by patent, even if there are thousands of them, and decide each of those individually.

[00:09:53] Speaker 02:
Our view is that that's not what the franned obligation contemplates at all.

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What good faith negotiations is, you don't put every party to the burden of litigating every single patent in every single country where you may have a patent.

[00:10:09] Speaker 02:
Now the first part of your question, Your Honor, I think had to do with

[00:10:12] Speaker 02:
Do the parties disagree about the scope of?

[00:10:14] Speaker 03:
Right, because you're saying you're ready to go to arbitration, and you were ready to go, and they were resisting arbitration.

[00:10:20] Speaker 03:
Are we all talking about the same thing here?

[00:10:23] Speaker 02:
Well, I think we are, because their position is that it would be irreparable harm for them even to be subjected to arbitration.

[00:10:30] Speaker 02:
Again, going back to this notion that nobody other than the parties themselves can decide on what are fair and reasonable cross-license terms.

[00:10:40] Speaker 02:
You know, as I think Your Honor noted.

[00:10:43] Speaker 03:
So how come you agree?

[00:10:44] Speaker 03:
Didn't Huawei agree to Sampson's pulling back on the fact that they were asking the court if the court was supposed to decide the rate?

[00:10:52] Speaker 03:
We did.

[00:10:52] Speaker 03:
Yeah, I thought you... So why did you... I mean, your view seems to be that, no, one, third parties can decide it, and two, yeah, third parties should.

[00:11:01] Speaker 03:
So why do you agree to that?

[00:11:04] Speaker 03:
I'm not trying to ask you confidential stuff.

[00:11:05] Speaker 02:
Oh, no, no.

[00:11:08] Speaker 02:
And I won't reveal any confidential stuff.

[00:11:10] Speaker 02:
But the reason was to try to simplify the proceedings before the district court.

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I think there were possibly 30 issues raised and summary judgment and motions in limine.

[00:11:20] Speaker 02:
Samsung was taking the position that the court absolutely was without power to decide this unless they consented and they refused to consent.

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So in view of that, it was basically we decided this is not the Hill we want to fight on.

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And plus, at that point, we already have a determination from the Chinese court on the Frand issues, that our conduct complied with Frand.

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Theirs did not.

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And therefore, we were entitled to an injunction in China, against infringement in China.

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And so we would have loved to have the district court decide the issue.

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That's what we pled in our complaint.

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But the arbitration you were talking about in China, the scope of it, was it limited to the two patents that were an issue in China?

[00:12:01] Speaker 02:
No.

[00:12:01] Speaker 02:
Or the whole thing?

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The franned issues and the arbitration we proposed

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in connection with the Chinese proceeding was for a global cross license between the parties to resolve the entire Fran dispute between them.

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The Chinese injunction relates to two patents, but they're both standard essential patents in China.

[00:12:22] Speaker 04:
But the Chinese court said that the injunction would go away if there was a license.

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Did they specify what kind of license it had to be?

[00:12:31] Speaker 02:
Well, the Chinese court found, and this is at appendix pages, I think, 55, 41 through 46, the Chinese court went through Huawei's offers and said these offers complied with France.

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Right.

[00:12:42] Speaker 02:
And so Samsung could accept one of those offers, and that would create a license that then would... Could or could have?

[00:12:50] Speaker 03:
Now that the appeal and the injunction is affirmed, can Samsung come in and say, okay, now I'm ready to arbitrate or come in?

[00:12:58] Speaker 03:
Or is it all, does Huawei hold all of the cards?

[00:13:02] Speaker 03:
Even if Samsung came in tomorrow and said, we're ready to arbitrate once the decision is final, it's no longer open, right?

[00:13:09] Speaker 03:
Huawei still wants a friend cross.

[00:13:11] Speaker 01:
No, no, no.

[00:13:11] Speaker 03:
I'm asking about what?

[00:13:12] Speaker 02:
It's what the injunction, at least.

[00:13:15] Speaker 02:
Oh, well, the absent some movement by the parties to arrive at a negotiated resolution or license.

[00:13:23] Speaker 03:
Well, is it fair to say that if the injunction is in place, what the deal is is absent Huawei agreeing to some alternative, right?

[00:13:33] Speaker 02:
Well, no.

[00:13:34] Speaker 03:
Because even if Samsung comes in,

[00:13:36] Speaker 03:
And it says, OK, I'm ready to negotiate.

[00:13:38] Speaker 03:
Or, OK, let's go to arbitration.

[00:13:40] Speaker 03:
Does Huawei not, under the injunction we're talking about, have the power to say, too little, too late, we're going for our injunction?

[00:13:47] Speaker 02:
Huawei does have that power.

[00:13:49] Speaker 02:
I will represent to the court that Huawei still wants

[00:13:52] Speaker 02:
a negotiated resolution to do this.

[00:13:54] Speaker 04:
And I think you already have represented to us.

[00:13:56] Speaker 04:
I mean, you'd be bound by your representations to us that say you still stand ready, willing, and prepared to go forward with a neutral decision.

[00:14:04] Speaker 02:
Well, we do.

[00:14:05] Speaker 02:
But let me have a expressive caveat.

[00:14:10] Speaker 02:
As Samsung made clear in its briefs in this court, it has steadfastly refused even to contemplate that possibility.

