22 Oct
2020

China

Beijing Sanyou Intellectual Property Agency Ltd

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

First, patent owners should have a stable patent. It is advisable to conduct a patent-stability analysis before initiating a lawsuit. Second, because of the uniqueness of patent cases in specific technologies, patent owners need a lawyer who is not only familiar with the law but who also has a good understanding of the technologies involved. And finally, patent owners must work with lawyers to ensure that the litigation strategy is correct, effective and beneficial, including such issues as where to sue, whom to sue, and what patent to sue, among other things.

Q: Are mediation and arbitration realistic alternatives to litigation?

Not presently. If any party refuses to participate in mediation or arbitration, the proceeding will be terminated. Most defendants are typically unwilling to choose mediation or arbitration.

Of course, if both parties wish to mediate, the court will mediate. More and more cases are being settled this way.

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

For most patent cases, a panel of judges will hear the case. China adopts the collegiate system. Typically, the panel has three judges, but in a few cases there are five.

There is no jury in China, instead, there are people’s assessors. In some patent cases, people’s assessors and judges will form a collegial panel to hear cases together. Theoretically, the people’s assessors have equal rights and obligations as judges. In practice, most people’s assessors follow the judges’ opinion.

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

In 2019, China’s Supreme People’s Court officially established the ‘technical investigation officer’ mechanism. Most patent courts have technical investigation officers. If the judge thinks it necessary, a technical investigation officer will help the judge to understand the appropriate technology and provide an opinion on technical issues. However, the officer’s opinion is not available to the parties.

According to the assignment of judges, technical investigation officers can participate in the inquiry, hearing and trial, as well as propose investigation suggestions to the judges. The judge will, at his or her sole discretion, decide whether to adopt the officer’s opinion, and the judge remains responsible for this decision.

The court may also entrust appraisers or experts to provide expert opinions on the professional or technical issues involved.

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

No. In China, while patent infringement disputes are dealt with by the People’s Court, the determination of patent validity is only dealt with by the China National Intellectual Property Administration (CNIPA). A branch of the CNIPA, formerly known as the Patent Re-examination Board, is responsible for handling patent invalidation proceedings.

Any unit or individual can file an invalidation request before the CNIPA.

The CNIPA can invalidate patents for many reasons, including lack of novelty; lack of inventiveness; insufficient disclosure to the CNIPA during the application process; and indefiniteness of claims. The CNIPA ultimately renders a decision of validity, partial validity or invalidity. CNIPA proceedings normally take between six and 10 months, and decisions may be appealed to the Beijing IP Court in the first instance and then to the IP tribunal of the Supreme People’s Court of China for the second and final instance.

Q: Who may represent parties engaged in a dispute?

According to the provisions of the Civil Procedure Law of China, attorneys at law, patent attorneys recommended by the All-China Patent Attorneys Association and staff of parties can represent parties engaged in a dispute.

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

In China, the court where the defendant is located and the court where the infringing act is committed have jurisdiction. For example, if there is a sale of infringing products in one place, the patentee can sue both the distributor and the manufacturer in that place. It is possible and easy for the plaintiff to engage in forum selection.

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

There is no pre-trial discovery system in China. There is nearly a total absence of compulsory discovery and narrow rules of admissibility. Courts may, at their discretion, undertake their own evidence collection or order the parties to engage in discovery, although it is uncommon. In China, plaintiffs bear a heavy burden of proof and must build much of their cases on evidence obtained by private investigators.

There are signs that Chinese courts are increasingly willing to order the preservation and disclosure of relevant evidence. Once obtained, an evidence preservation order could allow for a party to be questioned, its premises to be inspected, or for documents and samples of the allegedly infringing products to be produced.

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

In China, written evidence is widely used. In most cases, there is only written evidence and physical evidence. Oral evidence is not used widely in cases because its credibility is low and the court is cautious and strict when adopting oral evidence.

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

In a Chinese court, the parties may engage expert witnesses and entrust them to appear in court to express their opinions on the professional issues involved. Being entrusted by the party, the expert witness is somewhat partisan, like a lawyer, whose opinions are categorised as a party’s statement under China’s evidence rules.

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

Yes, infringement under the doctrine of equivalents is not provided for in China’s Patent Law, but the doctrine has been recognised by the Supreme Court’s interpretation. The equivalent features refer to the features that use substantially the same means, perform substantially the same function and produce substantially the same effect as the stated technical features and that can be contemplated by an ordinarily skilled artisan in the art without inventive labour.

Infringement under the doctrine of equivalents is not limited to non-essential features in a claim; all features in a claim may be tested under the doctrine of equivalents.

In practice, infringement under the doctrine of equivalents is not frequently supported by court judges.

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

Since there is no evidence disclosure system in China and the burden of proof for the patentee is heavy, it is very difficult for the patentee to prove patent infringement in biotechnology, business methods or software-related cases.

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

The Supreme People’s court has published a small number of guiding cases that are binding on lower courts. For other cases, there is no binding force on the court. However, in patent litigation, more and more courts and judges are beginning to pay attention to the role of precedent, and are encouraging lawyers and parties to submit reference 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?

Courts have less consideration of the same or similar cases of other jurisdictions. Decisions from the same jurisdictions are more persuasive than those from others.

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

In practice, the defendant often delays by submitting the objection of jurisdiction or applying for an appraisal, among other things. The plaintiff must adapt to the specific situation of the specific case. For example, there are already courts that punish the abuse of jurisdiction objection.

