Oppo Mobile Telecommunications Corp., Ltd. (“OPPO”) is a leading Chinese consumer electronics manufacturer with major product lines in smart phones, audio devices and power banks, among others. In November 2018, OPPO’s Guangdong headquarters and the Chongqing subsidiary entered into an agreement for a patent license with the Nokia Corporation and Nokia Technology (Beijing) Co. In 2021, upon the renewal of the license, a dispute arose between the two parties regarding the royalty rate for Standard Essential Patents (“SEPs”). OPPO, the licensee, sued Nokia, the licensor, in Chongqing People’s First Intermediate Court, with the aim of determining the rate. Nokia contested the Chongqing Court’s lack of specific jurisdiction over the dispute. The Chongqing Court ruled in favor of OPPO; OPPO subsequently appealed.

  In September, the Supreme People’s Court (“SPC”) made a ruling to affirm the Chongqing Court’s decision that a Chinese court possesses jurisdiction over the case to set a global FRAND royalty rate. [1]

  The case came down to three questions, as outlined below:

1.   Whether a Chinese court had jurisdiction over this case.

    

     The SPC concluded that China was the main licensing territory of the SEPs in dispute, the territory where a license negotiation took place, the reasonably foreseeable territory for the performance of the license agreement, and one of the main territories of SPE implementation. This means that, according to the SPC, China has sufficiently close territorial nexus regarding the present dispute. Accordingly, China has the legitimate jurisdiction.

    

     More specifically, the SPC explained that the present case was a contract and infringement dispute arising out of the clause of fair, reasonable and nondiscriminatory (“FRAND”) licenses for the SEPs. Both parties in the dispute—OPPO and Nokia Beijing Technologies—were in fact Chinese entities. At the time of renewal of the old license, and in a bid to incorporate some new SEPS, OPPO and Nokia carried out negotiation conferences mainly within China. Furthermore, in the statement from Nokia, it was clearly revealed that Chinese patents accounted for 46% of the SEPs in the license package. Considering also Nokia’s FRAND commitment, it was logically conceivable that China would be one of the primary places of implementation of the license should OPPO demand that Nokia fulfill the licensor’s obligation.

    

2.   Whether the Chongqing court was an appropriate forum to exercise such jurisdiction.

    

     The OPPO Chongqing Company established in the Yubei District of Chongqing is involved in the development, manufacture, use and sale of cell phone products. Apparently, the municipality of Chongqing was one of the primary places of implementation of the SEPs in dispute. The SPC therefore concluded that the Chongqing People’s First Intermediate Court, being lawfully assigned the territorial jurisdiction, has territorial nexus in the dispute. Hence, attempts by Nokia to push for a case transfer to a Beijing court were groundless.

    

3.   Whether the Chongqing Court was an appropriate court to set the global royalty rate for the SEPs in dispute.

    

     As mentioned previously, Chinese patents make up the majority of SEP packages in dispute. Among many other factors, the SPC indicated that China is more closely linked with the license territorially than other countries. The licensing terms of the SEPs are adjudicated by the Chinese on a global scale, which is not only conducive to understanding OPPO’s implementation practices but also makes the enforcement of court judgments easier and more convenient. According to the SPC, therefore, Nokia’s argument that it is improper for the Chongqing court to adjudicate such civil disputes over licensing terms on a global scale was unsubstantiated.

    

     In addition, Nokia attempted to challenge the Nokia Beijing entity’s litigation status so that the case would not be brought into Chinese jurisdiction. In particular, the legal representative of Nokia’s Beijing entity participated as an individual in the license negotiations. Nokia argued that this person’s participation in the negotiations is not the same as that of the Nokia Beijing entity itself. Of course, this argument was denied by the SPC because a company’s legal representative has the mandate or capacity to act on behalf of the company in an ordinary commercial role and, the SPC explained, the counterparty’s interest of trust is worthy of protection.

    

  In light of the foregoing analysis, the SPC upheld the Chongqing Court’s decision and dismissed the appeal. The Chongqing Court lawfully has jurisdiction in this case, that is, to set the global FRAND royalty rate for a SEP license.

  According to the court’s announcement, the Chongqing First People’s Court held the trial for the main suit of the Nokia/OPPO dispute on October 27, 2022.[2]

  The Nokia/OPPO case constitutes the second ruling by a Chinese court to confirm its jurisdiction over a dispute concerning the determination of a global SEP license rate, following the Sharp/OPPO case in October 2020 by the Shenzhen Intermediate People's Court and in August 2021 by the Supreme People’s Court.[3]

  From the Sharp/OPPO and Nokia/OPPO cases at least, one may draw a provisional conclusion that courts will evaluate several territorial factors in determining whether a patent-related dispute has a nexus with China. The places where the patent was granted, where the patent was implemented, where the license agreement was enforced, where the license was negotiated, where the license agreement was performed, and where property could be seized or enforced are all factors that a court would investigate. If any of these places are in China, given that the core issue concerns the global royalty rate, it is highly likely that a court would proactively rule to hold specific jurisdiction as China has a nexus with the dispute.

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