The Solution to Chinese Courts' Increasingly Aggressive Overreach

This commentary was originally published in RealClearPolicy on March 30, 2022.

In an alarming new affront to American sovereignty, Chinese courts are now attempting to prohibit American courts from adjudicating American patents for technologies such as wireless communications.

This new legal tactic is known as an anti-suit injunction (ASI). In several recent disputes, Chinese courts have used it to attempt to dictate global licensing royalty rates for inventions patented around the globe.

Those cases include recent disputes between Ericsson and Samsung, between the U.S. research and development business InterDigital and the Chinese smartphone giant Xiaomi, and between Sharp and another Chinese smartphone business, Oppo.

If a patent owner subject to an ASI entered by a Chinese court continues to pursue a case in another jurisdiction such as the United States, then China’s courts have threatened to impose fines of as much as $150,000 per day. The Chinese courts sometimes also threaten criminal penalties if an owner of a U.S. patent asks a U.S. court to adjudicate a claim of patent infringement in the United States. To be clear, this is an attempt by China to control the U.S. judiciary and to determine how much U.S. innovation is worth.

Fortunately, Congress has a way to combat this threat to our country, our courts, and our companies. Recently, Senators Thom Tillis, Chris Coons, Tom Cotton, Mazie Hirono, and Rick Scott have introduced the Defending American Courts Act, which would level the playing field by penalizing any party that seeks to encroach on the sovereignty of American courts through the use of a foreign anti-suit injunction.

Specifically, this bill would bar any party involved in a patent dispute who is trying to enforce a foreign ASI in an American court or the International Trade Commission from mounting a validity challenge against the disputed patent at the U.S. Patent and Trademark Office (USPTO). If the party was found to have infringed that patent, they could also be forced to pay enhanced damages and the other side’s legal fees. The bill would also require the USPTO to publish a study examining the impact of these anti-suit injunctions.

China’s motivations are clear. The country dominates the manufacture of many of our electronic devices. For instance, 8 out of the 10 largest smartphone manufacturers are Chinese. And it is estimated that over a third of the world’s 5G telecom equipment is made by Chinese manufacturers, as compared to less than 10 percent by American companies. But much of the technology that is in their devices was invented by companies in the United States, in Europe, and elsewhere, not in China.

In an attempt to support Chinese companies, China’s communist government is taking steps to ensure that the country’s own companies pay less for that technology. The patents may have been issued by the U.S. government, but if China has its way, it will be judges sitting in Beijing, Wuhan, Guangzhou, and Shanghai who determine how much they’re worth. This is a remarkable intrusion into the heart of U.S. sovereignty and the independence of U.S. courts.

Plus, this legal overreach is a direct threat to America’s innovation economy and the billions that our companies, universities, and research institutes invest every year into research and development. As one U.S. academic recently said, “China’s emerging use of the anti-suit injunction is an example of how China’s global ambitions affect even its courts.”

Others have also taken note of China’s dangerous trend. Recently the European Commission’s trade policy arm launched legal proceedings through the World Trade Organization (WTO), to ask for more information on China’s use of ASIs and for an explanation on the inconsistencies between these court actions and international law.

As international concern grows, this is an issue that American policymakers must act on now to ensure we do not lose our innovative edge.

The Defending American Courts Act would deter those seeking to evade the U.S. judicial system and send a powerful message regarding overreach by Chinese courts. And that message is clear: no foreign government will be permitted to impinge upon the sovereignty and independence of American courts.

As we continue to vie for supremacy in technologies that will shape a new industrial revolution, we cannot allow China to set the agenda for American innovation. The bipartisan group of Senators who authored this bill deserve great credit for defending U.S. sovereignty, and their proposal merits the support of all their colleagues.

Andrei Iancu served as the undersecretary of commerce for intellectual property and director of the U.S. Patent and Trademark Office from 2018 to 2021. He is senior adviser and cofounder of the American Innovation Project at the Center for Strategic and International Studies.

Paul R. Michel served on the United States Court of Appeals for the Federal Circuit for 22 years, and as its chief judge from 2004 until his retirement in 2010.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2022 by the Center for Strategic and International Studies. All rights reserved.

Andrei Iancu
Senior Adviser (Non-resident), Renewing American Innovation Project

Paul R. Michel

Former Chief Judge, United States Court of Appeals for the Federal Circuit