[00:14:19] Speaker 02:
If there's a way to have an arbitration that will really not just be another opportunity for delay, but that will actually produce a friend license, we're all for it.

[00:14:29] Speaker 02:
But the signs are not encouraging because the Chinese court went through five years of stalling by Samsung.

[00:14:36] Speaker 02:
It articulated kind of month by month what was going on.

[00:14:39] Speaker 03:
But where we are in this case is leaving aside the injunction

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you're doing, you went to court because you're trying to push them to resolution and you're going to get your resolution.

[00:14:53] Speaker 03:
It might take now another year or so to get a resolution in terms of who's violating Fran and what the Fran rate should be, right?

[00:15:00] Speaker 02:
Well, I don't think it's going to take another year.

[00:15:04] Speaker 02:
I suppose the Chinese case... No, I'm talking about the U.S.

[00:15:07] Speaker 02:
case.

[00:15:08] Speaker 02:
Oh, yeah.

[00:15:09] Speaker 02:
The U.S.

[00:15:09] Speaker 02:
case, sure.

[00:15:10] Speaker 02:
We could have to wait until September for a trial.

[00:15:13] Speaker 02:
And then the judge will presumably take certain things under advisement.

[00:15:17] Speaker 02:
So sure, it could be another year.

[00:15:20] Speaker 02:
And in the meantime, we've got this injunction against an order entered by a Chinese court that clearly had jurisdiction and that doesn't cut off the district court's ability to decide certainly any of the issues that are left before that court.

[00:15:35] Speaker 02:
So it's not at all like Microsoft where it would have prevented the district court from deciding the issues before it.

[00:15:41] Speaker 02:
Here it would not.

[00:15:43] Speaker 03:
I'm a little nervous about talking about some of this stuff.

[00:15:46] Speaker 03:
So if I go in a direction that you think is beyond the confidentiality.

[00:15:50] Speaker 03:
But isn't it the case that the district court surmised that as a practical matter, the conclusion is unavoidable that if the Chinese injunction goes into effect, this case is going to be necessarily forced to go away?

[00:16:04] Speaker 02:
No, I don't think that's true, Your Honor.

[00:16:06] Speaker 02:
Not when you think about what's left.

[00:16:07] Speaker 02:
We've got the question of infringement of US patents and past damages.

[00:16:12] Speaker 02:
And we've got the question of... Would the breach of contract question still remain open?

[00:16:17] Speaker 02:
It would, I think, because the breach of contract question is, has the conduct up until now... Remember, a forward-looking license in the U.S.

[00:16:24] Speaker 02:
is no longer on the table.

[00:16:26] Speaker 02:
That's been taken off the table in the U.S.

[00:16:28] Speaker 02:
case.

[00:16:28] Speaker 02:
So what we've got is, has their conduct up until now breached the France commitment?

[00:16:33] Speaker 02:
Now, the Chinese court has held that it doesn't.

[00:16:35] Speaker 02:
We think, certainly, once that's affirmed, that ought to have preclusive...

[00:16:39] Speaker 02:
I'm sorry?

[00:16:39] Speaker 02:
They said it does breach the framework.

[00:16:42] Speaker 02:
Their conduct breaches the framework, right, and ours does not, correct.

[00:16:46] Speaker 02:
Once that's affirmed, we think it should have preclusive effect, but that's for the district court to decide, and it can still decide the breach of contract claims that are left pending before it.

[00:16:58] Speaker 04:
That conclusion is not a given.

[00:16:59] Speaker 04:
It might not necessarily have preclusive effect.

[00:17:02] Speaker 02:
Well, we think it would, but sure, it's ultimately for the court that's making the decision to decide what to give perclusive effect to, certainly.

[00:17:12] Speaker 02:
I see my time is up.

[00:17:13] Speaker 02:
Have I answered your questions, Your Honor?

[00:17:15] Speaker 02:
Yes, yes.

[00:17:15] Speaker 02:
Thank you.

[00:17:16] Speaker 03:
We'll resource them in a little time.

[00:17:17] Speaker 03:
Let's hear from the other side.

[00:17:19] Speaker 00:
Good morning, Your Honor.

[00:17:20] Speaker 00:
Charles Rehoban, may it please the court.

[00:17:23] Speaker 01:
The decision below on the injunction... Can you just tell me, practically speaking, when you have two parties that can't negotiate a Fran license, how it's supposed to happen?

[00:17:36] Speaker 00:
Well, there's all different types of ways for it to happen.

[00:17:39] Speaker 00:
You could file infringement actions, which has happened in this case.

[00:17:42] Speaker 01:
But not to get an injunction, to actually get a cross-licensing rate.

[00:17:49] Speaker 01:
Because that seems to me to be the underlying goal of the Fran commitments, is to

[00:17:53] Speaker 01:
avoid all of this collateral litigation and all these infringement conditions and get parties that are standard essential patent holders to agree to fair and appropriate terms.

[00:18:04] Speaker 00:
I agree with that.

[00:18:05] Speaker 00:
I re-characterize it.

[00:18:06] Speaker 00:
I think the goal is that people not sue for injunctions

[00:18:11] Speaker 00:
when they have put in play their technology into a standard.

[00:18:15] Speaker 04:
Wait, wait.

