By Kan Zu, Unitalen Attorneys at Law

Background of the New Patent Law

In the past 5 years, the number of patent applications in China from 476,264 in 2005[1]increased to 976,686 in 2009[2], about 20% increasing each year. Among these applications, the number of patent applications from Chinese domestic applicants increased from 383,157 in 2005[3]to 877,611 in 2009[4], and the portion of the whole applications increased from 80% in 2005 to almost 90% in 2009. Following the patent applications increasing, a strong motivation exists for the domestic patent owners to protect their patents and innovations. Further, since 2006 China has been promoting independent innovations, and even 17th National Congress of the CPC defined the enhancement of China’s capacity for independent innovation and the construction of an innovative country as the core of the national development strategy, changing the country from a manufacturing country to an innovative country. China is investing heavily in R & D and education, and its innovation environment is improving. Its innovation performance will rise from 54th to 46th place between 2004-08 and 2009-13. According to the OECD, China’s R & D spending reached USD87 billion in 2006 as a share of GDP reached 1.4%. The government’s target is to reach 2% by 2010.[5]

Unlike the situation in 5 years ago, not only foreign companies but also Chinese companies and Chinese government have strong requirements for patent protection. Both Chinese companies and Chinese government started to invest heavily on R & D, without good protection of intellectual property, no incentive for them to invest continually to build up the innovative nation.

Under above circumstance, on December 27, 2008 China passed the 3rd amendment to the Chinese Patent Law (“New Patent Law”), and the New Patent Law came into effect on October 1, 2009. Following the New Patent Law, the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases (the “Interpretation”), which has been awaited for a long time, was adopted on December 21, 2009 and came into force on Jan 1, 2010. Further, the Implementation Regulations for the New Patent Law (“Implementation Regulations”) has been issued on Jan 9, 2010. The New Patent Law, Implementation Regulations and Interpretation would have some influence on the patent prosecutions and patent infringement litigations in China.

Here, we try to summary some changes of the New Patent Law and the Interpretation to provide some information that suppose would have influence on court practice in the future. While some regulations are provided in the New Patent Law and the Interpretation first time, but in practice had been adopted and applied for a long time. For example in the Interpretation, the Supreme Court has confirmed for the first time its approach to patent claim interpretation and has formally introduced a doctrine of file wrapper estoppel,[6] but it has been applied in practice for more than ten years.

Double Patenting

In July 2008, the Supreme Court vacated the appeal court’s final judgment and affirmed the judgment by trial court upholding the validity of Chinese patent No. 92106401.2, granted on Oct. 13, 1999, by finding no double patenting.

In December 2000, Jining Non-Pressure Boiler Factory (“Boiler Factory”) challenged the validity of Chinese patent No. 92106401.2 (“the ‘401 patent”) filed on Feb 22, 1992 by Mr. Xuezhang Shu (“Shu”) by submitting a Chinese utility model No. 91211222.0 (“the ‘222 utility model”) which contained almost same claims and was filed by Shu on Feb 7, 1991 and was granted on June 17, 1992, but the utility model was expired on Feb 8, 1999 as the utility model was filed under the first version of Chinese Patent Law which offered at most eight years protection for utility model. Boiler Factory alleged that the grant of the ‘401 patent caused double patenting which was violation of the article 12 of Implementation Regulations of Chinese Patent Law (the first version in 1992).[7] Shu argued that the ‘401 patent was granted after the ‘222 utility model was expired so that there was no double patenting, two identical patents existed in the same time. The Patent Reexamination Board affirmed, finding that the grant of ‘401 patent did not violate the Art. 12 of Implementation Regulations of Chinese Patent Law (1992 version) as when the ‘401 patent was granted the ‘222 utility model has been expired.

The Beijing 1st Intermediate Court (“the Trial Court”) affirmed, holding that the Chinese Patent Law or the Implementation Regulations of Chinese Patent Law did not prohibit an applicant to file applications for invention patent and utility model for the same invention in different time, and an applicant seeks the technology to be protected quicker that he may try to file an invention patent application and a utility model application later, or vis-à-vis, due to the different features of the two types of patents, invention patent has 20 years protection and utility model has quick examination procedure. The purpose of Art 12 of Implementation Regulation of Chinese Patent Law (1992 version) was to avoid an identical invention to be granted a patent more than once. “Same intention can only be granted as one patent” should be interpreted that there shall not exist two or more than two valid patents for the same invention, no statutory double patenting. As the ‘401 patent and the ‘222 utility model did not have overlap protection period, therefore the ‘401 patent and the ‘222 utility model did not constitute double patenting.

