China Patent Litigation: A Round Up
The amount of litigation concerning the intellectual property right cases, especially those involving patents have been constantly increasing, as China values the importance of the protection of its intellectual property rights more and more. Taking the Beijing IP Court as an example, the patent cases tried thereby in 2016 had an increase of 70.5% than that of the year of 2015. For 2017, the numbers will be staggering.
In order to illustrate some new developments happened in the recent patent litigations, we selected three typical and notable patent infringement cases tried by the Beijing IP Court or the Beijing High People’s Court in the recent two years as follows:
Case One: China IWNCOMM Co., Ltd. v. Sony Mobile Communication Products (China) Co., Ltd.
On March 20, 2017, the Beijing IP Court delivered its first instance judgment concerning a patent infringement dispute involving a standard essential patent No. ZL02139508.X “A wireless LAN and mobile device data secure communication secure access method”.
The plaintiff is the patent owner of the No. ZL02139508.X “A wireless LAN and mobile device data secure communication secure access method”, which was granted on March 2, 2005, and was incorporated into the national mandatory standard. The plaintiff claimed that 35 cell phones manufactured and sold by the defendant had infringed its No. 1, 2, 5, 6 patent claims, which were reflected in the points as follows: 1) the defendant infringed the said patent right by using the involved patent during the course of design, R&D, test and so on; 2) the defendant provided help to others, since the smart phone manufactured thereby is a necessary tool. Thus, the Plaintiff requested the court to order an immediate cease of the defendant’s infringement, as well as compensation plus with reasonable expenses amount to 33,362,373 Yuan.
The defendant replied that it did not constitute infringement, on the ground that it did not need to use the involved patent in the link of manufacturing; there was no help provided to others for co-infringement; and the plaintiff’s patent right had exhausted.
Upon trial, the Beijing IP Court considered that the defendant either complied with a national standard of “Quality Management System Requirements” during the course of design, R&D and test of its cell phones, or had its own quality control documents. However, since the defendant failed to provide its own quality control documents upon the court’s order, the court considered that the defendant must have complied with the said national standard, which led to a reasonable inference that the defendant did conduct the WAPI function test. The steps of such WAPI functions getting access to the Internet were then considered as falling into the protection scope of the involved patent claims. Thus, the defendant constituted infringement. Furthermore, the defendant’s infringing products as MT were considered to be able to co-implement the involved patent with AP and AS. As to the defendant’s reply regarding the exhaustion of rights, the court considered that such principle can only be applied to the circumstance of manufacturing method patent. There is no exhaustion of rights in the circumstance of use method patent.
In conclusion, the defendant was ordered to immediately cease its infringement of the involved patent due to its own fault, and compensate the plaintiff the economical loss amount to 8,629,173 Yuan which was calculated on the basis of the three times of the license fee, as well as reasonable expenses amount to 474,194 Yuan. Thus, the total amount is about 910,000,000 Yuan.
No appeal of the first instance decision was reported.
Significance of the Decision: this case attracted a lot of attention in China, not only because it was deemed as a big win by a Chinese company against an international giant as some Chinese media reported, but also reflected that new types of patent disputes has been emerging. For instance, the case herein is a standard essential patent dispute, which has increased year by year. According to one of the judges who tried this case, such case will have a profound impact on the business model of the telecommunication industry and its derived business model, and it may even promote the formation of the international rules regarding the standard essential patent implementation license.
Case Two: LG Innotek Co.,Ltd v. Nidec (Dongguan) Co., Ltd., Beijing Zhong Nan Shuang Lv Ke Ji Co., Ltd.
On September 20, 2016, the Beijing IP Court delivered its first instance judgment concerning use fee during the invention patent temporary protection period as well as patent infringement dispute involving an invention patent No. ZL201110369508.5 “spindle motor”.
The plaintiff is the patent owner of the No. ZL201110369508.5 “spindle motor”, which was published for granting on July 2, 2010 and still valid. The plaintiff claimed that the spindle motor contained in the DVD players manufactured by the defendant Nidec and sold by the two defendants infringed its said patent.
The defendant Nidec replied that the involved products were substantially different in terms of structure than the involved patent, thus those products did not infringe the involved patent; whereas the defendant Zhong Nan Shuang Lv contended that the alleged infringing products sold thereby had legitimate origin and were authorized sales.
Upon trial, the Beijing IP Court considered that the current evidence were sufficient to prove that the defendant Nidec manufactured and both the defendants sold the infringing products. As to whether such behaviors fell into the category of implementing the involved invention during the patent temporary protection period, as well as patent infringement, the court considered that the defendant did implement the invention during the temporary protection period of the involved patent (which was at least from May 2013 to July 2014), and constituted patent infringement after the grant of the involved patent herein. It is worth of noting that the court also considered that the obtaining of such temporary protection shall be on the basis that the patent had been granted. With respect to the sales by the defendant Zhong Nan Shuang Lv, the court determined that such sales was lack of authorization, and therefore constituted patent infringement.