[00:18:15] Speaker 04:
There's two sides to this.

[00:18:17] Speaker 04:
So the patent holder agrees to a FRAND commitment, the implementer is the third party beneficiary of that commitment, and in turn has an obligation to also comply with FRAND.

[00:18:27] Speaker 04:
So if you choose to use the essential patents as part of the standard, or you choose to use the standard, you have an obligation to come to the table.

[00:18:36] Speaker 04:
And what I understand the Chinese court found is that Huawei continually offered a license, and Samsung refused to come to the table for what, seven years?

[00:18:48] Speaker 00:
Your Honor, we have a completely different view of the facts in terms of those negotiations.

[00:18:55] Speaker 03:
But can you go back to Judge Hughes' question?

[00:18:58] Speaker 03:
OK.

[00:18:58] Speaker 03:
The intent, this is supposed to end.

[00:19:01] Speaker 03:
The parties are supposed to agree on some number.

[00:19:04] Speaker 03:
And if they can't do that, somebody has to impose it.

[00:19:07] Speaker 03:
You have a sentence in your brief that says no arbitrator is suited to decide all the necessary and disputed questions of business planning, et cetera.

[00:19:16] Speaker 03:
How can that, there's never any.

[00:19:18] Speaker 00:
There's no obligation.

[00:19:20] Speaker 00:
I'm sorry.

[00:19:21] Speaker 03:
Yeah.

[00:19:21] Speaker 00:
There's no obligation under Etsy to license your entire portfolio to a competitor.

[00:19:27] Speaker 00:
That's not an obligation.

[00:19:29] Speaker 00:
The obligation is you can't seek an injunction unless you're operating in accordance with France.

[00:19:35] Speaker 00:
That's the whole point of the declaration that gets made.

[00:19:41] Speaker 00:
And the whole point is we deal with damages with these patents.

[00:19:45] Speaker 01:
Can you just clarify, when you're talking about your entire portfolio, are you talking only about standard essential patents or other patents that you think aren't standard essential?

[00:19:54] Speaker 00:
I meant standard essential, Your Honor.

[00:19:56] Speaker 00:
It could be others, if the parties agree to it.

[00:19:59] Speaker 01:
But the obligations I'm talking about is... Well, let's leave aside the other ones, because I thought that was a little bit of a complicated fact.

[00:20:04] Speaker 00:
I'm sorry, I missed that.

[00:20:05] Speaker 01:
Leave aside the potentially non-standard ones.

[00:20:07] Speaker 01:
Yes.

[00:20:08] Speaker 01:
might have been a complicating factor.

[00:20:09] Speaker 01:
If we're just talking about standard essential patents, and you've offered them as standard essential patents, why aren't you obligated to license them on Fran terms?

[00:20:20] Speaker 00:
You are.

[00:20:21] Speaker 00:
You are.

[00:20:21] Speaker 00:
And what's happened here?

[00:20:22] Speaker 01:
Well, I thought you just said you weren't obligated to license your entire standard portfolio.

[00:20:28] Speaker 00:
Well, I take your point, Your Honor.

[00:20:32] Speaker 00:
I take your point.

[00:20:33] Speaker 01:
Maybe this is oversimplifying, but it seems to me the whole point of this Fran stuff

[00:20:37] Speaker 01:
is to avoid all of this messy litigation about infringement, validity, and the like in terms of the first obligation is for people that have them to attempt to negotiate a fair and reasonable rate for licensing them.

[00:20:50] Speaker 01:
And if either party, and I know you both have your different views of the facts, if both parties or one party doesn't follow through that, doesn't somebody have to resolve what that fair and reasonable rate is?

[00:21:07] Speaker 00:
Somebody has to resolve whether there's a breach of friend.

[00:21:11] Speaker 03:
And how do you decide whether there's a breach of friend unless you establish what some fair and reasonable rate is?

[00:21:17] Speaker 00:
Exactly.

[00:21:18] Speaker 00:
Exactly.

[00:21:19] Speaker 03:
So you agree that some neutral third party, if the parties are unable to do it, has to decide the rate.

[00:21:25] Speaker 00:
The thing we're talking about with the arbitration is non-financial terms where, for example, if you're a businessman negotiating, these contracts are like for 10 years or eight years.

[00:21:35] Speaker 00:
They're long term.

[00:21:36] Speaker 00:
And when you're negotiating them, as a business person, you have to make predictions about what technology is going to come in the future and what's not.

[00:21:45] Speaker 00:
And so there's a lot of business judgments that go into.

[00:21:48] Speaker 04:
But you've participated in a lot of arbitrations already in these kinds of cases, as have many other large corporations.

[00:21:55] Speaker 04:
I mean, there's been, there's all kinds of arbitrators who do complex business negotiations.

[00:22:01] Speaker 04:
The whole point is to have the party sit down and lay out what the business considerations are.

[00:22:07] Speaker 00:
Right.

[00:22:08] Speaker 04:
And then someone to make a decision because you can't just go forever.

[00:22:12] Speaker 00:
Right.

[00:22:12] Speaker 00:
I agree.

[00:22:13] Speaker 00:
So, so what we have here is while we made a tactical decision when it filed this without any notice to us,

[00:22:22] Speaker 00:
It filed these Chinese actions seeking only injunctions on SEPs in its hometown.

