China

Q: How can patent owners best enforce their rights in your jurisdiction?

There are two ways that a patent can be enforced in China:

• before the court through a lawsuit; or
• before the local IP bureau through an administrative enforcement procedure.

Courts remain the primary avenue through which to enforce patents in China where damages and injunctions can be ordered; however, administrative enforcement before the local IP bureau is swiftly gaining popularity. Although awarding no damages, administrative enforcement costs less while promising expedited issuance of a decision within three months of the filing date. Hence, if injunction is the primary goal of a patent owner, administrative enforcement may be a cost-effective and efficient solution. The general environment for IP enforcement is favourable for the rights holders. With specialised IP courts across the country and a centralised IP Appeal Tribunal, the standard and rules for infringement have been unified. Damages awards have been constantly increasing and wilful infringement can be awarded up to five times the actual loss or illegal gains. Only the China National Intellectual Property Administration (CNIPA) has authorisation to hear the invalidity proceedings of patents.

Q: Are mediation and arbitration realistic alternatives to litigation?

Arbitration or mediation by an independent party in patent infringement cases are rare in China. They are not realistic alternatives to litigation. Courts encourage parties to settle through mediation, but it happens only after an infringement case has been filed and is under the court’s supervision.

Q: Who hears patent cases – for example, individual judges, a panel of judges, a mix of judges and technical experts, judges and juries?

In China, there are no juries. However, the court often assigns a panel consisting of three judges and a technical officer to hear a patent case. The technical officer is selected from the court’s pool of experts and will help the judges understand the technologies. The technical officers’ opinion often has a considerable effect on the case’s outcome. For cases involving a relatively simple technology, technical officers will not be assigned.

Q: What level of expertise can litigants expect
from courts?

China has set up specialised IP courts, IP tribunals and a centralised IP Appeal Tribunal to hear the increasing number of IP disputes and to strengthen the judicial protection of IP rights. The IP courts and tribunals accept a huge number of IP cases each year; for example, in 2020, the courts took 525,618 new IP first-instance cases, second-instance cases and applications for retrial, and concluded 524,387 cases. The IP courts in Beijing, Shanghai and Guangzhou are considered the most experienced since they were the first IP courts established in 2014 and have gained extensive experience. Other IP tribunals have also since gained tremendous expertise. The level of a judicial district’s economic development is often a good indicator of its courts’ expertise. Courts in more prosperous regions tend to have a higher level of expertise, as they are likely to have handled more patent cases. Therefore, forum shopping is important for patent litigation in China. The Supreme Court IP Appeal Tribunal assumes appellate jurisdiction for all patent cases and has put in tremendous effort into unifying adjudication standards, including issuing judicial interpretations and publishing exemplified precedential cases. In general, the IP court judges are specialised and have a reputation for being among the best educated judges in China.

Q: Are validity and infringement dealt with together in proceedings?

No, in China, infringement and validity are bifurcated. In a patent infringement lawsuit, the court will not rule on a patent’s validity. Nevertheless, the defendant can use a prior art use defence in trial. For a typical patent infringement case, the defendant will almost always file patent invalidity at the CNIPA. The infringement lawsuit and the invalidity proceedings are independent of each other. However, in most cases, the judge of the infringement lawsuit will wait for the result of the validity proceedings before substantially assessing the infringement case. If CNIPA declares the asserted patent invalid, the court is likely to dismiss the infringement case. The patent owner can appeal the invalidation decision to the Beijing IP Court by initiating an administrative lawsuit. Either party can appeal the Beijing IP Court decision should the party find the judgment unsatisfactory. The second-instance judgment is final. If the patent owner ‘revives’ its patent through administrative lawsuits, it can refile the patent infringement case.

Q: Who may represent parties engaged in a dispute?

Both lawyers and patent agents can represent parties in a patent dispute. Patent agents need special qualifications to represent clients in court. On the other hand, lawyers take part in the CNIPA’s patent invalidity proceedings as citizens, whereas patent agents can represent their clients as patent agents in such proceedings. In China, a patent agent qualification requires a scientific background. Many patent lawyers have both a lawyer’s licence and a patent agent’s certificate.

Q: To what extent is forum selection possible in your jurisdiction?

Forum selection is easily achievable, such as through a transaction in a shop located in a city where the court resides. For example, if a patent owner finds that a target has been making infringing products, it simply purchases (if possible, for such products) the infringing product at a place within the jurisdiction of the patent owner’s preferred court. Online shopping is not a valid route for forum shopping. For large-scale infringing projects, a patent owner can choose to sue at either the defendant’s premises or the project’s location.