While vacating the judgment by the Trail Court, the appeal court, Beijing High Court held that “double grant” determination for double patenting should be made as grant of the patents twice for the same invention, but two patents for same invention existing is not sine qua non of double patenting. Patent system not only protects the patent owners but also protects public interests. The technology described in a patent would enter into public domain once the patent is expired and anybody would be freedom to use it. Here, the ‘222 utility model was expired on Feb 8, 1999 and the technology described in the utility model entered into the public domain. When the ‘401 patent was granted on Oct 13, 1999, it took back the technology in public domain and awarded it to the patent owner, and would cause the public confusion on freedom to use the technology in public domain. The appeal court concluded that the grant of the ‘401 patent was double patenting.

Supreme Court accepted re-hearing request in 2007 and vacated the judgment by appeal court in 2008 by upholding the interpretation by the Trail Court that Art. 12 of Implementation Regulations of Chinese Patent Law (1992 version)[8]should be understood that the same invention cannot have two or more than two valid patents existed. Hence, under the current patent system, the same applicant might file applications for invention patent and utility model for the same invention and it would not violate the rule of double patenting under the condition that the invention patent did not co-exist with utility model.

Supreme Court’s judgment brought a lot of debates from the judges, private practioners, scholars, and etc. criticizing that the Supreme Court had a broaden interpretation. The interpretation of “the same invention can only be granted as one patent” by the Supreme Court would cause two critical issues, an applicant may extend the protection period of the invention and the technology in the public domain may be awarded to an applicant for exclusive use.

After the amendments, the New Patent Law still offers the opportunity for an applicant to secure quick but limited patent protection while the application of invention patent is pending by filing an application of utility model. However, obviously the legislative has put attention on Shu’s case, even though allowing one applicant files applications of invention patent and utility model for same invention, the applicant must meet all three criteria below to get the invention patent application granted.

1. applications of invention patent and utility model for the same invention must be filed on same day;

2. the granted utility model is not terminated;

3. the applicant explicitly states to abandon the granted utility model.[9]

The above strict requirements for an applicant to file applications both invention patent and utility model would effectively avoid situations of unreasonable extending the protection period of a patent and entitled an applicant to enjoy exclusive use of technology which is in public domain.

Design Patent

The New Patent Law and the Interpretation would have influence design patent infringement litigations on several aspects below.

Under the New Patent Law, without the authorization from the patentee, offering for sale of the products protected by the design patent would constitute design patent infringement.[10] Offering for sale refers to those actions, advertisement, window-display or exhibition on a trade fare, and etc. which the infringer has intention to sell the infringement products.[11]

In practice, a lot of designs are copied by the infringers and in some situations the patentees are not able to obtain the infringement products by various reasons as evidence to file a lawsuit against the infringers, i.e. the infringer does not have store but only sells the infringement products online, the infringer exports the products outside China and has products advertisement on the website but does not sell the products in China, or the infringer shows the infringement products on the trade fare try to build up some potential sales. In such circumstance, normally the patentee was in difficulty to get the infringement products, and the enforcement authorities, courts or government agencies, had different attitude to the offering for sale of products protected under design patent. In practice, most courts did not accept the case as infringement but some government authorities might take action to protect the patentee.[12] However, even among those government authorities, they had discretion on determination whether they should take action to protect the design case by case. It is not predictable for the patentee to secure the rights based on design patent against the infringement by offering for sale until the New Patent Law added the offering for sale as an infringement of design patent.

Like invention patent and utility model, how to determine the protection scope of design patent is a critical issue. The New Patent Law emphasizes that the brief description is important to determine the protection scope of the design patent as the description of an invention patent or utility model[13], and an applicant must submit the brief description to describe the novelty of the design and some features which are not easily to be showed on the drawings or pictures when filing a design application[14].

In finding design patent infringement, the Interpretation provides some detailed rules on determination of infringement of design patent that using the identical or similar design on identical or similar products constitutes design patent infringement[15] and explains that the court shall find identical or similar products according to the use of the products[16].