When it comes to calculating the use fee of the temporary protection period, the court considered that implementing an invention patent during the temporary protection period is not infringement in nature. However, it has the same fact as that of the circumstance of infringement after a patent was granted, except that they will face different legal consequence; therefore, the patent owner has the right to claim both the suffered interest and loss. As to the fee to be paid for the patent implementation during the temporary protection period, it can refer to the provisions regarding the patent licensing fee; in case there is no patent licensing fee for reference, it can be dealt with the provision regarding the infringement compensation, upon taking full consideration of types of patent, nature and circumstance of the implementation of the patent, as well as discovered facts and so on.
Based on the above, apart from the immediate cease of manufacturing and sales of the infringing products by the two defendants, the defendant Nidec was also ordered to pay the plaintiff the use fee during the temporary protection period amount to 2,426,834 Yuan, and compensate the plaintiff the economical loss amount to 1,202,048 Yuan as well as reasonable expenses amount to 207,240 Yuan. Thus, the total amount of the case was amount to about 3,800,000 Yuan.
The appeal of this judgment to the second instance court was rejected, and the first instance court judgment herein was maintained.
Significance of Decision: this case was notable on the ground that it clarified the rules to determine the implementing patent during the temporary protection period, as well as the calculation of the use fee of the temporary protection period.
Case Three: Panasonic Co., Ltd. v. Zhuhai Jin Dao Electronic Co., Ltd., Beijing Li Kang Fu Ya Trade Co., Ltd.
On December 29, 2016, the Beijing High People’s Court delivered its second instance judgment concerning design patent infringement dispute involving a design patent No. ZL201130151611.3 “cosmetic equipment”.
The plaintiff in the first instance, Panasonic, is the patent owner of the No. ZL201130151611.3 “cosmetic equipment”, which was published for granting on January 22, 2014 and still valid. The plaintiff claimed in the first instance court that the two defendants infringed its design patent by licensing, manufacturing, selling, promising to sell the infringing products without authorization. The two defendants denied the claims mentioned above, which was not supported by the first instance court, Beijing IP Court.
Then, the two defendants mentioned above appealed to the Beijing High People’s Court, due to dissatisfaction of the first instance court’s decision, which ordered them to compensate Panasonic economical loss as well as reasonable expenses amount to 3,200,000 Yuan. Their appealing grounds are summarized as follows: 1) the Jin Dao Company only manufactured and sold the alleged infringing products with handles, but did not sell the alleged infringing products without handles; 2) the alleged infringing products does not look similar to Panasonic’s design patent in terms of overall visual effect; 3) the three million compensation determined by the first instance court was not proper and lacked of legal grounds; 4) it is erroneous for the first instance court to fully support Panasonic’s reasonable expenses claim.
Upon trial, the Beijing High People’s Court considered that, when it comes to determine design patent infringement, it shall first review whether the alleged infringing products are the same or similar to the patented products. Then, it shall decide whether the design is the same or similar. In the current case, since all parties did not raise oppositions on the issue that the patented product and the alleged infringing products are the same product, the core issue herein lies in the second one. Upon comparison between the graphic of the involved design patent and the real products/photos of the alleged infringing products, the court decided that those infringing products fell into the protection scope of the involved design patent.
With respect to the compensation amount, the court considered that the amount of the compensation claimed by Panasonic was reasonable, since it was calculated on the basis of 18,411,347 multiplied 260. The former number was the amount of the infringing products appeared on the searching results on some e-commerce platforms, and such search results were preserved as evidence by notarization; whereas the latter number was the average price of the searched products. It is also reasonable that the defendant Li Kang Company shall share the joint and several liability with the defendant Jin Dao Company with respect to the 200,000 Yuan reasonable expenses, on the ground that it continued to sell, and promised to sell the infringing products, even after the acknowledgement of the ongoing lawsuit herein.
In conclusion, the Beijing High People’s Court considered that the first instance judgment ascertained facts clearly and applied the laws correctly, and should be maintained. This judgment was final.
Significance of Decision: this case was one of the twelve patent civil cases in the China Court IP Typical Cases of in 2016. It was selected on the ground that the compensation amount to 3.2 million Yuan herein has been the highest for design patent infringement cases determined by the Beijing court so far. According to the court, in case the right owner has provided preliminary evidence of the interest obtained by the infringing party, whereas the accounting books and relevant materials concerning the patent infringement are controlled by the infringing party, the court may order the infringing party to provide such books and material. If the infringing party refuses to provide without justification or provide false books/material, the court may determine the interest obtained from such infringement on the basis of the right owner’s claim and provided evidence.
ABOUT THE AUTHOR: Fei Dang
Fei Dang is a Senior Associate with MMLC.
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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.