[00:22:28] Speaker 00:
And a day before, filed a Northern District case.

[00:22:32] Speaker 04:
Well, even the District Court conceded it wasn't really a day before.

[00:22:35] Speaker 04:
Well, the Court of Appeals conceded it wasn't really a day before.

[00:22:38] Speaker 04:
And threw that issue off the table.

[00:22:39] Speaker 04:
So let's assume they're filed on the same day.

[00:22:41] Speaker 00:
OK.

[00:22:43] Speaker 00:
And in the US case, they're saying court, the very theory that we're talking about, Samsung breached Fran.

[00:22:52] Speaker 00:
So therefore, we want declaratory relief that Samsung cannot get an injunction worldwide based on that contract breach.

[00:23:02] Speaker 04:
And that's the issue before... But that has to do with you licensing your patents, not them licensing their patents.

[00:23:10] Speaker 00:
Well, they're both intertwined because when you make a friend declaration, there's a box you check that says you're only making it if the other side is also friend.

[00:23:20] Speaker 00:
And I think you alluded to that.

[00:23:22] Speaker 00:
And so both those issues are joined below.

[00:23:25] Speaker 00:
They're going to be decided.

[00:23:27] Speaker 00:
And the only point of this is... Well, no, no, no.

[00:23:30] Speaker 04:
It's possible, given that there's usually a range of franned reasonableness, that both sides could be compliant with their franned obligations.

[00:23:39] Speaker 04:
That's right.

[00:23:39] Speaker 04:
Vis-a-vis their own obligations, but not being compliant with their franned obligations vis-a-vis the other side's patents.

[00:23:47] Speaker 00:
It's a possibility, yeah.

[00:23:49] Speaker 00:
Right.

[00:23:50] Speaker 00:
But if I could just get back to, this injunction is very narrow.

[00:23:55] Speaker 00:
It's not overturning the Chinese court.

[00:23:59] Speaker 00:
It's not doing anything like that.

[00:24:00] Speaker 03:
But which injunction?

[00:24:01] Speaker 03:
We've got several.

[00:24:02] Speaker 00:
The anti-suit injunction.

[00:24:03] Speaker 03:
OK.

[00:24:04] Speaker 00:
All the anti-suit injunction does, or all it's about, is the appropriate timing of a possible remedy.

[00:24:11] Speaker 00:
It's not second guessing the Chinese courts.

[00:24:14] Speaker 04:
What is it that gives the district court the right to decide the question before the Chinese courts do?

[00:24:20] Speaker 04:
When the same question is presented to both, why doesn't the Chinese court have the authority?

[00:24:25] Speaker 00:
They have the authority.

[00:24:26] Speaker 00:
They have the authority, and they are pursuing it.

[00:24:30] Speaker 00:
This is only about the remedy of injunction.

[00:24:33] Speaker 00:
That's it.

[00:24:34] Speaker 00:
It's the only thing.

[00:24:35] Speaker 04:
And the only thing this court said was... It's a remedy that you have the ability to undo if you choose to come to the table.

[00:24:42] Speaker 00:
Well, if they enforce the injunction, then we'll have to agree to their terms.

[00:24:46] Speaker 00:
That's called patent holdup.

[00:24:47] Speaker 04:
No, you don't have to agree to their terms.

[00:24:49] Speaker 04:
They've already said that they would allow a third party to analyze... Which would deprive this court of its jurisdiction, which violates... Of its jurisdiction into what?

[00:24:58] Speaker 04:
You've already said this.

[00:24:59] Speaker 04:
You already said the district court has no authority to set a number.

[00:25:02] Speaker 00:
So why is... The breach of contract claims, Your Honor.

[00:25:05] Speaker 00:
The breach of contract... What will happen if this gets enforced, and I'm not going to go into the confidential information, it's in the record, but Samsung will have no choice.

[00:25:14] Speaker 00:
It's not going to shut down all its facilities in China.

[00:25:17] Speaker 00:
And so we'll have to.

[00:25:18] Speaker 03:
So what is the court going to decide here?

[00:25:21] Speaker 03:
What is your view?

[00:25:21] Speaker 03:
You took off the table them coming up with the rate.

[00:25:25] Speaker 00:
They took off the table them coming up with the rate voluntarily.

[00:25:27] Speaker 04:
You argued that nobody could do it.

[00:25:30] Speaker 04:
Now, you also separately argued that somehow the damages would be sufficient, which means you theoretically think a jury can do it even though a complex arbitrator or a district court judge can't do it.

[00:25:41] Speaker 00:
With respect to that, I don't think we argued that nobody could do anything.

[00:25:44] Speaker 00:
But what we're pointing to is the business judgments that should be made by private parties negotiating rather than having a third party.

[00:25:50] Speaker 03:
Can you just tell me, answer just what you contemplate the district court being able to decide?

[00:25:56] Speaker 00:
Rule on the breach of contract claims.

[00:25:58] Speaker 03:
Saying what?

[00:25:59] Speaker 03:
He has to decide whether or not Huawei has

[00:26:03] Speaker 03:
comply with its brand obligations, and then he has to decide whether Samsung has.

[00:26:07] Speaker 03:
And in doing that, does he not have to put some sort of dollar value or range on the portfolio of set patents for both of those people?

