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China – Jiangsu High Court Upholds Dismissal Of Administrative Lawsuit Involving USB 3.0 Connector Essential Patent Dispute.

23 February, 2015

 

 

On Dec. 19, 2014, Jiangsu High People’s Court upheld the first instance ruling by Nanjing Intermediate People’s Court that dismissed an administrative lawsuit brought by Lotes Suzhou Co., Ltd. (Lotes Suzhou). Lotes Suzhou had appealed the decision of the Intellectual Property Office of Jiangsu Province (Jiangsu IPO) that found that the company’s USB 3.0 connector products infringed the patent CN200810128623.1 (CN’623) held by Foxconn Kunshan Computer Connector Co., Ltd. (Foxconn Kunshan).

 

In July 2012, Foxconn Kunshan filed a complaint before Jiangsu IPO asserting that Lotes Suzhou’s USB 3.0 connecters infringed the CN’623 patent. Jiangsu IPO issued a decision in July 2013 finding that Lotes Suzhou’s acts constituted infringement of Foxconn Kunshan’s patent rights and ordered Lotes Suzhou to stop manufacturing the infringing products, destroy infringing products in inventory, and destroy molds specially used for the manufacture of the infringing products.

 

In the first instance of the administrative lawsuit, Lotes Suzhou argued that its parent company, Lotes Co., Ltd. (Lotes) and a third party, Hon Hai Precision Industry Company Ltd (Hon Hai), which enjoys joint ownership of the CN’623 patent with Foxconn Kunshan, are both contributors to the USB 3.0 Standards established by international USB organization. And according to relevant specifications, contributor agreements, as well as Hon Hai’s declarations, the CN’623 patent had been contributed and Hon Hai had granted a license to Lotes and its affiliated entities to use it, including its dependent claim 4. Jiangsu IPO argued that Lotes Suzhou’s products fall within the scope of both claim 1 and claim 4 of the CN’623 patent, while the USB 3.0 Contributor Agreement did not cover the features defined in claim 4 of the patent.

 

The first instance court held that neither claim 1 nor claim 4 of the CN’623 patent is an essential patent claim as defined in the Contributor Agreement, as the Contributor Agreement provided that the contributed scope shall not include any technology that is related to the specification but itself is not a part of the specification. In addition, the court found that the Contributor Agreement does not automatically grant a license, and that an authorization shall be obtained separately from a right owner. However, Lotes Suzhou failed to prove that it had obtained such an authorization.

 

The first instance court rejected Lotes Suzhou’s other allegations that 1) Foxconn Kunshan had no right to initiate the administrative proceedings due to a settlement agreement between Lotes and Hon Hai; 2) Jiangsu IPO failed to add Hon Hai to the administrative proceedings; and 3) the administrative proceeding should have been suspended due to a pending civil litigation in the U.S. The court based this decision on the grounds that 1) the settlement agreement was to solve disputes between Lotes and Hon Hai before 2006 and shall not be applied to the current case; 2) Hon Hai, as the joint owner of the CN’623 patent, had made a declaration to give up its right to file legal actions and such declaration shall be valid; and 3) Lotes Suzhou failed to prove the connection between the pending U.S. litigation and the current case.

 

The Jiangsu High Court upheld the first instance court’s decision in all respects.

 

The Jiangsu High People’s Court’s Decision for the case filed by Lotes Suzhou is available here.

 

Orrick

 

For further information, please contact:

 

David Goldstein, Partner, Orrick

dgoldstein@orrick.com

 

Douglas Lahnborg, Partner, Orrick

dlahnborg@orrick.com

 

Philippe Rincazaux, Partner, Orrick

princazaux@orrick.com

 

Howard M. Ullman, Orrick

hullman@orrick.com

 

Orrick IP Practice Profile in China

 

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