Q: To what extent is pre-trial discovery permitted?

There are no discovery proceedings in China. The plaintiff should try to gather as much evidence as possible before filing the lawsuit. The plaintiff may persuade the court to compel certain evidence from the defendant at a hearing (almost impossible pre-trial) – for example, the defendant’s accounting books – if the plaintiff can prove that they have no access to the evidence and that despite their best effort, they could not produce such evidence. If the defendant refuses to present the evidence as the court orders, the court may rule in the plaintiff’s favour regarding the relevant issues. The court, within its discretion, may also order on-site inspection of the defendant’s premises based on the plaintiff’s request.

Q: To what extent is evidence written and oral at proceedings?

Chinese courts generally prefer written evidence, giving it more deference than to evidence in a non-written form. If a person has submitted written testimony to the court, the court generally requires that the person appear before the judge for questioning. If the person fails to appear, unless the relevant party can provide a reasonable explanation that the court accepts, the court will most likely not consider the testimony as evidence.

Q: What role, if any, can expert witnesses play?

In patent or trade secret litigation cases, expert witnesses are often retained by the parties to provide technical support. The expert witness can prepare and submit an expert report and can be directed and cross-examined during trial. The expert witness could be a party’s employee, a professor from a university or an industry expert. Courts tend to give more deference to a non-employee technical expert. Their roles are similar to an expert in a US patent case.

Q: Is the doctrine of equivalents applied by courts in your jurisdiction and, if so, what form does
it take?

Chinese courts apply the doctrine of equivalents. The standard applied is whether the accused products have equivalent characteristics with the asserted patent that can be conceived by an ordinary technician in the same technical field without any creative effort. ‘Equivalent characteristics’ refer to characteristics in the accused products that, through methods basically identical to the technological characteristics recorded in the claims, realise basically identical functions and achieve a basically identical effect.

Q: To what extent are courts obliged to consider previous cases that have covered issues similar to those pertaining to a dispute?

China is not a common law country, hence courts are not obliged to follow precedents. However, the Supreme Court promotes and encourages uniformed adjudication standards. To this goal, the Supreme Court publishes guiding cases and exemplary cases each year which demonstrate importance legal doctrines or when lower courts have split opinions.

These cases provide guidance for decision making, and unify standard on judgements. As a practical matter, we often cite precedent cases to support our legal arguments in patent cases.

Q: Are there problems in enforcing certain types of patent relating to, for example, biotechnology, business methods or software?

Chinese courts require preliminary evidence of infringement before a case can be accepted. Usually, a plaintiff can purchase a product and conduct infringement analysis at the pre-filing stage. Biotechnology, business methods or software patents pose challenges because they involve the defendant’s internal processes that the plaintiff does not have easy access to. However, the court will accept preliminary evidence of infringement in these cases and the plaintiff has a variety of routes available to obtain the infringement information after a case is filed. For example, the plaintiff can request a court to order an on-site inspection of the defendant’s premises, or the court can order the defendant to submit documents related to manufacturing process or internal parameters, among other things, after the plaintiff has demonstrated that it cannot obtain such information. The plaintiff can also submit an expert report to prove infringement.

Q: To what extent are courts obliged to consider previous cases that have covered issues similar to those pertaining to a dispute?

China is not a common law country, meaning that the courts are not obliged to follow precedents. However, the Supreme Court promotes and encourages uniformed adjudication standards. The Supreme Court publishes guiding and exemplary cases each year that demonstrate the importance of legal doctrines or when lower courts have split opinions. These cases provide guidance for decision making and unify standards on judgments. As a practical matter, precedent cases may be cited to support legal arguments in patent cases.

Q: To what extent are courts willing to consider the way in which the same or similar cases have been dealt with in other jurisdictions? Are decisions from some jurisdictions more persuasive than those from others?

The courts are sometimes interested in cases in other jurisdictions, especially cases involving international or cutting-edge legal issues (eg, FRAND issues in SEP cases). The judges are open to and welcome judgments from other jurisdictions that provide comprehensive reasoning that is helpful for deciding a case. The courts refer to decisions from US and EU courts more often than to those from other jurisdictions. For patent invalidation proceedings at the CNIPA, if the patent is invalidated in another jurisdiction, the CNIPA will take that into consideration when deciding on the validity of the patent.

