The court ruled to dismiss all of Fractus' claims

 According to people familiar with the matter, recently, the Shanghai Intellectual Property Court ruled to dismiss all lawsuits filed by Spanish company Fractus against domestic mobile phone manufacturer OPPO because the patents involved in the lawsuit were ruled invalid by the State Intellectual Property Office. After the Dutch court ruled that Xiaomi mobile phones did not infringe Fractus' antenna patents, Fractus' aggressive attack strategy against domestic mobile phone manufacturers suffered a disastrous defeat in China.

The Spanish company Fractus is one of the most active NPEs in the past decade. From 2009 to 2019, Fractus frequently initiated patent lawsuits at home and abroad, and the defendants included international companies such as Samsung, HTC, LG, and BlackBerry, and successfully forced almost all of the defendants to reach an agreement with it. Samsung, the only company that did not agree to a settlement, was ordered to pay Fractus tens of millions of dollars in patent infringement compensation in May 2011.

In recent years, with the rise of Chinese mobile phone manufacturers, Fractus has gradually turned its attack on Chinese mobile phone manufacturers. In addition to OPPO, Huawei, Xiaomi, vivo, ZTE, etc. have all been its targets. However, in recent years, the patent strength and ability to deal with intellectual property risks of domestic manufacturers such as OPPO have improved rapidly. This time, OPPO won a comprehensive victory in the confrontation with Fractus, proving the value of Chinese mobile phone manufacturers increasing their investment in intellectual property and strengthening the construction of intellectual property teams with facts and tangible achievements.

Fractus v. OPPO: The whole story

The "grudge" between Fractus and OPPO dates back to 2018. In July and October 2018, Fractus filed patent infringement lawsuits against OPPO and vivo in the Shanghai Intellectual Property Court, claiming that the two Chinese companies infringed its Chinese patents for wireless device antenna technology, mainly involving two Chinese patents.

A search of the patent database of the State Intellectual Property Office shows that the patent in question has expired. However, according to the relevant provisions of the Patent Law, within the statute of limitations, the patent owner has the right to pursue infringements that occurred before the expiration of the patent. Fractus therefore initiated patent lawsuits against OPPO and vivo.

In order to counter the attack by Fractus, OPPO filed invalidation applications for the two patents involved in the case, CN200710104517.5 and CN200710185111.4, on September 5, 2018. On September 30 this year, the Patent Reexamination Board of the State Intellectual Property Office issued a decision declaring all four of Fractus' Chinese patents involved in the case invalid, including the above two patents.

Note: Fractus’ patents involved in the case were invalidated

At this point, OPPO has solved the patent basis of Fractus's lawsuit. With the Shanghai Intellectual Property Court's ruling to dismiss all the lawsuits filed by Fractus against OPPO, the patent battle between OPPO and Fracutus in China ended with OPPO's complete victory.

Aggressive NPE

According to Fractus, the company is a Spanish-based antenna technology developer with an intellectual property portfolio of more than 40 inventions and more than 120 patents in the United States, Europe and Asia. As a pioneer in geometric antenna technology, it has successfully licensed its antenna technology patents to numerous wireless device manufacturers around the world.

However, all signs indicate that Fractus is actually an NPE that relies on patent licensing as its main source of profit, and its strategy is very aggressive. Samsung, LG, Sharp, HTC and other mobile phone manufacturers have all been the targets of the company's patent lawsuits.

As early as 2009, the company sued a large number of mobile phone manufacturers, including Samsung, LG, RIM, Pantech, Kyocera, Palm, HTC, Sharp, UTStarcom, Sanyo, etc. Subsequently, almost all of the above-mentioned companies were forced to reach patent licensing agreements with Fractus. Samsung, the only company that did not agree to the settlement, was ordered to pay Fractus tens of millions of dollars in patent infringement compensation in May 2011.

In addition to mobile phone manufacturers, operators are also targets of Fractus. In April 2018, the company filed lawsuits in the United States against the four major operators in the United States, AT&T, Sprint, T-Mobile and Verizon (collectively referred to as "operator defendants"), accusing the operator defendants of infringing several patents owned by Fractus by deploying antennas on their networks.