[00:26:17] Speaker 00:
I don't know that it's necessary, but you definitely would consider it.

[00:26:21] Speaker 03:
It was reasonable, don't you look at whether there are other licenses, and you come up with some range, right?

[00:26:27] Speaker 00:
You look at different things.

[00:26:29] Speaker 00:
You look at different licenses.

[00:26:30] Speaker 00:
By the way, the most important license in this case was withheld by Huawei from China.

[00:26:34] Speaker 03:
But we don't get into the details of this case.

[00:26:35] Speaker 03:
So what is the district court going to decide?

[00:26:38] Speaker 00:
Breach of contract on both sides.

[00:26:40] Speaker 00:
And the reason those claims are in place.

[00:26:42] Speaker 03:
And therefore, that conclusion is going to include what?

[00:26:46] Speaker 00:
I'm sorry?

[00:26:46] Speaker 03:
Whether or not somebody breached their contract or failed to comply with Fran because their offers were unreasonable.

[00:26:52] Speaker 00:
Right.

[00:26:52] Speaker 00:
And then the result of that, as pled in their complaint by Huawei,

[00:26:57] Speaker 00:
against us on the same theory is that you can't seek injunctive relief.

[00:27:02] Speaker 00:
There's no dispute that if you're not friend, both sides agree, you can't seek injunctive relief.

[00:27:07] Speaker 04:
So this is about... But there's also a pretty broad understanding among everybody who looks at these questions that if you do, if you as the implementer refuse to participate and comply with your friend obligations, then injunctive relief is available.

[00:27:27] Speaker 00:
It gets complicated, but you have to show that you comply too.

[00:27:31] Speaker 01:
Well, so what happens if the district court in this case ultimately decides that you both breached your contracts and no injunctions?

[00:27:42] Speaker 01:
But doesn't something then have to happen to force you to actually reach a friend rate?

[00:27:46] Speaker 01:
Because otherwise it basically leaves the playing field that the implementers can just keep on doing things and keep on reaping profits and not paying out friend rates.

[00:27:57] Speaker 00:
No, I don't think that's the case, but the issue this joint here is about injunctive relief.

[00:28:02] Speaker 01:
So is the question there that they have to go through patent infringement claims, and if they show patent infringement that they're going to get a reasonable royalty rate?

[00:28:13] Speaker 00:
These are different issues, Your Honor.

[00:28:14] Speaker 01:
I understand they're different issues, and I'm perhaps speaking at too broad of a practical global level, but it seems to me that all of this collateral litigation over injunctions and the like

[00:28:26] Speaker 01:
is just allowing both sides to try to gain influence over each other in negotiations when what should really be happening is you two should be setting down and negotiating at a friend rate.

[00:28:37] Speaker 00:
I agree 100%.

[00:28:37] Speaker 01:
But neither of you seem to be willing to even explain how that could be done.

[00:28:41] Speaker 00:
We're doing it in settlement talks right now, OK?

[00:28:45] Speaker 00:
We're trying to do it.

[00:28:46] Speaker 00:
Both sides are trying to do it, Your Honor.

[00:28:48] Speaker 04:
That's seven years in the making.

[00:28:49] Speaker 04:
I mean, you keep saying that.

[00:28:52] Speaker 04:
But there doesn't seem to be any evidence of it.

[00:28:54] Speaker 00:
Well, again, this is not before the court, but we have a very long set of facts that we could go through about how Huawei has changed its foundational assumptions in every single one of these proposals they've made.

[00:29:10] Speaker 00:
And they make a proposal that says it's all patents, not just SEPs.

[00:29:15] Speaker 00:
They make a proposal that says it's just SEPs.

[00:29:17] Speaker 00:
They make a proposal that says it's just 4G.

[00:29:19] Speaker 00:
They change it every single time, except the one thing they don't change

[00:29:24] Speaker 00:
is they want 1.5%.

[00:29:25] Speaker 00:
That's your standard rate.

[00:29:28] Speaker 04:
I mean, they argue in their bravery that that's not true.

[00:29:32] Speaker 00:
Well, the actual negotiations are confidential.

[00:29:35] Speaker 00:
But so I can't go into the he said, she said.

[00:29:38] Speaker 04:
There's a lot of debate back and forth about whose set of facts is accurate.

[00:29:42] Speaker 04:
The reality is what we have is one court having looked at whatever set of facts saying that Huawei complied with its friend obligations and you did not.

[00:29:51] Speaker 04:
Right?

[00:29:52] Speaker 04:
And we have another court who hasn't

[00:29:53] Speaker 04:
looked at those facts.

[00:29:54] Speaker 04:
I disagree.

[00:29:57] Speaker 00:
I disagree.

[00:29:58] Speaker 00:
I don't think the Chinese court decided breach of contract.

[00:30:00] Speaker 00:
In fact, if I could find it.

[00:30:02] Speaker 04:
It said as a precondition to determining whether an injunction is appropriate, it had to conclude whether or not Huawei complied with its grant obligations.

[00:30:12] Speaker 00:
Yeah.

[00:30:12] Speaker 00:
And what does that mean under Chinese law?

[00:30:15] Speaker 00:
I can't figure it out.