In the end of 2003, in Wuliangye Group vs. Kwei Chow Moutai Co., Ltd. (“Moutai”) Sichuan Intellectual Property Office found that the bottle of one of Moutai’s wine was similar to the design patent 02302648.0 (the “‘648 design”) which was assigned to Wuliangye Group. Sichuan Intellectual Property Office found that the Moutai’s wine bottle, a panda with a bamboo in arm shaped bottle, had only slightly difference from the ‘648 design on the direction of inclination of bamboo, and without the brief description of ‘648 design to indicate the use of design even the design looked like as a handicraft article for ornamentation or decoration but we might suppose that it could be used as a container of wine as the name of the design was glass bottle by enlarging the size. Sichuan Intellectual Property Office concluded that the accused wine bottle had same idea with the design, similar shape and drawings, and would cause the consumers’ confusion so that the accused product constituted design patent infringement. In this case, we disagree with the conclusion of Sichuan Intellectual Property Office that Sichuan Intellectual Property Office had found that the design was used for ornamentation and decoration which is completely different from the function of wine bottle, but they made an unrealistic hypothetical that the design could be used as a container for alcohol to extend the scope of protection of ‘648 design in another product area.

In the Interpretation, the Supreme Court has explicitly stated that “the court shall determine the identical and similar product according to the use of the design.[17]” Under the New Patent and the Interpretation, we would have much clear rules to determine the identical or similar product.

The Interpretation further reiterates that criterion of identical or similar design shall be the knowledge and capability of a common consumer[18], and a comprehensive determination based on overall visible effects of the design and features of the accused product.[19] In Neoplan Bus GmbH (“Neoplan”) vs. Zhong Wei Bus Co., Ltd. (“Zhong Wei”), Neoplan accused four types of buses manufactured by Zhong Wei infringed the Chinese design patent No. 200430088722.4 (“the ‘722 design patent”) owned by Neoplan. Beijing 1st Intermediate Court found the fact that both the ‘722 design patent and the accused products had wedge-shaped upper and lower front screens, tilted front lights, wedge-shaped front part of the bus relevant to tilted front lights, side windows ranging back to the bus, horizontal stretched depression line on side of the bus, trapezoid rear windows, hexagon engine bonnet, triangle rear lights, radiator grille not on the middle of the rear, and wheel shroud covering a part of wheels. The court also found that the accused products had some difference from the ‘ 722 design patent on direction signal lights, windscreen wipes, positions of plates, places of exits, frames of rear windows, air inlet holes of engine bonnet, positions of air-conditions, and etc. The court was in opinion that the identical design between the ‘722 design patent and the accused products constituted the overall view of the buses, and even though the difference was found the difference was minor and imperceptible in part that the difference was not able to have distinct effective on the overall design of the buses. In early 2009, the court concluded that the accused products and ‘722 design patent were similar designs and the accused products infringed the ‘722 design patent.[20] Even the judgment was made before the Interpretation issued, though the court has followed the basic criteria in determining similar design, overall visual effects. The Interpretation rules that the court shall determine the designs are identical if the accused design and design patent are no difference in overall visual view, and the designs are similar if there is no substantial difference in overall visual view[21]. The case is on appeal and we shall be waiting for the opinions from appeal court for further interpretation.

Moreover, the Interpretation introduces the term “distinctive design features” which is different from the “key elements of the design” in practice for years. The Supreme Court considers that it might be much clear to decide the image of the overall visual effect by using the distinctive design features which is the features of the design patent distinctive from the prior designs.[22] So far we have not seen any infringement case under the distinctive design features test, but we suppose the Supreme Court would like to limit the judges’ discretion on key elements of the design test, because the key elements of the design is unclear term and no standards to define “the key elements” that a judge would have a broad discretion on interpretation of the key elements. By introducing “distinctive features” as a standard of identical and similar, both parties in suit and judge would be much clear in infringement issues although the “distinctive features” would much heavily depend on the evidence submitted by both plaintiff and defendant.

Claim Construction and Claim Interpretation

The Interpretation explains the claim construction and claim interpretation. Even in practice all Chinese courts followed the steps of claim construction and claim interpretation in handling the patent infringement cases for years. Lack of uniform standards and the different professional level of the judges, each court had its own way on claim construction and claim interpretation which caused some ridicules judgments as I know a case that the judge drew a conclusion that the defendant’s product did not infringe the independent claim 1 but infringed the claim 2 which was the dependent claim of independent claim 1.

The Interpretation now confirms that claim construction and interpretation shall be based on the contents of the claims and the understanding of ordinary skilled person in art by reading the description and drawings[23]. Additional to use the intrinsic evidence to interpret the claims, Supreme Court first time introduces the extrinsic evidence to interpret the claim under condition that the intrinsic evidence is not sufficient to interpret the claims[24].

