China's Supreme Court Issues Draft Interpretation on IP and Competition Pretrial Measures


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On February 26, 2015, the Chinese Supreme People’s Court released a Draft Interpretations of the Supreme People’s Court on Issues Related to the Application of Laws in Reviewing Act Preservation Cases of Disputes over Intellectual Property Rights and Competition (“the Draft”) in order to specification on reviewing act preservation cases of disputes over intellectual property rights and competition.

The Draft includes 22 Articles and formulates detailed provisions mainly on the following issues:

Applicant

The Parties of disputes over intellectual property rights and competition may file an application for act preservation measures before the commencement of the judgment or arbitral award.

Intellectual property right holders are entitled to apply for act preservation
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measures of disputes over intellectual property rights infringement. Meanwhile, interested parties such as licensees of intellectual property licensing contracts and lawful successors of intellectual property may have the right to apply for act preservation measures in those cases.

Application

An application for act preservation measures of disputes over intellectual property rights and competition shall states the followings:
(A) The basic situation of the Applicant and the Respondent;
(B) The content and duration of act preservation measure; and
(C) Rights basis, facts and reasons of filing the application for act preservation measure.

Review

In accordance with the Draft, there are two solutions with respect to review term. One solution is the Court shall review timely after it decides to proceed to an act preservation measure; another solution is the Court shall make a decision within 30 days since the date of acceptance of an application for act preservation measure for non-emergency situations.

The Court shall ask the Applicant and the Respondent or hear their opinion before make a decision for taking act preservation measures. While it decides to take act preservation measures, it shall deliver the decision to the Applicant, the Respondent and person assisting in the execution in advance.

Act preservation

The Court shall consider the following factors to determine whether it is necessary to take a preservation measure:
(A) Winning possibilities of the Applicant in the case;
(B) Whether it is possible for the act of the Respondent or for other reasons to make it difficult to implement any future judgment or otherwise damage the Applicant, or cause irreparable damage to the legitimate rights and interests of the Applicant;
(C) Whether the damage to the Respondent by taking a preservation measure is significantly more than that to the Applicant if no any preservation measure is taken; and
(D) Whether taking preservation measure would harm to the public interest.

The “irreparable damage” refers to the damage of the Applicant caused by the applied act preservation measure is irreparable or difficult to calculate through money. The Draft gives the following examples of situations when “irreparable damage is generally believed to have been caused”:
(A) The occurrence or continuation of the act of applied-for preservation will seize the market shares of the Applicant or force the Applicant to operate by using irreversible low price, thereby seriously weakening the competitive advantage of the Applicant.
(B) The occurrence or continuation of the act of applied-for preservation will make it difficult to control of the subsequent violations, and will significantly increase the damage to the Applicant;
(C) The occurrence of the act of applied-for preservation will violate the personal rights of the Applicant;
(D) The Respondent cannot pay the damages; and
(E) It will cause irreparable damage to the Applicant.

Meanwhile, the followings are excluded from such situations:
(A) The Applicant knows or should know that the existence of the act of applied-for preservation, but unreasonably delay for seeking judicial relief;
(B) The IP right holder as the Applicant without reasonable cause does not use or implement the relevant IP and has no plan to the use or implementation thereof;
(C) The damage of the Applicant caused by the act of applied-for preservation will be easier to be accounted through monetary; and
(D) Other situations when irreparable damage will not caused to the Applicant.

Security

The security determined by the Court according to Articles 100 and 101 of the PRC Civil Procedure Law shall be valid and can be used as reference to determine the amount of compensation of the Applicant for a wrong act preservation application. The Court shall determine a reasonable amount of the security, which shall be able to compensate for the loss of the Respondent due to preservation mistake, under the claims of the Applicant and the Respondent and the necessary evidence.

As reviewing on whether take an act preservation measure or not, the Court may order the Applicant to append the appropriate securities whereas the Respondent claims and can prove that it might or has suffered more damages due to the act preservation measure. While the Applicant doesn’t append the security, part of or the whole preservation measure will be modified or rescinded.

Lifting preservation

An act preservation measure can be rescinded by the Court in the following situations:
(A) The Applicant doesn’t file a lawsuit or request arbitration within 30 days after an act preservation measure is taken;
(B) The right basis of an act preservation, the rights and obligations relationship between the Applicant and the Respondent or the necessity of the preservation ceases to exist; and
(C) The Applicant applies for rescinding it while application error is found.

The “application error” refers to the followings:
(A) The preservation measure is rescinded since the Applicant doesn’t file an lawsuit or request arbitration;
(B) The preservation measure is rescinded due to improper of the preservation measure from the beginning; and
(C) The Applicant doesn’t get support from the Court in the case or the Court isn’t support the Applicant’s claims involving of act preservation.

Miscellaneous

The Court shall determine the effectiveness period of an act preservation measure according to the Applicant's request and the specific circumstances of the case, and the period can be extended under the requirement of the Applicant which should be submitted within 10 days before the deadline of the period.

A decision of taking an act preservation measure can be reviewed once by the Court who made the decision. And the Court shall review and make a ruling within 10 days.

While the Respondent refuses to perform act preservation measure, the Court may fine, detention it or even pursue it criminal responsibility in accordance with Article 111 of the PRC Civil Procedure Law.

The Draft is going to replace the Several Provisions of the Supreme People's court on Issues Concerning Applicable Laws to Stop the Patent Right Infringement of the Prior Litigation and the Interpretation of the Supreme People's Court on the Application of Law for Stopping the Infringement upon the Right to the Exclusive Use of a Registered Trademark and Preserving Evidence before Filing a Lawsuit.

ABOUT THE AUTHOR: Xia Yu
Xia Yu is an Associate in the MMLC Group.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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