Service of Process in China - GK IP Bridge 1 v Huawei Technologies Co Ltd.

Land controlled by the People's Republic of China shown in dark green; land claimed but uncontrolled shown in light green.
Author Addicted04 Licence CC BY-SA 3.0 Source Wikimedia Commons

Patents Court (Nicholas Caddick QC) GK IP Bridge 1 v Huawei Technologies Co Ltd. and others  2021] EWHC 1261 (Pat) (14 May 2021)

This was an application by two Chinese companies, Huawei Technologies Co. Ltd and Huawei Device Co. Ltd. to set aside an order by the Chief Master to permit service of process against them on the British company Huawei Technologies (UK) Ltd, and the companies' solicitors.  The application came on before Nicholas Caddick QC sitting as a deputy judge of the High Court on 15 April 2021. By para [36] of his judgment of 14 May 2021. Mr Caddick QC set aside the Chief Master's order (see GK  IP Bridge 1 v Huawei Technologies Co. Ltd and others  [2021] EWHC 1261 (Pat) (14 May 2021).

The Dispute
This is a dispute between Huawei Technologies Co. Ltd and Huawei Device Co. Ltd and the first defendant's British subsidiary, Huawei Technologies (UK) Ltd., implementors of an ETSI standard, and GK IP Bridge 1, the proprietor of patents that are alleged to be essential to the standard, over the terms of licences that IP Bridge 1 has agreed to offer to implementors on fair, reasonable and non-discriminatory ("FRAND") terms. Negotiations have taken place between the parties since 2015 and offers and counteroffers have been exchanged. Those negotiations appear to have broken down with IP Bridge accusing the Huawei companies of holding out.  That is to say, spinning out the negotiations for as long as possible while working the patent but not paying for it in the meantime. IP Bridge has issued patent infringement proceedings here and in Germany while the Chinese Huaewei companies have started proceedings in China for a declaration of FRAND terms for IP Bridge's Chinese SEPs. For the meaning of the terms "implementor", "SEP", "holding up" and "holding out", see my article, Patents: Supreme Court upholds Court of Appeal and Sir Colin Birss on FRAND 27 Aig 2020).

The Applicable Law
Orders for substituted service are made by the Chief Master. China is a party to the Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. The learned deputy judge noted at para [11] of his judgment that the principles governing when it is appropriate for a court to make an order for alternative service on a defendant in a country (such as China) that is a signatory to the HSC have been discussed in Deutsche Bank AG v Sebastian Holdings Inc. [2014] EWHC 112 (Comm), Societe Generale v Goldas Kuyumculuk Sanayi Ithalat Ihracat AS [2017] EWHC 667 and, on appeal, at [2018] EWCA Civ 1093, Marashen v Kenvett [2017] EWHC 1706 (Ch), Celgard LLC v Shenzhen Senior Technology Material Co Ltd [2020] EWHC 2072 (Ch), M v N [2021] EWHC 360 (Comm) and GHS Global Hospitality Limited v Beale [2021] EWHC 488 (Ch).

Mr Caddick drew the following guidance from those decisions at para [12]:

"a. Where the court gives permission to serve a claim form out of the jurisdiction, it also has power, by reason of CPR r.6.37(5)(b)(i) and r.6.15(1), to make an order permitting service by an alternative method or at an alternative address (Celgard at [115] and GHS at [10]).
b. Such an order can only be made if the court is satisfied that there is "a good reason". If there is a good reason, the most important aspect of the jurisdiction is to ensure that the defendant is adequately informed of the contents of the claim form and the nature of the claim (Celgard at [116]).
c. Where a defendant is resident in a country that is party to a convention as regards service, then service in accordance with that convention is "the prime way of service" in that country (Deutsche Bank at [27]). Further, where a country has (like China) stated its objection under Art.10 of the HSC to service otherwise than through the authority that it has designated to deal with service under the HSC, an order for alternative service will only be made in "exceptional circumstances" (sometimes referred to as "special circumstances") (Societe [2017] EWHC 667 at [49(9)(b)] endorsed at [2018] EWCA Civ 1093 at [31]-[35]), Marashen at [57] and M v N at [8(iv)]).
d. In determining whether exceptional circumstances exist, each case will turn on its own particular facts and involves balancing the various factors (GHS at [12]).
e. Mere delay or additional expense arising from having to serve in accordance with the HSC do not, without more, constitute exceptional circumstances (Societe [2017] EWHC 667 at [49(9)(a)] and [2018] EWCA Civ 1093 at [31][35]). However, delay might suffice when coupled with another factor or factors such as, for example, some form of litigation prejudice or where it is of such exceptional length as to be incompatible with the due administration of justice (Marashen at [57] and Celgard at [119]).
f. Some examples of the sort of factors which might help establish the existence of exceptional circumstances are set out in M v N at [9] and [10]. They include, for example, the need for urgent interim injunctive relief or for relief under the Arbitration Act 1996."

Mr Caddick considered whether any exceptional circumstances applied in this case.

The Chief Master had made his order in the belief that 

"there was (1) a strong likelihood that service in China on the First and Second Defendants would take over a year, (2) a real likelihood that it would take substantially more than a year due to Covid-19 and (3) a possibility that it might take more than two years."

The first and second defendants produced evidence that service could be effected in accordance with the Hague Convention in a year or less. They also offered to accept service by an alternate method if it could not be effected within 11 months.  Such a delay was not exceptional in the circumstances.

Delay in receiving Payment
Mr Caddick held that the delay in receiving remuneration from the Chinese companies, while unsatisfactory, was not exceptional, that the negotiations had already lasted 6 years and that there was nothing to stop IP Bridge from pursuing Huawei's Engish company or pressing ahead with the German litigation.

The claimant argued that delay in effecting service would diminish the benefits of a final injunction.  The deputy judge thought that that might well be true but it was not an exceptional circumstance.

Holding Out
IP Bridge complained that the Chinese companies were holding out.  Mr Caddick thought that he was in no position to make that finding as the parties had exchanged offers and counter-offers of settlement.

Chinese Proceedings
It was argued that the claimant's proceedings in China might result in an inconsistent judgment and an order that could fetter the jurisdiction of the English court,  The learned deputy held that this was one of the normal consequences of multi-jurisdictional litigation. He noted that the claimant had already obtained an anti-suite injunction in Germany. There was no evidence that the court would make an order limiting the jurisdiction of n English court.

Position of the Defendants
Mr Caddick accepted the claimant's submission that it would be undesirable to proceed against the defendants in different stages but thought that the case against the Chinese companies could be managed in such a way that those proceedings would quickly catch up with the proceedings against the English company.

There were a number of other points but these did not affect Mr Caddick did not consider them extraordinary.

Further Information
Anyone wishing to discuss this case or any of the topics discussed in this article may call me on 020 7404 5252 during office hours or send me a message through my contact form at other times.


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