Shanghai High Court affirmed the trail court’s judgment in favoring of defendant, Kingtainer Packaging Container Co., Ltd (“Kingtainer”) by ruling that the terms in claims shall be interpreted by referring back to the specification and drawings first. In 2004, Schuetz Werke GmbH & Co. (“Schuetz”) sued Kingtainer for infringement of Suchuetz’s Chinese patent No. 92102563.7 (“the ‘563 patent”) before Shanghai 2nd Intermediate Court (“the trail court”). The trail court found that the trough on the bottom of the container of Kingtainer did not have slight gradient slope which was one of the elements of the claim of the ‘563 patent so that no infringement was found. Schuetz appealed to Shanghai High Court arguing that according to the well-known Chinese lexicon and character dictionary, Ci Hai, “slight” may be explained to “almost no”, so that the straight trough on the bottom of container of Kingtainer was equivalent to the claim of the ‘563 patent which may be interpreted as “trough on the bottom of container is almost no slope”. Shanghai High Court denial of Schuetz’s argument, holding that “As for the terms of the claim of the patent, it shall be interpreted first by looking at the description and drawings of the patent. When clear understanding cannot be obtained from the description or drawings of the patent, the claim can be interpreted by what the person skilled in the art would have understood, and further may refer to the technical reference books, encyclopedias, and dictionary to define what the person skilled in the art would have understood.”[25] Shanghai High Court insisted that the term “slight” in the claim should be interpreted by looking at the description and drawings first. From the description, the Shanghai High Court found that the sloping trough on the bottom in the patent was used to drain the liquid empty from the container so that “slight” would not be able to be explained as “almost no”, and the degree of the slope must be able to drain the liquid empty from the container. The interpretation of “slight” by Schuetz according to the well-known Chinese lexicon and character dictionary was not acceptable so that the arguments of Schuetz should be rejected. Shanghai High Court dismissed the Schuetz’s appeal and the judgment from the trail court was affirmed.

By issuing Interpretation, the Supreme Court clearly confirms the opinions of Shanghai High Court in using the evidence of intrinsic and extrinsic to interpret the claims that only under circumstance that the intrinsic evidence is not sufficient to ascertain the proper scope of the claims the extrinsic evidence, technical reference books, text books, publications and the understanding of ordinary person skilled in the art, and etc., shall be introduced.

The “understanding by person skilled in the art” would bring another important question that the “understanding” refers to which situation, the understanding by person skilled in the art at time the patent was drafted or the understanding by person skilled in the art at time of the accused products were manufactured. The majority are in opinions same to the international practice that if a claim may, upon its proper construction, cover products or processes which involve the use of technology unknown at the time the claim was drafted, the patent specification and claims based on thereon should be drafted so that a person skilled in the art would understand the description in a way which was sufficiently general to include the new technology.[26] However, the Supreme Court did not explain clearly in the Interpretation and leave it in practice for the judges to construe.

Doctrine of Equivalents and File Wrapper Estoppel

Even though doctrine of equivalents does not appear on the Chinese New Patent Law, it was adopted in China in 2001 that the Supreme Court issued an interpretation explicitly stated that the scope of protection of patent defined by the elements in the claim, including the scope defined by the features which are equivalent to those elements[27]. In the Interpretation, the Supreme Court merely reiterates that a court shall consider that the accused product falls into the scope of protection of the patent if the accused product or process contains features which are same or equivalent to the elements of the claim.[28] As the Interpretation does not provide the detailed explanation of the term “equivalent”, the criteria for testing the equivalent would be still same to the definition in 2001, “in substantial same way, performing substantial same function, producing substantial same result, and obviously exchangeable element by skilled in the art without any creative work”.[29] Like the question in claim interpretation, the point of time is still unclear, “exchangeable element”, at the time of draft or at the time of infringement.

Because the Interpretation does not provide any much new information of the doctrine of equivalents, and in the end of 2009 in case of Shengguo XUE vs. Xiangmin ZHAO, Zhangren ZHAO, the Supreme Court adopted the above criteria to test the equivalents[30], we suppose that the Supreme Court intends to keep the same criteria for equivalents as was adopted in practice for years and the Interpretation would not have significant influence on doctrine of equivalents.

File wrapper estoppel has been adopted in practice for almost ten years and in the Interpretation, Supreme Court formally states that a court shall not uphold the patentee’s claim when the patentee or the applicant intends to extend the scope of the protection to some additional features which have been taken out of the scope of the protection during the prosecution or invalidation proceedings by amending claims, specifications or submitting statements.[31]

Like doctrine of equivalents, prosecution history estoppel has been adopted in practice for almost ten years and the Interpretation does not add any new material to this doctrine so that no significant change in practice would be occurred on estoppel after the New Patent Law or the Interpretation.

Means-Plus-Function Claims

The scope of protection for the claims containing mean-plus-function was in different opinions by judges, the Patent Office, and the Patent Reexamination Board.

