More evidence that Chinese patent values could rise as Apple win shows increasing court focus on quality

On the sidelines of the INTA annual meeting in San Diego, IAM attended a seminar on the last year’s changes to trademark law in China. There was a nice bonus at the end, though, in the form of a discussion of patent litigation trends from Wan Hui Da senior partner Sam Li.

Li began by asking for a show of hands: “Who believes that China has strong patent protection?” Not a single hand went up around the large conference table among the 20 or so participants (IAM is much more charitable in its assessment, but abstained from voting). The thrust of the presentation though, was that in certain areas (like injunctions) protection is quite strong, while in weaker areas such as damages, proposed reforms could hold some promise for patent owners.

It is well known that damages in patent cases are miniscule in China and usually statutory damages, capped at RMB 1 million ($161,116) are all that is awarded. A judicial interpretation issued in January, said Li, affirmed that the owner’s profit or infringer’s profit can be used to calculate compensatory damages, and this could be a way to get around reliance on the statutes. Often evidence collection is the biggest barrier to obtaining this type of relief, but Li noted that if a proposed article in the new patent law shifting the burden to the defendant were passed into law, damage awards could increase quickly. Regardless, Li said, damages are rising, and he wouldn’t be surprised if courts become too bold in granting damages within the next few years and begin to correct in the opposite direction.

On the injunction front, Li noted that the situation is quite a bit better. A permanent injunction is almost automatic if infringement is shown. The new move, Li said, was toward strengthening the preliminary injunctions where plaintiffs can show irreparable harm will occur in one’s absence. This is an enticing possibility. One need look no further than India, which is attracting increasing interest now that the likes of Ericsson and Novartis have demonstrated the strong possibility of obtaining an interim injunction from the Delhi High Court. Any move toward more interim relief in China would deserve significant attention. A jurisdiction in which large damages awards and injunctions are readily available is always very interesting for plaintiffs and, logically, would lead to an increase in the value of assertable (ie, good quality) patents.

Li and partner Huang Hui also discussed the recent decision in favour of Apple in a dispute over its Siri technology. To provide some background, a company called Shanghai Zhizhen Network Technologies patented a voice-activated personal assistant application it called “xiao i” back in 2003, four years before development of Siri began. Zhizhen sued Apple for patent infringement in 2012 in the Shanghai No. 1 Intermediate Court. Apple responded by asking the PRB to invalidate the patent. Instead, PRB upheld it, a decision which was ratified on appeal by the Beijing No. 1 Intermediate Court. Now, the Beijing Higher People’s Court has weighed in on the side of Apple, ruling that the patent should be invalidated. Provided its judgment stands, the Beijing court’s validity decision should put an end to the infringement case in Shanghai, which has not returned a verdict.

China’s state press agency ran an explanation of the decision: “Jiao Yan, chief judge in this case, told Xinhua that Zhizhen's patent specification did not explain all technologies used in the invention. According to China's patent law, specification should allow common technical personnel in related fields to practice the technologies easily. Meanwhile, Jiao said the patent claims failed to clearly define the limits of exactly what the patent does, and does not, cover.”

Quality is a major concern for virtually all stakeholders in the Chinese patent market, including the judiciary. Huang said that judges “have a strong desire to scrutinize patent quality”. We could be seeing a trend in China similar to that in the United States, where validity has become more important relative to infringement. China has a bifurcated system; the Beijing courts have jurisdiction to review PRB decisions, as they did here, but Huang also noted that other civil courts want the power to assess validity issues in infringement cases: “There is a JI (judicial interpretation) in circulation asking for comments, and in the draft you can see in many places the courts are trying to expand their jurisdiction into the validity issue. The courts have proposed to examine the inventiveness issue and to be able to determine whether a patent is apparently valid.”

China’s highest legal authorities are no doubt keenly aware of the challenges that the quality question poses to the growth of their developing IP ecosystem. If the judiciary, as well as administrative bodies, start aggressively sorting out the wheat from the chaff, it should benefit the long-term health of the system, even though the perceived value of many SIPO-issued assets may take a hit in the short term. Either way, watch the relationship between administrative and civil litigation. It is bound to get more important.

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