China: Harmonizing Judgment Criteria, Balancing Parties' Interest — Relevant Interpretation on New Judicial Interpretation of the Supreme People's Court

Last Updated: 27 November 2017
Article by Zunxia Li and Lindong Liu

On March 22, 2016, the Supreme People's Court of China(SPC) published a new judicial interpretation "Several Issues Concerning Application of Law in the Trial of Cases involving Patent Infringement Disputes (Part II)" (hereinafter referred to as "New Judicial Interpretation"), which took effect from April 1, 2016.  This new judicial interpretation as the second part is a successor of the old judicial interpretation issued by SPC on December 28, 2009 and being implemented since January 1, 2010, mainly relating to application of laws when handling patent infringement cases.

In comparison to the old judicial interpretation, the New Judicial Interpretation, aiming at harmonizing the judicial judgment criteria and balancing interest of different parties and makes clearer and more detailed provisions with regards to the controversies and difficulties faced in the current judicial practice when handling patent infringement cases, which will not only give significant guidance to the current China judicial practice, but also be directed to guide and promote the technological innovation of China.  Relevant interpretations on New Judicial Interpretation are summarized as follows:

First Interpretation: Harmonizing Judgment Criteria, Strengthening patent Judicial Protection

1.1  Providing Relevant Remedies, Resolving Problems Existed in Current Judicial Practice

In the current China judicial practice, the patentee is always in a dilemma of "long-term trial, difficulty in adducing evidence and low compensation" when seeking judicial remedy against patent infringement, which makes it difficult to protect the patentee and accordingly impair greatly the enthusiasm of the patentee in the enforcement of patent and technological innovation.  Under such circumstance, the New Judicial Interpretation provides the patentee with the following remedies:

To solve the problem of "long-term trial", Article 2 of New Judicial Interpretation provides a remedy approach "ruling rejected first, another suit filed later". Specifically, where a claim that the patentee tries to assert rights thereof has been invalidated by the Patent Reexamination Board (PRB), the competent court can rule to reject the complaint based on such claim. If there is evidence showing that the invalidation decision by PRB is overruled by an effective administrative decision, the patentee may file another suit, which limitation of actions is counted since the effective administrative decision is served.  Such remedy may greatly shorten the trial term of the case and avoid the litigation exhaustion of the parties.   

To solve the problem of "difficulty in evidence collection and low compensation", the New Judicial Interpretation takes the remedy of "reasonable reversal of burden of proof" in Article 27. Specifically, in case the actual loss suffered by the patentee is difficult to determine, if the patentee could provide preliminary evidence to prove the profit got by the infringer and the account books and materials related to the infringement are mainly held by the infringer, the court may order the infringer to provide such account books and materials. If the infringer, without good cause, fails to provide or provides false account books and materials, the court may determine the profit got by the infringer based on the patentee's claim and evidences.  Through the approach, the burden of proof is reasonably shifted from the patentee to the infringer.  Meanwhile, the New Judicial Interpretation further stipulates in Article 28 "application of agreed compensation". Specifically, where the patentee and the infringer agree the compensation amount or the counting method of compensation about the patent infringement, the patentee may claim to the court for application of such agreement to determine the compensation.  

1.2  Harmonizing Controversies Existed in Judicial Practice, Defining and detailing Judicial Criteria

Due to certain subjectivity in determination of design patent infringement, the courts in different levels and different jurisdictions take quite different standards when determining design patent infringement. To unify the judgment, the New Judicial Interpretation introduces the term of "freedom of design" and provides that "when determining the knowledge level and capability of a common consumer of a design, the freedom of design of products of the category same as or close to that of the design patent at issue when the infringing act takes place shall be considered.  Where the freedom of design is big, the competent court may determine that it is not easy for the common consumer to notice minor difference between different designs; where the freedom of design is little, the competent court may determine that it is easy for the common consumer to notice the minor difference between different designs."