In recent years, domestic mobile phone manufacturers have emerged as a new force and have become Fractus' new target. In addition to OPPO and vivo mentioned above, ZTE, TCL and Xiaomi have also been sued for patent infringement by the company.

In 2017, Fractus accused ZTE of infringing its seven antenna patents. In March this year, Fractus and ZTE reached a patent litigation settlement, and the terms of the settlement agreement were kept confidential.

In September 2019, Fractus sued Xiaomi for patent infringement in the District Court of The Hague, Netherlands, and also sued 15 Xiaomi dealers, intending to ban the sale of Xiaomi phones in the Netherlands, and even tried to apply for a cross-border injunction to stop Xiaomi sales in Germany, Spain, and France. In December of the same year, after trial, the Dutch court ruled that Xiaomi phones did not infringe Fractus' antenna patent and rejected Fractus' request for a temporary injunction.

Just one month after Fractus reached a settlement with ZTE, Fractus filed a lawsuit against TCL in the United States District Court for the Eastern District of Texas. Information from the legal services website patexia shows that the patents involved in Fractus' lawsuit against TCL are the same as the patents it used to sue ZTE in 2017.

Fractus has repeatedly had disputes with major global equipment manufacturers due to its charging policy. According to people familiar with the matter, Fractus' patent licensing fees are very aggressive. In the process of contacting domestic manufacturers including OPPO and vivo, it asked domestic manufacturers for tens of millions of dollars in licensing fees.

Domestic mobile phone manufacturers: Increase investment in intellectual property rights to ensure safe business operations

Fortunately, as mentioned above, Fractus's attack on domestic mobile phone manufacturers has not been very successful. This time, OPPO defeated Fractus's attack in China, which shows that domestic mobile phone manufacturers represented by OPPO have strong intellectual property risk prevention and control capabilities and litigation response capabilities, which has greatly boosted the confidence of domestic companies in confronting international NPEs. Behind all this is the rapid improvement of domestic companies' intellectual property strength in recent years.

Taking OPPO as an example, OPPO's intellectual property system construction and team building have been fruitful in recent years. Public data show that as of September 30, 2020, OPPO's global patent applications exceeded 52,000 and the number of global authorizations exceeded 21,000. Among them, the number of invention patent applications exceeded 46,000, and invention patent applications accounted for 88% of all patent applications. According to the 2019 International Patent Treaty (PCT) application rankings released by the World Intellectual Property Organization (WIPO), OPPO ranked fifth in the world. In the "2020 Global Wireless Communication Network Technology Invention Patent Ranking (TOP100)" jointly released by the incoPat Innovation Index Research Center and IPRdaily Chinese Network recently, OPPO ranked third with 5,353 patents, second only to Huawei and Qualcomm.

In terms of risk and patent litigation response, OPPO has achieved favorable results in litigation confrontations with powerful international NPEs such as Sisvel and Fractus. In the patent litigation confrontation with Fractus, OPPO invalidated all the patents involved and their related patents of the same family, and finally the court ruled to dismiss the lawsuit, avoiding huge compensation. This fully demonstrates the strong professional ability of OPPO's intellectual property team in dealing with risks. On the other hand, since all the patents that Fractus could use to "harm" domestic mobile phone manufacturers were invalidated, OPPO also helped other domestic mobile phone manufacturers avoid litigation risks and huge compensation. Therefore, this case has a huge impact on the entire domestic mobile phone industry.

Ultimately, the most fundamental way to deal with the growing global intellectual property risks is to enhance one's own intellectual property strength and build one's own patent "firewall". Chinese companies with globalized business should increase their investment in intellectual property, strengthen the construction of intellectual property teams, and enhance their ability to respond to intellectual property risks. Only in this way can they have the confidence and the ability to resolve risks when dealing with patent litigation, thereby ensuring the safe operation of their business.