[00:30:17] Speaker 00:
There's no one at the Chinese court didn't do any analysis of numbers, by the way, of

[00:30:22] Speaker 00:
of what would be friend and not friend.

[00:30:25] Speaker 00:
All they did was talk about subjective bad faith.

[00:30:28] Speaker 00:
Um, so look, I'm not trying to second guess the Chinese court.

[00:30:32] Speaker 00:
All I'm saying is Huawei asked this court to decide breach of contract.

[00:30:38] Speaker 00:
We joined the issue with our counterclaim and we, and the district court should be allowed to decide those issues, uh, without interference from an injunction that would require settlement in this case.

[00:30:52] Speaker 00:
This is directly on point from Microsoft versus Motorola.

[00:30:57] Speaker 01:
But at a certain point, this all just ends up to being delayed.

[00:31:01] Speaker 01:
I mean, the district court, it's going to take another year and a half to decide that breach of contract claims.

[00:31:08] Speaker 01:
One or both of you are going to appeal from that.

[00:31:10] Speaker 01:
And all the time, you're going to be selling your phones.

[00:31:14] Speaker 01:
You're going to be manufacturing their phones.

[00:31:16] Speaker 01:
And they're not going to be getting their patent licenses paid.

[00:31:22] Speaker 00:
I mean, it can't be that we've asked the court to decide this issue in this case, so has Huawei.

[00:31:28] Speaker 00:
So the idea that it's going to go on and on forever.

[00:31:31] Speaker 04:
Not to decide the license number.

[00:31:33] Speaker 04:
You specifically said that.

[00:31:33] Speaker 00:
Right.

[00:31:33] Speaker 00:
But the issue here is whether the injunction is appropriate.

[00:31:37] Speaker 00:
Look, we're just trying to get a decision from the court in the US.

[00:31:40] Speaker 00:
That's it.

[00:31:40] Speaker 00:
We're not trying to tell Chinese courts what to do.

[00:31:43] Speaker 00:
But Huawei, having initiated this case, simultaneously as it were, has invoked this court's jurisdiction.

[00:31:52] Speaker 00:
We have joined the issue on breach of contract and asked the district court in the United States to decide this issue.

[00:31:59] Speaker 00:
Nobody says that we don't have the right to go to the district court and ask for these decisions to be made.

[00:32:05] Speaker 00:
Microsoft versus Motorola says of the Etsy.

[00:32:08] Speaker 04:
Microsoft versus Motorola is not anything like this case.

[00:32:11] Speaker 04:
In Microsoft versus Motorola, the court specifically found there was bad faith in going to the other court.

[00:32:18] Speaker 04:
And here, this court specifically found the district court found that it's not.

[00:32:22] Speaker 04:
In Microsoft versus Motorola, one of the issues was that in Germany, the court refused to even take into consideration framed obligations and how those came into play in determining whether an injunction should issue, and here the Chinese court did.

[00:32:37] Speaker 04:
In Microsoft versus Motorola, the court said at least three times, these are two U.S.

[00:32:41] Speaker 04:
companies, so we have an interest in this.

[00:32:44] Speaker 04:
Now we do not have either company.

[00:32:46] Speaker 04:
being a U.S.

[00:32:47] Speaker 04:
company.

[00:32:47] Speaker 04:
And there's like seven different grounds and distinctions.

[00:32:50] Speaker 00:
Well, everyone that you've raised with respect is irrelevant to the gallo factors.

[00:32:54] Speaker 00:
And that's what we have to apply here.

[00:32:56] Speaker 00:
Ninth Circuit is controlling precedents, undisputed.

[00:33:00] Speaker 00:
And we have the three gallo factors.

[00:33:02] Speaker 00:
One, would it be dispositive?

[00:33:03] Speaker 00:
Breach of friend will be dispositive of the injunction issue.

[00:33:09] Speaker 00:
It's holding Microsoft versus Motorola.

[00:33:12] Speaker 00:
It's the very same fact pattern on SEPs and hold up.

[00:33:16] Speaker 00:
And so that's met.

[00:33:19] Speaker 00:
Public policy, there's a public, there's a district court found there's a public policy, or the Unterwisser public policy factor.

[00:33:27] Speaker 00:
The district court found two public policies.

[00:33:31] Speaker 00:
One, for the court not to have interference with its jurisdiction.

[00:33:34] Speaker 00:
Two, policy against patent holdup.

[00:33:36] Speaker 04:
It did not find the second.

[00:33:38] Speaker 04:
It specifically did not find the second.

[00:33:40] Speaker 04:
That's a misstatement in your red brief.

[00:33:42] Speaker 04:
It's a misstatement in your red brief.

[00:33:43] Speaker 04:
It specifically did not find the second.

[00:33:45] Speaker 04:
It said that the governmental policy seemed to go both ways.

[00:33:50] Speaker 04:
There's also a strong governmental policy, and it cites Delarine for the proposition that we don't allow implementers to hold out and not participate in their friend obligations.

[00:34:02] Speaker 04:
So he said, but the real public policy here, the one I'm relying on, is I get to decide this case.

[00:34:08] Speaker 04:
That's what he said.

[00:34:10] Speaker 04:
He did not say that there was a public policy against injunctions in S&P's.