As the current patent law system has no provisions relating to "contributory infringement", the judicial practice is very controversial in handling such patent infringement cases.  Thus, the New Judicial Interpretation makes definite provision in Article 21, "if a party knows that relevant products are raw materials, intermediate materials, parts or equipment specially used to exploit a patent, but still—without the authorization of the patentee and for production or business purposes—provides such a product to another party that conducts patent infringing acts, the party shall be held liable for contributory infringement. If a party knows relevant products or methods are patented products or methods but still—without the authorization of the patentee and for production or business purposes—induces another party to conduct patent infringing acts, the party shall be held liable for abetting others to conduct infringement."

Further, to remove the controversy in current judicial practice on "determination of patent infringement and of reasonable fee during the term of patent application after publication", Article 18 of the New Judicial Interpretation provides a definite criteria. That is, "where the granted patent has a scope of protection different from that of the published patent application, the competent court may determine the infringer employs the invention if the accused technical solution falls into scope of protection of both, if falling into only one scope of protection, the court shall determine no exploitation of the invention by the infringer.  The reasonable fee paid by the infringer during the term of patent application after publication may be reasonably determined with reference to the patent royalty."

The New Judicial Interpretation makes further clarification about determination of the act of selling of product sales contract, "where the product sales contract is established in accordance with the law, the act of selling will be deemed constituted".  Meanwhile, the New Judicial interpretation definitely provides that "the prior art or prior design shall be determined according to the patent law of PRC being in force before the application date of the patent at issue", which thereby cancel the controversy caused by the transition between the new and old patent laws of PRC about scope of prior art or prior design which could be used during defense of prior art or prior design."

Second Interpretation: Rooting Balance of Interest, Limiting reasonably expansion of patent protection

When harmonizing the judicial criteria and strengthening the judicial protection of patent rights, the New Judicial Interpretation also makes reasonable limitation on the protection of patent right in order to have an interest balance between the patentee and the public.  

2.1  Strengthening publicity and boundary of the claims, Insuring Certainty of Scope of Protection to the public

For the captioned purpose, the New Judicial Interpretation provides the following:

Article 5 provides that "when determining the scope of protection of a patent, the preamble part and feature part of an independent claim and the reference part and limitation part of a dependent claim will all be considered."

Article 7 stipulates that "where the alleged infringing composition includes all features of a closed-mode composition claim and additional features, the court shall decide that the claim is not infringed, unless the additional features are impurities that are always inevitably included."

Article 9 stipulates that "where an alleged infringing technical solution is not applicable to the application environment as defined by claims at issue, the alleged infringing technical solution is considered not to fall within the scope of protection of the claims at issue."

Article 10 provides that "for a product defined by a claimed process feature, products made by a process different from or not equivalent to the claimed process are considered not to fall within the scope of protection of the product by process claim."

Article 12 prescribes that where the numeric feature of the claims are defined by the term "at least" or "no more than", and the person skilled in the art deems that the patented technical solution specially states the limitation of the term on the technical features after reading the claims, the specification and drawings, if the patentee holds that the numeric feature different from that of the claims are equivalent, no infringement will be considered established.

2.2 Reasonable Limitation on Patent Right, Balance of Public Interest

To avoid unlimited expansion of patent right by the patentee of standard essential patent based on the nature of monopoly of the right, the New Judicial Interpretation makes reasonable limitation in Article 24, "in case the patentee violates the FRAND principle and negotiates in bad faith, the license agreement could not be reached and the infringer has no obvious fault, the claims of the patentee of standard essential patent for requesting the infringer to stop the exploitation of the standard will not be supported".  

Besides, on the basis of exemption of "the infringing user in good faith" from liability of compensation in Article 70 of patent law of PRC, Article 25 of New Judicial Interpretation further exclude such user from the liability of stopping the infringement if the user could provide evidence to show the legal source and have paid reasonable consideration for the infringing product.

Further, Article 26 of New Judicial Interpretation stipulates that if the infringement concerns the state interest or public interest, the competent court may decide the infringer to pay reasonable fee rather than stopping the infringement. 

In summary, the publication of the New Judicial Interpretation perfects the patent law system of China, unifies the judgment criteria, and strengthens the guidance of the judicial practice on the technological innovation, and thereby provides solid legal security to promote the innovation and create a legal environment best for innovation. 

(This article was originally published in The Patent Lawyer Magazine March/April 2016)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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