The global patent war between Chinese company ZTE Corporation [stock name "ZTE" (000063.SZ)] and American company Vringo is an intriguing case that deserves Chinese companies to learn from.
According to the lawyer's interpretation, the dispute between the two parties was ultimately due to the shortcomings in the evidence collection, which made ZTE a very passive position. Vringo then used this procedural advantage to successfully force ZTE to reconcile. What is sighing is that the focus of this case is not a defense at the substantive legal point, but a procedural dispute.
Of course, after the event, Zhuge Liang can do anything, but in the process of litigation, the situation is complicated and the situation is changing rapidly. The consideration and measurement of the parties in a particular situation is difficult for outsiders to understand, so it should be more tolerant and understanding of the parties!
On December 18, 2015, ZTE and Vringo filed court documents with the US District Court for the Southern District of New York (hereinafter referred to as the “Local Courtâ€), ending the lawsuits of both parties. Prior to this, Vringo announced a global settlement with ZTE on December 9, 2015. ZTE agreed to pay Vringo a US$21.5 million patent license fee.
Moreover, it was disclosed in Vringo's statement to the US Securities and Exchange Commission that ZTE's payment will be paid on or before December 22, 2015. Since the case was settled out of court, ZTE could not appeal under US law.
The case attracted public attention because on August 12, 2015, the US District Court issued a 27-page judgment (“Memorandum Opinion†(hereinafter referred to as “Judgementâ€), the case was Vringo v. ZTE (case number) 14-cv-4988) and ZTE v. Vringo (case No. 15-cv-0986).
The case originated from the global patent dispute between the two parties. ZTE argues that its legal director ("chief counsel") Guo Xiaoming cannot enter the United States to accept Vringo's enquiry and evidence collection ("deposiTIon") because the US federal government is conducting a criminal investigation into whether ZTE illegally sells equipment originating from the United States to Iran. Mr. Guo may be detained or arrested ("detained or arrested") upon entry.
The local court refused to accept the reason of ZTE and insisted that Mr. Guo go to the United States to accept the inquiry and collect evidence. Surprisingly, this 27-page verdict details the ins and outs of the ongoing global patent war between ZTE and Vringo. The story involves patents, anti-monopoly, contracts, criminal law and other laws, which are comparable to Hollywood blockbusters.
Global disputes between ZTE and Vringo
First look at the protagonists of these two legal world Hollywood blockbusters.
ZTE, of course, is familiar with everyone. It is a communications company headquartered in Shenzhen, China. It is one of China's top five and one of the world's top ten smartphone manufacturers. Vringo is a Nasdaq-listed patent operating company in New York, USA, with more than 600 patents.
The incident dates back to August 2012, when Vringo issued $22 million in stock financing to purchase more than 500 patents from Nokia's bankruptcy auction, at least seven of which were considered standard essential patents for wireless communications. Vringo must license these standard essential patents in accordance with the principles of fair and reasonable non-discrimination (hereinafter referred to as "FRAND").
Since October 2012, Vringo has sued ZTE patent infringement in Australia, Brazil, France, Germany, India, Malaysia, the Netherlands, Romania, Spain and the United Kingdom.
At the end of 2013, ZTE and Vringo negotiated and settled the issue.
On November 26, 2013, Vringo provided a confidentiality agreement to ZTE.
On December 9, 2013, ZTE signed the confidentiality agreement, and the effective date began on December 6, 2013. The confidentiality agreement stipulates that any documents and information related to the negotiation are confidential and prohibits the parties from using the confidential information in current or future litigation. The parties agree to use the New York law to interpret the confidentiality agreement and the court in New York State if there is a dispute.
On December 10, 2013, ZTE and Vringo met to negotiate. Vringo did a 40-page demo and provided a settlement. Each page of all documents is indicated as a confidential document.
