Jacob Schindler

When news broke that an injunction had been ordered against Apple in Beijing, the initial instinct of some observers was that while the case was a PR knock for the US company, there wasn’t much for the company to worry about. After all, the ban was promptly stayed by the Beijing IP Court, which will next consider Apple’s appeal, and the right in question – a design patent – would not have been substantively examined before registration. But in an exclusive interview with IAM Andy Yang, of Beijing-based law firm Wis & Weals, who represents plaintiff Shenzhen Baili, has revealed that his client’s design patent has already survived a validity challenge by an Apple affiliate.

As more information has come out about the case, some observers have gone so far as to publicly advise Apple to settle the dispute, even at the risk of potentially encouraging further litigation. It is becoming clear that this episode could become a cautionary tale about a key injunction risk in China. This is what Yang had to say:

How long has this dispute been going on? Have the two sides engaged in negotiations over a licence?

We approached Apple with goodwill, with no intention of hindering Apple’s sales. We just want to clarify the facts and protect our IP. Since we first notified Apple in September 2014, we have been hoping to reach a peaceful settlement with them. In December 2014, Baili put forward a patent infringement complaint before the Beijing Intellectual Property Office. There is no licence between the two sides.

Why did you decide to make your first complaint to the Beijing IP Office rather than a civil court?

Bringing the patent dispute to the local IP Office is one channel for patent owners to protect their rights. For Baili, the administrative complaint is in keeping with its requirements because:

  1. Baili’s principle aim is to clarify the facts and obtain a fair statement on whether there was an infringement, and from there to protect its IP. An administrative procedure can quickly resolve the conflict in keeping with Baili’s requirements.
  2. Baili is protecting its rights with goodwill and no malice toward Apple. Civil actions may appear more antagonistic, while administrative action is a more moderate approach.
  3. Beijing IP Office has the professionalism and expertise to deal with the case. During the administrative proceeding of this case, there were two case hearings, in which procedural rights of both parties are fully protected. Both parties have a chance to present evidence, set forth their opinions and debate about them. Any party can sue Beijing IP Office to the court against its decision. Such follow-up proceedings are in the court, and the court will have the final decision to ensure the judgment quality.
  4. In a dispute like this, civil actions will usually mean claims for huge damages, it will intensify conflicts and cause huge burden of legal cost for the parties. This is not Baili’s objective. In local IP Office procedures, there are no claims of compensation.

We believe that Beijing IP Office made a professional and fair judgment. Similarly, we believe the Beijing IP court will maintain the finding of patent infringement.

Has Apple challenged the validity of the design patent?

In March 2015, an Apple affiliate made an invalidity request against Baili’s patent. In January 2016, SIPO’s Patent Re-examination Board (PRB) came out with its decision, which did not sustain the Apple affiliate’s request, and upheld the validity of Baili’s patent. The PRB held a public hearing and all sides furnished evidence and set forth their opinions.

One facet of the story that surprised some was the body that had ordered the sales ban: the Beijing IP Office. But as this blog has written in the past, administrative enforcement cases are booming in China. Infringement complaints nearly doubled between 2014 and 2015, from about 7,671 to about 14,202. One reason they may not be on patent counsel’s radars is that just a couple hundred of these per year involve a foreign party, and I would guess the foreigner is the plaintiff in the vast majority. Nevertheless, it was only a matter of time before a major Western brand came into the crosshairs.

Speed is one of the key advantages of the process. China’s law provides for a local IP Office to open a case within five days of receiving a patent infringement complaint. The timeline for resolving the case is just four months for complex disputes. If the office determines that infringement has occurred, it can begin enforcing an injunction within its remit immediately, and it’s effective until overturned by another administrative body or court. As the Apple case shows, it can be stayed pending appeal, but it doesn’t have to be, according to practitioners. I asked Yang how long the injunction against Apple was in force for, but he declined to comment.

A Wall Street Journal investigation found that Shenzhen Baili is insolvent, suggesting that the relatively low cost of a SIPO infringement claim may have played a big role in its selection as a venue. A guide prepared by the European Commission’s China IPR Helpdesk quotes the price of asking an IP office to investigate patent infringement as ranging from just $4,500 to $12,000. Nor does the injunction come at a cost. Plaintiffs asking a civil court for a nationwide preliminary injunction need to post bond, an amount practitioners say would be beyond the means of a small company (and certainly an insolvent one). Administrative complaints come with no such requirement.

Design patents pose an acute risk. While offices can investigate infringement of any patent, it’s comparatively rare for them to take on cases involving invention patents due to the complexity of the infringement analysis. But practitioners say the office is more “confident” when it comes to assessing design infringement. While design patents aren’t substantively examined before they’re placed on the register, the office may search for prior art as part of a thorough investigation. In the Baili-Apple case, the fact that the design had already survived an invalidity request may have been a key factor in the Beijing IPO’s decision.

Additional reporting Cassie Lam