In vacating the judgment of Beijing 2nd Intermediate Court, Beijing High Court upheld the arguments of Hebei Precrep Industrial & Trading Co. Ltd. (“Precrep”) that the interpretation of “one-way penetration layer” should be limited to the scope described on combination of the descriptions.

Zhanchi Zeng (“Zeng”) sued Precrep before Beijing 2nd Intermediate Court asserting infringement of Chinese utility model No. 01207388.1 (“the ‘388 patent”) related to an absorbing sweat insole. By interpreting the function term “one-way penetration layer” in claim 1 of the ‘388 patent, Beijing 2nd Intermediate Court rejected the arguments by Precrep that Zeng did not have any limitation on the function term “one-way penetration layer”, and the “the cloth with funnel shaped holes” was merely an embodiment of the description of the ‘388 patent, and held that “one-way penetration layer” should include all layers which might penetrate water molecule to one direction and cannot limit the term to the embodiment because “ in order to disclose the invention sufficiently, the embodiment was one of the optional form of the disclosure by an applicant, like an example, and without violation of estoppel embodiments cannot be used to limit the scope of the claims.”[32]

Precrep appealed to Beijing High Court arguing that the claim of the ‘388 patent was interpreted mistakenly by Beijing 2nd Intermediate Court so that the scope of the protection was unreasonable expended by interpreting “one-way penetration layer” to any layer structure which might penetrate water molecule to one direction. Beijing High Court reversed the judgment of Beijing 2nd Intermediate Court and held that “as for interpretation of function claims, the court should not interpret the claims literally to cover all means performing the same function but should limit the claim to the embodiments described in the description.”[33] Specifically, in patent infringement case, the function claims shall be limited to exact what described in embodiments and the equivalents in the description. In description of the ‘388 patent, “one-way penetration layer” was specifically indicated as a “cloth with funnel shaped hole” and the accused product contained two layers, one was non-waving cloth and the other was layer for absorbing sweat, to perform the “one-way penetration layer” which was neither identical nor equivalent to the “cloth with funnel shaped holes” so that no infringement was found.

In the Interpretation, Supreme Court upheld the judgment from Beijing High Court that once a claim contains means-plus-function, the court shall determine the scope of protection based specifically on the embodiments or equivalent embodiments which describe the function in the description and drawings.[34]

While the Chinese Patent Office has the different concerns on the means-plus-function claims. The Examination Guidelines provides another standard on examination of means-plus-function claims that “as for claims containing function elements, the function elements shall be understood that cover all means to perform the function.”[35] The two different standards in prosecution proceedings and litigation proceedings might easily cause confuse of the applicants and patentees to draft patent applications and argue the infringement issues. Nevertheless, we believe the Examination Guidelines would be changed to the same standard as the Supreme Court’s standard in the future because the Beijing High Court would follow the standard in the Interpretation and Beijing High Court is the final court in patent validity issues. In 2006 the case of In re Shenzhen Bak Battery Co., Ltd. (“Bak”), Beijing High Court vacated the judgment of Beijing 1st Intermediate Court and remanded. In Bak’s case, Beijing High Court explicitly ruling that the function elements of the claims should be limited to the embodiments which perform the function in the descriptions but should not be interpreted to cover all means performing the same function.[36]

As Beijing High Court is the final court for the validity issue and the standard of interpretation of means-plus-function claims is same in infringement and validity issue that function claim shall be limited specifically to the embodiments or equivalents in the descriptions, and the standard was upheld by Supreme Court in the Interpretation, the Patent Office and the Patent Reexamination Board would be deliberately considering the above cases and standard in prosecution proceedings. The Interpretation also provides a guideline for the applicants how to draft the applications containing means-plus-function claims, more embodiments broader protection.

Prior Arts Defense

Before the New Patent Law, prior arts defense arguments were in practice adopted by the courts for years but there was no legal basis under the old Patent Law. Unlike the US system, the Chinese courts are not able to make decision of validity directly as the validity issue shall be decided by the Patent Office or the Patent Reexamination Board. In most patent infringement cases, the defendant would challenge the validity of the patent, and some patents in suit especially for the utility models and designs, per se not patentable, are lack of novelty due to the Chinese examination system. In practice, a lot of courts accepted the arguments that it would not be infringement under the circumstance of finding the accused product were identical or equivalent to a prior art.

In practice, most courts were considering the prior art defense in situation that the patentee claimed patent infringement under doctrine of equivalents. However, in Strix Limited vs. Ningbo SLT Electrical Appliance Manufacture Co. Ltd. the Supreme Court upheld the judgment of Beijing High Court ruling that the prior art defense should be considered not only for the infringement under doctrine of equivalents but also for literal infringement.