On February 24, 2014, ZTE filed an antitrust lawsuit in Shenzhen, alleging that Vringo refused to comply with the FRAND principle in patent licensing and abused its market dominance. ZTE’s complaint cites Vringo’s confidential information. Vringo didn't know the lawsuit in Shenzhen at the beginning. It was not until June 26, 2014 that ZTE's complaint and relevant information were obtained from the Shenzhen court.
On April 10, 2014, ZTE filed a monopoly on Vringo against the European Commission.
On May 15, 2014, Vringo received relevant documents from the European Commission and needs to reply by June 17, 2014. At this time, Vringo did not know that he was accused in Shenzhen. Therefore, on June 4, 2014, Vringo sent a letter to ZTE asking ZTE to give an exemption (“waiverâ€), allowing Vringo to use the confidential information in the negotiations when answering the European Commission. Vringo did not receive a response from ZTE before the response deadline, so subject to the confidentiality agreement, Vringo erased the relevant confidential information in its reply.
On June 24, 2014, ZTE replied to two conditions for granting an exemption: (1) Mutual immunity between the two parties. (2) The confidential information of the exemption must be directly related to the allegations made by ZTE to the European Commission. The District Court held that it could be inferred that ZTE recognized the validity of the confidentiality agreement.
On January 13, 2015, Vringo received a letter from the China Development and Reform Commission stating that the NDRC had initiated an antitrust investigation against Vringo. In the process of obtaining evidence in this case, ZTE admitted that it submitted the draft of Vringo on December 10, 2013 to the National Development and Reform Commission in April 2014.
Meanwhile, on July 2, 2014, Vringo filed a lawsuit in the District Court, accusing ZTE of violating the confidentiality agreement. The next day, the court moved again and asked the court to issue a temporary injunction. On July 7, 2014, the local court issued a temporary injunction prohibiting ZTE from using, citing or revealing confidential information. On August 13, 2014, Vringo amended the complaint, increased fraudulent lure (Vringo revealed confidential information), violated the implied contract terms of honest credit and fair trade, and the unfair competition.
On February 5, 2015, ZTE sued Vringo in the US federal court in Delaware, accusing Vringo of violating good faith negotiations, or licensing contractually necessary patents under the FRAND principle. The Federal Court of Delaware transferred the case to the Federal District Court for the Southern District of New York for convenience, effectiveness, consistency, and fairness.
In the course of the proceedings, the District Court held that ZTE actively resisted the provision of documents and other requests for evidence. Because Mr. Guo approved ZTE’s “use war to make peace†strategy, Vringo asked Mr. Guo to ask for evidence. The local court held that ZTE deliberately delayed and began to argue that Mr. Guo was a company executive and did not understand the case of the case, so there is no need to be questioned for evidence. Vringo was forced to file a court motion requesting the District Court to order Mr. Guo to come to New York for an inquiry. On July 24, 2015, the District Court approved Vringo's request.
On August 5, 2015, ZTE submitted a court motion to disclose for the first time that the US federal government is conducting a criminal investigation into whether ZTE has illegally sold equipment originating from the United States to Iran, which may result in Mr. Guo being detained or arrested upon entry. So, ask the court to re-measure the decision to approve Vringo's court motion. ZTE also suggested that if the local court forced Mr. Guo to come to the United States to accept the inquiry, the ZTE would be forced to accept the sanctions without complying with the order of the local court.
The District Court held that, given ZTE’s lack of candid and deliberate delays, the court had discretionary powers but would not make a favorable ruling against ZTE. Therefore, the local court rejected the ZTE court motion on August 11, 2015. On August 12, 2015, the District Court issued the revised judgments mentioned above.
As ZTE did not comply with the local court's forensic order, on September 8, 2015, Vringo filed a legal motion requesting the court to directly award ZTE to the lawsuit and compensate Vringo's attorney's fees. On December 9, 2015, Vringo announced a global settlement with ZTE. ZTE agreed to pay Vringo's $21.5 million patent license fee, and the two sides ended the global patent war.
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