[00:34:17] Speaker 00:
I can go back and, I mean, he said what I was referring to is page 16.

[00:34:22] Speaker 04:
And the Court of Appeals did not rely on that public policy either.

[00:34:26] Speaker 00:
Oh, you're talking about the Microsoft case.

[00:34:27] Speaker 04:
No, I'm talking about, I'm sorry, in this particular case, the district court refused to rely on that policy.

[00:34:35] Speaker 00:
Well, in page 16,

[00:34:38] Speaker 00:
The analysis is on page 16 through 17, A 16, appendix 16 through 17.

[00:34:43] Speaker 04:
Yeah, look at 17.

[00:34:44] Speaker 00:
OK.

[00:34:45] Speaker 04:
He goes back and forth.

[00:34:46] Speaker 04:
He says there's policy implications on both sides of this deal, but that's not the policy that matters.

[00:34:52] Speaker 04:
The policy that matters is whether I get to decide this case.

[00:34:57] Speaker 00:
I guess I don't see that.

[00:34:58] Speaker 00:
If I could just point to lines 17, lines 19 through 22, quote, under these circumstances, the Senjen order

[00:35:08] Speaker 00:
interferes with equitable considerations by compromising the court's ability to reach a just result in the case before it is free of external pressure on Samsung to enter into a hold-up settlement before the litigation is complete.

[00:35:22] Speaker 04:
Right.

[00:35:22] Speaker 04:
That has nothing to do with whether there's a public policy against any injunction in an FCP context.

[00:35:29] Speaker 00:
I guess what I was referring to is a policy against hold-up, Your Honor.

[00:35:32] Speaker 04:
And there's also a policy against hold-out.

[00:35:34] Speaker 00:
Yes.

[00:35:36] Speaker 04:
a very strong public policy.

[00:35:37] Speaker 00:
My only point was that the court identified the policy against holdup.

[00:35:41] Speaker 00:
The court identified the public policy to preserve its jurisdiction.

[00:35:46] Speaker 00:
And the court found that enforcement of the injunction would interfere with its ability to decide the issues that both sides have asked it to decide.

[00:35:55] Speaker 00:
And its antecedent injunction is simply put off the injunction enforcement until I have an opportunity to decide what you, Huawei, ask me to decide.

[00:36:03] Speaker 04:
We now know that's

[00:36:06] Speaker 04:
What?

[00:36:07] Speaker 04:
At the earliest, the trial would be in April.

[00:36:10] Speaker 00:
We have to go off the record the district court had when it issued its order.

[00:36:13] Speaker 00:
And at that time, the trial date was in December.

[00:36:16] Speaker 00:
It's not for the appellate court to change the order based on changed circumstances.

[00:36:22] Speaker 00:
They should go down.

[00:36:23] Speaker 04:
But the order didn't say until my December trial date.

[00:36:26] Speaker 04:
It said until I can get a chance to decide this.

[00:36:29] Speaker 04:
It left it wide open.

[00:36:30] Speaker 00:
Right.

[00:36:30] Speaker 00:
But at the time.

[00:36:31] Speaker 04:
No notation on it.

[00:36:32] Speaker 00:
Yes.

[00:36:33] Speaker 00:
But at the time it was made, there was a December trial date.

[00:36:37] Speaker 00:
And everyone expected that that was going to be a trial.

[00:36:39] Speaker 03:
Can I ask you something?

[00:36:39] Speaker 03:
Just one final question I have on that.

[00:36:42] Speaker 03:
I don't understand the import of what the district court said.

[00:36:45] Speaker 03:
When on page 14, he says, how am I to adjudicate whether these offers were franned, if they're global portfolios?

[00:36:54] Speaker 00:
I'm sorry, Your Honor.

[00:36:55] Speaker 03:
What line are you on?

[00:36:57] Speaker 03:
Page 14, starting at line 17, and just going on and on and on.

[00:37:02] Speaker 03:
you know, I'm reading this and I'm thinking, well, the district court judge has just told us it's, he thinks it's impossible for him to resolve the breach of contract issue in this case.

[00:37:13] Speaker 00:
Yeah.

[00:37:13] Speaker 00:
That's dicta in this doesn't have anything to do with the gallo factors.

[00:37:17] Speaker 03:
He's talking about when he has considerable considerations are that it would deprive him of his ability to adjudicate the issues before him.

[00:37:25] Speaker 03:
I didn't know how to read the fact that he's kind of telling us

[00:37:29] Speaker 03:
I'm never going to be able to decide this.

[00:37:30] Speaker 00:
He told us from the beginning, first status conference in this case, the private parties should negotiate this.

[00:37:36] Speaker 00:
And it doesn't make any sense for either party to go to any court and try to have some court negotiate or determine all of these complex things.

[00:37:45] Speaker 00:
And I think he's alluding back to his view, generally, that that's going to be something that he thinks should be done privately because it would be hard to do in front of a jury or in front of a judge.

[00:37:58] Speaker 00:
But again, that doesn't relate to the Gallo factors.

[00:38:01] Speaker 00:
He went on to say, but you have to not enforce this injunction so I can try.

[00:38:07] Speaker 00:
So I can do it.

[00:38:11] Speaker 00:
So I don't think that comment is inconsistent with his ruling that enforcement of an injunction would result in taking away his ability to decide what both parties asked him to do because

[00:38:27] Speaker 00:
Samsung can't afford to have its plants shut down in China.

