A Primer on Select Issues in China Patent Litigation

As Chinese companies become more active in the registration and enforcement of their intellectual property rights, foreign companies doing business in China have needed to update their strategies for intellectual property clearance and protection. In 2019 and 2020, China was the world’s largest filer of international patents – around 69,000 were credited to China incorporated enterprises. This article looks at recent developments in this area, and provides a primer on some important China patent litigation issues.

The number of intellectual property related lawsuits filed in China in 2020 (including around 29,000 patent and design litigation matters), were over three times greater than what was filed in 2016. Although the figures for 2021 will not be released until next year, the figure is thought to have grown exponentially. Indeed, we have been involved in more trademark/unfair competition, patent and copyright litigation before the courts in China, over the last eighteen months, than in the previous three years combined. These lawsuits have certainly included acting for foreign defendants in China, accused of infringing of patents owned by Chinese companies. Further, the administrative enforcement of intellectual property
rights, including patent rights, in China via the Intellectual Property Bureaus continues to grow as well.

The procedural rules for patent litigation before the courts in China are relatively settled, despite a new Chinese Patent Law having commenced in 2021, and have not undergone significant change over the last few years. It should be noted though that late 2020, the Supreme People’s Court and the China National Intellectual Property Administration announced the promotion of a settlement mechanism for intellectual property disputes, and carrying out of online litigation and mediation coordination of such disputes. The platform allows parties to a dispute to submit a dispute mediation application to a court, once a lawsuit has been filed and accepted – that court will then refer the case to mediation, and if a settlement agreement is reached during mediation, the parties can have that agreement confirmed by the court with a view to supervision of the enforcement of its terms. This development was welcomed when it was announced, and will certainly be useful in some types of cases - however in the area of patent litigation, where complicated issues are often at stake, it appears that these mediation arrangements have had limited success. In this regard, we query whether court mediation could be looked at as a possible mandatory requirement, as a lawsuit moves towards a hearing, as opposed to earlier in a lawsuit’s pathway. Often issues and key factual and legal points start to crystalise closer to a hearing, as opposed at the commencement of litigation.

It must be remembered that China’s legal system does not involve juries as such. In a patent litigation lawsuit, three judges will be appointed by a court registrar to hear a matter, and usually a technical expert depending upon the subject of the patent issues involved, will also be appointed to a court. Ideally, patent litigation should take place in one of the China’s intellectual property courts, and if possible in one of the more established courts, such as those in Beijing, Guangzhou or Shanghai. Regarding appeals, we note that the Supreme People’s Court maintains jurisdiction over appeals from all first instance patent litigation matter (for some, this seems to be an attempt to promote consistency in decisions and the application of legal principles, kind of like a binding precedent system of some kind, as generally China does not utilise such as system). Local protectionism can still be an issue in some areas of course, and when coupled with some areas not having specialised intellectual property courts set up, the forum for where a patent litigation case is going to be heard at first instance, can be very important.

As many patent litigators are aware, often a defendant will raise the issue of a registered patent that a plaintiff is attempting to enforce, should never have been registered in the first place. In China, a court will not rule on the validity of a registered patent, but instead will require that a defendant refer that question to the China National Intellectual Property Administration – in most cases, a court will suspend infringement proceedings, awaiting a decision on validity. Further, despite these arrangements, a defendant can of course raise prior art issues in their defence in the infringement proceedings in China.

One issue that catches out foreign litigants, and can be particularly frustrating at times, is the fact that China does not have a discovery system in place. For this reason, the use of property preservation applications, extensive aggressive research teams, and well respected technical experts are vital when involved in patent litigation in China. Further, in order for a court to accept a patent litigation for consideration, the court will require some kind of evidence as to infringement – in those cases where process patents are involved, technical experts and research teams will be extremely important at that preliminary time as well.

Defendants to patent litigation need to be aware that the Chinese courts have a reputation of being pro-patentee, in that it has been widely noted that from 2014 to early 2021, the winning rate for plaintiff patent owners was close to 70% before the Beijing Intellectual Property Court.

By MMLC Group, China
Law Firm Website: https://www.mmlcgroup.com
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ABOUT THE AUTHOR: Matthew Murphy
Matthew Murphy is a Partner in the MMLC Group, focused on IP Litigation and Transactions.

Copyright MMLC Group

Disclaimer: Every effort has been made to ensure the accuracy of this publication at the time it was written. It is not intended to provide legal advice or suggest a guaranteed outcome as individual situations will differ and the law may have changed since publication. Readers considering legal action should consult with an experienced lawyer to understand current laws and.how they may affect a case. For specific technical or legal advice on the information provided and related topics, please contact the author.

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