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

If a court believes that failure to take a preservation measure will cause irreparable damage to the legitimate rights holder or the interested party, the court may consider granting a preliminary injunction. The following factors are considered:

  • whether the applicant’s request has a factual and a legal basis, including whether the validity of the claimed intellectual property is stable;
  • whether failure to take an act preservation measure will cause irreparable damage to the legitimate rights holder or the interested party;
  • whether damage caused to the applicant in case of failure to take an act preservation measure exceeds damage caused to the respondent in case of taking the act preservation measure;
  • whether taking the preservation measure harms public interests; and
  • other factors.

It is unusual for a court to consider granting a preliminary injunction.

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

In general, it takes one to two years for invention patent cases and six months to a year for utility model and design cases to reach a decision at first instance.

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

It depends; however, for a normal case, it usually costs about $30,000 to $50,000.

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

China continues to increase the amount of damages. The court has also ruled that the losing party should bear reasonable attorneys’ fees. Usually, the winning party’s costs is recoverable from the losing party.

Q: What remedies are available to a successful plaintiff?

The following remedies are available to a successful plaintiff:

  • injunction (the court will order the defendant to stop the infringing act); and
  • damages and reasonable expenses.

Q: How are damages awards calculated?

In China’s patent infringement lawsuits, damages may be determined through a number of routes:

  • the rights holder’s loss of profits;
  • the illegal profit of the infringer; or
  • the patent licence fee.

In a case where the above three options cannot be clearly calculated, statutory compensation (currently between Rmb100,000 and Rmb1 million) may be applied at the plaintiff’s request.

An upcoming and anticipated amendment to China’s patent law will significantly increase the amount of monetary damages available to successful plaintiffs by:

  • reducing the plaintiff’s burden of proving damages where the relevant documents and evidence are primarily in the possession of the defendant infringer;
  • increasing the maximum statutory damage to Rmb5 million; and
  • adding punitive damages.

Q: Under what circumstances will courts grant permanent injunctions?

For most cases, if the court holds that patent infringement is established, the courts will grant permanent injunctions. In consideration of the national interest or the public interest, the court may consider not granting permanent injunctions, but order the infringer to pay a reasonable fee.

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

Yes. China has a system of second instance and final judgment. Most cases are closed after the second instance. It means that if the parties are not satisfied with the first-instance judgment, they can appeal to a higher court, and the higher court will and must conduct the second-instance trial. The second-instance judgment will be the effective and final judgment and the parties can apply for its enforcement.

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

It typically takes about six months to a year.

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

Yes. There is a retrial procedure. After the final trial of a case, the parties can apply for a retrial on the grounds of errors in evidence determination, application of law and litigation procedure, among others. The decision regarding a retrial will be decided by a higher court after the examination.

The difference between applying for retrial and an appeal is that, as long as the parties appeal according to law, the court should certainly conduct the second instance, while the application for the retrial will be subject to the court’s examination and approval before the retrial procedure can be initiated. Before the initiation of the retrial procedure, the original judgment will be enforced. Chinese courts impose strict control over the retrial procedure. According to incomplete statistics, less than 10% of retrial applications can be approved by the court.

Regarding the time limit for applying for a retrial, both Chinese and foreign parties should apply within six months of the judgment taking effect.

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

China has been increasing IP protection and has set up special IP courts in Beijing, Shanghai and Guangzhou. These IP courts have a reputation for being pro-patentee.

Q: Are there other fora 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?

Yes, administrative petition (or administrative enforcement) is a unique and important way of enforcing a patent in China. A patentee can file a petition with local administrative authorities with materials showing their legal right and preliminary infringement evidence.

Compared with judicial enforcement, the administrative authority should close the case in four months. The administrative authority may start an ex officio investigation on its own initiative. It may save patentees money. In the case of exhibitions or trade shows that last for a short time, administrative authorities may act faster so that evidence is preserved.

If the administrative authorities determine an act of infringement of a patent, they have the right to issue an order to stop the infringing act. However, if the patentee needs to claim compensation for infringement from the infringer, it is necessary to negotiate a settlement or file a civil litigation.

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

The Supreme People’s Court of China established its IP Tribunal on 1 January 2019. Judgments, rulings, meditation statements and decisions made by the IP Tribunal should be regarded as final decisions made by the Supreme People’s Court itself. The IP Tribunal will hear all appeals against first-instance civil judgments or rulings made by the Higher People’s Court, IP Court or Intermediate People’s Court in cases concerning invention patents, utility model patents, new plant varieties, layout design of integrated circuits, know-how, computer programs and antitrust. The IP Tribunal will also hear appeals against first-instance administrative judgments related to the above cases, as well as design patents.

The establishment of the IP Tribunal has played a very positive role in strengthening the protection of IP rights and unifying judgment standards.

Beijing Sanyou Intellectual Property Agency Ltd

16th Floor, Block A

Corporate Square, 35 Jinrong Street

Beijing 100033

China

Tel +86 10 8809 1921

Fax +86 10 8809 1920

Web http://www.sanyouip.com

Jian Chen

Partner

[email protected]

Jian Chen is a senior partner in Beijing Sanyou Intellectual Property Agency Ltd, specialising in intellectual property and unfair competition matters. He has worked on patent litigations in various technical areas, with a focus on mechanical and electronic matters. He has a bachelor of engineering degree in mechanical engineering from Beijing Institute of Technology, an LLB from Tsinghua University and an LLM from Chicago Kent College of Law, United States. Mr Chen has worked on numerous IP litigation and enforcement cases representing foreign clients. He regularly participates as a speaker and panellist at various conferences.