Strix Limited (“Strix”) sued SLT for infringement of Strix’s the Chinese Patent No. 00103897.4 (“the ‘897 patent”) related to a thermal controller used on the container for boiling water. SLT argued that the accused product was manufactured under the public known technology and submitted the prior art Chinese utility model No. 89208920.2 (“the ‘920 patent”). Beijing 2nd Intermediate Court ruled that once the infringement under doctrine of equivalents was found, but the defendant provided an evidence that the accused product was equivalent to a prior art, the accused product would not constitute patent infringement asserted by plaintiff. The court rejected SLT’s defense by finding that SLT’s product was identical to the ‘897 patent, and the accused product was not equivalent to the prior art the ‘920 patent.

SLT appealed to Beijing High Court. Beijing High Court found that the accused product was literally covered by the scope of claim 1 of the ‘897 patent, and further found that the accused product was equivalent to the prior art, the ‘920 patent which was err finding by Beijing 2nd Intermediate Court. Beijing High Court reversed the judgment of Beijing 2nd Intermediate Court concluding that “even though the thermal controller made by SLT fell into the scope of protection of the ‘897 patent, the accused product did not constitute patent infringement because the accused product was equivalent to the prior art the ‘920 patent.”[37]

Strix requested the Supreme Court to re-hear the case arguing that the prior art defense would not be applied here as the accused product was identical to the claim 1 of the ‘897 patent. Supreme Court rejected Strix’s argument and explicitly affirmed that the prior art defense could be applied to the situation that the accused product was found literally infringing the patent.

Supreme Court held that Strix’s argument that the prior art defense should not be applied as the thermal controller was identical to the ‘897 patent was lack of legal basis and concluded that the application of prior art defense could not be excluded due to the accused product was identical to the patent in suit.[38] Strix’s request was dismissed.

The New Patent Law has clearly confirmed the prior art defense that if the defendant provides the evidence showing the accused technology is a prior art the accused technology would not constitute patent infringement.[39] In the Interpretation, the Supreme Court provides further explanation that “once all elements of accused technology fallen into the scope of the protection of the patent are identical to or no substantial difference from the relevant elements of a prior art, the court shall treat that the accused technology meets the requirement of prior art defined in Article 62 of the Patent Law…”[40] From the above stated New Patent Law and the Interpretation, no requirement of the situation of the infringement under doctrine of equivalents shall be met to apply prior art defense which was adopted in practice by a lot of courts for years. The defendant may apply prior art defense to any patent infringement assertion, either under doctrine of equivalents or literal infringement.

Declaratory Judgment

The first case of declaratory judgment in China was occurred in 2001. In responding to the request of Jiangsu High Court in case of Suzhou Long Bao Biotech Industrial Co., Ltd. vs. Suzhou

LongLife Co., Ltd., Supreme Court, after deliberately consideration, confirmed that the court might accept the non infringement confirmation suit case. The Supreme Court held that Suzhou

LongLife Co., Ltd. (“Longlife”) sent warning letters alleging patent infringement to the sellers who sold the products made by Suzhou Long Bao Biotech Industrial Co., Ltd. (“Long Bao”), caused the sales of the Long Bao’s products were stopped, and damaged interests of Long Bao, and further ruled that the court should accept the case which the purpose of the litigation was merely to request the court to confirm that the plaintiff did not infringe the defendant’s patent which alleged by defendant in the warning letter.[41] A very common situation was that a potential infringer would file a declaratory judgment before a court upon receiving a warning letter or cease and desist letter or any other similar information where the potential infringer may take advantage of communication with the judge to obtain a favorable non-infringement judgment or to transfer the patent infringement case filed by the patentee to the court which may in favor to the potential infringer. The infringement issue would have completely different results by different judges due to the levels of professionals. In the past years from the Supreme Court issuing an opinion on Long Bao’s case, many declaratory judgments were filed by the potential infringers in bad faith before the patentee filing patent infringement litigations that in fact the declaratory judgment protected the infringers to some extent.

In responding to jurisdiction issue requested by Hebei High Court and Beijing High Court, the Supreme Court ruled that the jurisdiction of declaratory judgment should be based on the Article 29 or Civil Procedure to decide which court had jurisdiction. The declaratory judgment and the patent infringement litigation based on the same fact were independent litigation, and both parties filed different litigations of declaratory judgment and patent infringement litigation before different courts, the cases should be heard by one court. Normally in practice, the court which has accepted the case first would have jurisdiction.