Q: What realistic options are available to defendants seeking to delay a case? How might a plaintiff counter these?

The defendant can object to the court’s jurisdiction to delay a patent case. The decision on jurisdictional objection can be appealed to the IP Appeal Tribunal at the Supreme Court if the court rejects the objection. The entire process can take up to six months. The plaintiff has few effective counters to the jurisdiction objection delay. The defendant can also file for patent invalidation, but under the law, the court need not stay an infringement case on an invention patent. Courts usually proceed with the trial but will wait until the CNIPA has decided on validity to make a decision. For design patents or utility model patents, the court is required to stay the infringement proceeding under law, which can effectively delay the case.

Q: Under what circumstances, if any, will a court consider granting a preliminary injunction? How often does this happen?

A preliminary injunction is extremely difficult to achieve in China. The necessary factors for issuing a preliminary injunction are similar to those in the United States:

• likelihood of success;
• stability of the patent;
• irreparable harm to the plaintiff;
• balancing test of harm to the rights holder and the accused infringer; and
• public interest.

Q: What is the realistic timescale to get a decision at first instance from the initiation of proceedings?

Eighteen months.

Q: How much should a litigant budget for in order to take a case through to a decision at first instance?

Litigation budget varies depending on the complexity of the case and on the law firms and attorneys hired. The attorney’s fee could range from $50,000 to $300,000. In addition, there could also be third party costs, which may include expert fees, investigator fees and demonstrative company fees, among others, which could range from $30,000 to $150,000.

Q: To what extent are the winning party’s costs recoverable from the losing party?

The plaintiff can recover its patent litigation costs from the losing defendant if the costs can be proven and are reasonable. On the other hand, the defendant cannot recover its costs from a losing plaintiff unless the case is proven to be malicious, which is rare.

Q: What remedies are available to a successful plaintiff?

Typical remedies include damages, injunction and litigation costs. An injunction is often imposed if infringement is found. If an injunction is not imposed, the court usually cites public interest considerations.

Q: How are damages awards calculated?

Damages are calculated based on the plaintiff’s loss or the defendant’s illegal gains. If such loss or gain cannot be determined, damages can be calculated based on royalties. Punitive damages of between one and five times the loss or gain can be awarded if the court finds serious and wilful infringement. If these approaches fail to sufficiently determine damages, the court can, at its discretion, determine statutory damages ranging from $4,700 (Rmb30,000) to $782,000 (Rmb5 million).

Q: Under what circumstances will courts grant permanent injunctions?

Permanent injunctions are routinely granted if infringement is found, unless public interests are involved.

Q: Does the losing party at first instance have an automatic right of appeal?

Yes, the losing party is entitled to file an appeal; however, it must be filed within 15 days for domestic companies and 30 days for foreign companies.

Q: How long does it typically take for the appellate decision to be handed down?

Starting from the filing of the appeal, it takes approximately one year to 18 months for the appellate decision to be handed down.

Q: Is it possible to take cases beyond the second instance?

The second instance is final in China. Nonetheless, the losing party may seek retrial at the Supreme People’s Court, although it is seldom granted.

Q: To what extent do the courts in your jurisdiction have a reputation for being pro-patentee?

The IP courts in China have a reputation for being pro-patentee. Patentees enjoy a high rate of success according to statistics. For example, from 2014 to early 2021, the winning rate for foreign parties stands at 68% in IP infringement cases before the Beijing IP Court.

Q: Are there other forums outside the court system in which it is possible to assert patents in your jurisdiction? If so, under what circumstances might it be appropriate to use them?

Patentees can initiate administrative enforcement at the local IP bureau. The administrative agency decides on infringement and it is faster and less costly than lawsuits, but does not award damages. If the patentee seeks damages, they must obtain them through settlement or file a lawsuit.

Q: In what circumstances do courts in your jurisdiction accommodate remote hearings, for example during pandemic-related lockdowns?

During the covid-19 pandemic remote court hearings were held instead of in-person hearings. However, recently, more hearings are being held in courts as covid restrictions are loosening in China. In the meantime, however, the CNIPA has become accustomed to remote hearings for invalidation proceedings, as they are more convenient for all parties.

Q: Are there any other issues relating to the enforcement system in your country that you would like to raise?

The newly amended Patent Law took effect on 1 June 2021. It adopts an open patent licence system that encourages patentees to openly license their patents to the public at a reduced pre-fixed licensing fee or no fee during the open licence term.