[00:38:32] Speaker 00:
And therefore, if an injunction was enforceable and they intended to enforce it, we'd just cry uncle and do whatever terms they want.

[00:38:42] Speaker 03:
OK, thank you.

[00:38:51] Speaker 02:
I'll try to be brief, Your Honor, in view of the hour.

[00:38:54] Speaker 02:
This notion of being forced to accept whatever terms Huawei wants and holdup and all that, there are a number of problems with that.

[00:39:02] Speaker 02:
One is the Chinese court has already decided that this would not be a holdup license or a holdup settlement because the offers were franned.

[00:39:12] Speaker 02:
So that's off the table.

[00:39:13] Speaker 04:
At least it's off the table if you accord any... How do you respond to his argument that says they didn't really even look at numbers?

[00:39:19] Speaker 04:
They didn't even analyze numbers?

[00:39:21] Speaker 02:
I don't understand that.

[00:39:22] Speaker 02:
If you look at, and I would refer to the court to pages, I think it's 5519 through 46, the Chinese court in painstaking detail goes offer by offer.

[00:39:32] Speaker 02:
And all those places where it's blacked out, that, by the way, was by the Chinese court ordered that, which is why it's that way even in the confidential appendix.

[00:39:39] Speaker 02:
Each of those is a number.

[00:39:41] Speaker 02:
They're going through each rate for each standard and all of that.

[00:39:45] Speaker 02:
So how counsel can say the Chinese court didn't even consider this and it was just sort of a subjective bad faith thing, it's just completely contrary to this detailed, painstaking analysis in that decision.

[00:39:57] Speaker 02:
So that's just wrong.

[00:39:59] Speaker 02:
And the other thing is that,

[00:40:01] Speaker 02:
So let's suppose that the Chinese injunction finally caused Samsung to accept what the Chinese court has said would be a friend license.

[00:40:12] Speaker 02:
Even then, that's not going to change the issues that are before the district court unless Samsung wants to abandon them at that point.

[00:40:18] Speaker 02:
The breach of contract claims are no longer about an ongoing friend license, because that's off the table.

[00:40:25] Speaker 02:
It's just did past conduct violate

[00:40:28] Speaker 01:
the fran contract and it's the point of getting a declaratory judgment on that if you have now agreed to an ongoing licensing well there may not be any point your honor you're right but that's not the product that's a that's a I don't understand why that doesn't it may not mood it but it would make it kind of silly for both sides to keep spending money on litigation well it might accept that it would move to infringement cases right

[00:40:52] Speaker 02:
Well, it would moot the infringement cases if Samsung agreed that those, in fact, were standard essential patents.

[00:40:58] Speaker 02:
But they're challenging that.

[00:41:00] Speaker 02:
So unless they gave up on that, we'd still have to litigate that.

[00:41:03] Speaker 03:
Well, nobody's agreed to an ongoing license at this stage.

[00:41:06] Speaker 02:
No, no.

[00:41:07] Speaker 02:
But I was, I think.

[00:41:08] Speaker 04:
So are you saying that you would agree to a license with Samsung now that was only backward looking?

[00:41:13] Speaker 02:
No, no, no.

[00:41:14] Speaker 02:
What I'm saying is that the district court case at this point

[00:41:19] Speaker 02:
is all backward-looking.

[00:41:20] Speaker 02:
It has infringement occurred up till now.

[00:41:22] Speaker 02:
If so, what are the damages?

[00:41:24] Speaker 02:
Has a breach of contract occurred up till now?

[00:41:26] Speaker 02:
If so, are there any damages?

[00:41:28] Speaker 02:
For example, in the Microsoft Motorola case, Your Honor, there was a damage claim with the breach of friend obligation because Microsoft had taken action to prepare for the eventuality that the German injunctions might be enjoined.

[00:41:41] Speaker 02:
We don't know whether there'd be such a claim here, but in theory, it might not just be this declaration of breach or no breach.

[00:41:47] Speaker 02:
There could be a damages type remedy.

[00:41:50] Speaker 02:
So as a practical matter, it may not make a difference, but it is not depriving the district court of jurisdiction to decide an issue the party still wanted to decide.

[00:41:58] Speaker 02:
If Samsung decides it doesn't want the court to decide the issue, well, that's fine.

[00:42:02] Speaker 02:
But that's not the kind of deprivation of jurisdiction that Gallo or these other cases are talking about.

[00:42:08] Speaker 02:
So just a couple of other very quick points.

[00:42:11] Speaker 02:
It's true that the Chinese court didn't decide breach of contract because the breach of contract claim wasn't presented there, but all of the Frand issues were fully litigated.

[00:42:19] Speaker 02:
As the district court acknowledged, the Chinese court issued the injunctions there because it found that Huawei had complied with Frand, Samsung had not.

[00:42:27] Speaker 02:
That decision is entitled to respect from the U.S.

[00:42:30] Speaker 02:
courts.

[00:42:30] Speaker 02:
That's what the comedy principle is all about, and this injunction violates that principle.

[00:42:35] Speaker 03:
Thank you.

[00:42:36] Speaker 03:
Thank you, Your Honor.