In September 2003, Honda Motor Co., Ltd. (“Honda”) found from the advertising materials that the model “SRV” made by Double Circles Auto Co., Ltd. (“Double Circles”) was extremely similar with the model “CR-V” made by Honda, and Honda sent six warning letters to Double Circles. On Oct. 16, 2003 Double Circles filed a declaratory judgment with Shijiazhuang Intermediate Court requesting a non-infringement judgment. On Nov. 13, 2003 Honda sued Double Circles with Beijing High Court alleging infringement of three Honda’s Chinese design patents, No. 01319523.9 (“the ‘523 design”) related to the vehicle, No. 01302609.7 (“the ‘609 design”) and No. 01302610.0 (“the ‘610 design”), both designs were related to bumpers. In solving the conflict of jurisdictions, the Supreme Court found that the declaratory judgment filed by Double Circles in Shijiazhuang Intermediate Court was related to the ‘523 design, and the patent infringement litigation filed by Honda in Beijing High Court related to the ‘523 design, the ‘609 design and the ‘610 design, and the two courts accepted the cases in different dates. The declaratory judgment of ‘523 design was earlier than the infringement litigation but the declaratory judgments of the ‘609 design and the ‘610 design were later than the infringement litigations. Therefore, the Supreme Court concluded that Beijing High Court should transfer the infringement case of the ‘523 design to Shijiazhuang Intermediate Court and Shijiazhuang Intermediate Court should transfer the declaratory judgment cases of the ‘609 design and the ‘610 design to Beijing High Court vis-à-vis.

By filing a declaratory judgment first, Double Circles successfully selected the court and got a favorable judgment finally even though the model of “SRV” was extremely similar to the ‘523 design.

In awareness of the above default of declaratory judgment, in the Interpretation, the Supreme Court ruled that the accused infringer shall respond to the patentee upon receiving warning letter or cease and desist letter. Once the patentee does not file a patent infringement lawsuit within one month from the date of receiving accused infringer’s response or within two months from the date of accused infringer sending the response, the accused infringer may file a declaratory judgment.[42]

Remedies

The remedies absolutely would be the one of the most important issues concerned by the patentees. The New Patent Law and the Interpretation do not provide any other further remedies than injunctions including preliminary injunction and permanent injunction, evidence perseverance, damages, and etc. Low damages on patent infringement have been criticized and questioned that if the infringement cost is low no innovative nation would be created. Hence, the New Patent Law raises the cap of statutory damages on infringement from half million RMB to one million RMB. In China, the damages can be calculated in three ways, lost of profit, defendant’s profit by infringement, or reasonable license fee. Nevertheless, the patentee may choose the statutory damages if the above ways are not available.[43] Actually damage was not the low but the patentee normally could not provide correspondent evidence when he claimed big damages that most patentees chose the statutory damages instead of lost of profit or defendant’s profit. In some cases the patentees had successfully provided evidence for calculating damages and the court accepted the evidence and awarded several million US dollars as damages, such as in Holley Comm Co., Ltd. vs. Samsung, 50 million RMB damages awarded, in Neoplan Bus GmbH vs. Zhong Wei Bus Co., Ltd., more than 20 million RMB damages awarded.

By awarding damages over three hundred million RMB to the patentee, CHINT Group (“the CHINT”), Wezhou Intermediate Court accepted the evidence that the profit made by defendant from the infringement products during August 2 2004 to July 31 2006. CHINT sued Schneider Electric (Tianjin) SA. (“Schneider”) on August 2, 2006 alleging Schneider infringed the Chinese utility model No. 97248479.5 (“the ‘479 patent”) owned by CHINT. The court assigned an auditor to audit the profit made by Schneider from the accused products, and based on the information of Schneider’s business registration the court calculated the profit from the accused products was over 300 million RMB and awarded the damages.

However, the case brought a question on the calculation of damages by defendant’s profit. The defendant’s profit should be calculated as the whole profit generated by the accused products, net profit or the profit of added value by using the accused infringement technology. The ‘479 patent merely solved the problem of quick opening and closing of breaker so that the profit from the beaker did not come all from the ‘479 patent, but the quality, materials, design, manufacturing techniques, marketing efforts, management, and etc. contributed the profit.

In the Interpretation, the Supreme Court rules that when a court decides the defendant’s profit under Article 65 of the New Patent Law the profit shall be limited to what is generated by the patented technology, and the profit comes from other aspects shall be deducted. While the infringement product is a part of another product, a court shall calculate the portion of profit generated by this part by counting the cost and value of the part to reasonably decide the damages.[44]

Conclusion

Even some issues having not been addressed, the New Patent Law and the Interpretation have clarified some issues which were completely under the discretion of the judges, and, no doubt, Chinese courts have made impressive progress on patent litigations and will be better and more professionals especially in some cities where the economic is more developed.

As GDP is the number two in the world, China had and would have offered continually much opportunities to develop business and generate profits for both domestic and foreigners. China has been making a lot of efforts on patent protection and the protection is even closer to practice in the US and Europe. Under such circumstance, having patents in China and actively enforcing the patents in China will lead the business successful in China.

[1] http://www.sipo.gov.cn/sipo2008/ghfzs/zltj/gnwszslnb/2005/200804/t20080421_386186.html

[2] http://www.sipo.gov.cn/sipo2008/ghfzs/zltj/gnwszslnb/2009/201001/t20100121_488329.html [3] http://www.sipo.gov.cn/sipo2008/ghfzs/zltj/gnwszslnb/2005/200804/t20080421_386186.html

[4] http://www.sipo.gov.cn/sipo2008/ghfzs/zltj/gnwszslnb/2009/201001/t20100121_488329.html [5] A New Ranking of the World’s Most Innovative Countries

[6] Overview of recent reform of PRC Patent Law

[7] Art. 12 of Implementation Regulations of Chinese Patent Law (1992 version): same invention can only be granted as one patent.

[8] Art. 12 of Implementation Regulations of Chinese Patent Law (1992 version): same invention can only be granted as one patent.

[9] Art. 9 of Chinese Patent Law

[10] Art. 11 of Chinese Patent Law: … After the grant of the patent for a design, no entity or individual may, without the authorization of the patentee, exploit the patent, that is, make, offer to sell, sell, or import the product incorporating its or his patented design, for production or business purpose.

[11] Art. 24 of Judicial Interpretation on Several Issues Concerning Hearing Patent Disputes

[12] Guangdong Province Intellectual Property Office had some enforcement cases against offering for sale based on design patent. http://www.pharm-ip.com/article/2009/03/11/1236755870.html

[13] Art. 59 of Chinese Patent Law: … The extent of protection of the patent right for design shall be determined by the design of the product as shown on the drawings or photographs. The brief explanation may be used to interpret the design of the product as shown on the drawings or photographs.

[14] Art. 27 of Chinese Patent Law: Where an application for a patent for design is filed, a request, drawings or photographs of the design and a brief explanation of the design shall be submitted.

[15] Art. 8 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases: Once a design identical or similar to the design patent uses on the products in the category identical or similar to that the patent product, the court shall determine that the accused product falls into the scope of protection of the design patent.

[16] Art. 9 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases: The court shall determine whether the accused product is in a category identical or similar to that the patent product according to the use of the product. The court may refer to the brief description of the design patent, the International Classification for Industrial Design, the functions, the marketing approaches, and the actual use in determining the use of the product.

[17] Art. 9 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[18] Art. 10 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Case

[19] Art. 11 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Case

[20] [2006] No. 12804 Judgment of Beijing 1st Intermediate Court

[21] Art. 11 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[22] Art. 11of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases: … In circumstance below, it normally has much influence on the overall visual effect. … (ii) features of granted design patent which are distinctive from the prior designs.

[23] Art. 2 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[24] Art. 3 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[25] Judgment of Schuetz Werke GmbH & Co. vs. Kingtainer Packaging Container Co., Ltd. on Oct 15, 2004

[26] Kirin-Amgen, Inc. vs. Hoechst Marion Roussel Ltd.

[27] Art. 17 of Judicial Interpretation on Several Issues Concerning the Application of the Law in Hearing on Patent Disputes Cases

[28] Art. 7 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[29] Art. 17 of Judicial Interpretation on Several Issues Concerning the Application of the Law in Hearing on Patent Disputes Cases

[30] Supreme Court Judgment, No. 1562 of 2009

[31] Art. 6 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[32] Judgment of Beijing 2nd Intermediate Court, No. 11450 in 2005

[33] Judgment of Beijing High Court No. 367 in 2006

[34] Art. 4 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[35] Part II of Patent Examination Guidelines 2006

[36] Judgment of Beijing High Court No. 00179 in 2006

[37] Judgment of Beijing High Court, No. 571 in 2006

[38] Notice of Refusal to Re-Hearing by Supreme Court, No. 51-1 in 2007

[39] Art. 62 of the New Patent Law

[40] Art. 14 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[41] Response from the Supreme Court to Jiangsu High Court, No. 4 in 2001

[42] Art. 18 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases

[43] Art. 65 of Chinese Patent Law

[44] Art. 16 of the interpretation of the Supreme Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases