China: The Determination Of The Date When A Patent Right Is Declared Invalid Shanxi Qinfeng Farming Machinery (Group) Ltd. v. Shanxi Dongming Agricultural Technology Co.,Ltd. (Article No. 19 From "China Patent Case Review 2015" By Beijing East IP Ltd.)

Smart Farming Machine with Miniature Pedrails

Shanxi Qinfeng Farming Machinery (Group) Ltd. v. Shanxi Dongming Agricultural Technology Ltd. - The Determination of the Date When a Patent Right is Declared Invalid (Civil Judgment (2012) Min Ti Zi No.110 by the Supreme People's Court on November 20, 2012)

The Chinese Patent Law (2009) stipulates, in Article 47, Paragraph 2, "the decision declaring the patent right invalid shall have no retroactive effect on any judgment or mediation decision of patent infringement which has been pronounced and enforced by the people's court, on any decision concerning the handling of a dispute over patent infringement which has been complied with or compulsorily executed, or any contract of patent license or of assignment of patent right which has been performed prior to the declaration of the patent right invalid; however, the damage caused to other persons in bad faith on the part of the patentee shall be compensated." This judgment illustrated that the date when a patent right is declared invalid shall be the decision date of the patent invalidation proceeding.

The patentee, Shanxi Qinfeng Farming Machinery (Group) Ltd. ("Qinfeng" hereinafter), holds a patent for utility model No. ZL92223888.X ("the '888 Patent" hereinafter) titled "Smart Farming Machine With Miniature Pedrails", and filed a patent infringement lawsuit against the alleged infringer, Shanxi Dongming Agricultural Technology Ltd. ("Dongming" hereinafter) for infringing the '888 Patent.

This infringement lawsuit came to a conclusion after the first and second instances, during which the asserted patent went through two invalidation proceedings. In the latter one of the two invalidation proceedings, the Patent Reexamination Board ("PRB" hereinafter) made Decision No. 14443 declaring validity of claims 2 and 3 of the '888 Patent on Jan. 21, 2010. In the infringement lawsuit, the court for the second instance held the judgment made by the court for the first instance, that is, confirming that Dongming infringed the '888 Patent of Qinfeng, ordering an injunction and awarding a damage of RMB 150,000 (around 35,000) to Qinfeng. The court for the first instance executed the judgment on March 16, 2011 and issued the Civil Ruling (2011) Xi Zhi Min Zi No.38 to complete the execution of the second instance judgment. Due to a delay in the bank procedure, Qinfeng did not receive the awarded damage until March 17, 2011.

Afterward, the PRB made a Decision No. 16225 on Request for Invalidation ("Decision No. 16225" hereinafter), declaring full invalidation of the '888 Patent. The Decision No. 16225 was then upheld in the following administrative lawsuit and came into force in the end. It is to be noted that Decision No. 16225 was made on March 15, 2011, announced to public on March 25, 2011, and delivered to Qinfeng on April 3, 2011. According to Article 47, Paragraph 1 of the Chinese Patent Law (2009), any patent right which has been declared invalid shall be deemed to be non-existent from the beginning. Based upon the new fact, Dongming requested the Supreme People's Court for retrial on the ground that Decision No. 16225 should be retroactive on the executed judgment of the infringement lawsuit.

The judgments in the first and second instances of the infringement lawsuit should be repealed in the situation where the asserted patent has been declared fully invalid. The issue is whether Decision No. 16225 is retroactive on the execution of the judgment of the infringement lawsuit. Apparently, it is critical to determine the timing when the judgment of the infringement lawsuit was executed and the timing when the asserted patent was declared invalid in an effort to address the above issue.

Generally, the date when a civil judgment is executed shall be the date when the rulings included in the judgment have been fully executed and the benefits favorable to the concerned party as determined by the judgment have been carried out. In the present case, the court for the first instance has fully completed the execution on March 16, 2011. The awarded damage was received by Qinfeng on the next day only due to the delay in the bank procedure. Therefore, it is beyond dispute that the execution of the judgment of the infringement lawsuit was completed on March 16, 2011.

Thus, whether Decision No. 16225 is retroactive on the judgment of the infringement lawsuit depends on the timing when the asserted patent was declared fully invalid. In the present case, Decision No. 16225 involved three legal dates: the decision date (March 15, 2011), the announcement date (March 25, 2011), and the delivery date (April 3, 2011). The date when the judgment of the infringement lawsuit was executed falls behind the decision date, but precedes the announcement date and delivery date. If the decision date is regarded as the time when the asserted patent was declared invalid, Decision No. 16225 should be retroactive on the judgment of the infringement lawsuit; otherwise, it should not if either the announcement date or the delivery date is deemed as the time when the asserted patent was declared invalid.

The Supreme People's Court identified the decision date, March 15 2011, as the date when the asserted patent was declared invalid, when the judgment of the infringement litigation had not yet been fully executed. Therefore, the present case would not fall in the scenario without retroactivity as provided by Article 47, Paragraph 2 of the Chinese Patent Law (2009). On the merits, the Supreme People's Court reversed the first and second instance judgments and restitute the benefits conferred to Qinfeng.

In this case, the judge of the Supreme People's Court explained the reasons for identify the decision date as the date when the asserted patent was declared invalid, with the following factors to be taken into account while determining the time point of the invalidation declaration: a) this time point should be clearly known to the public; b) this time point should be an ascertained one that would not change with the specific situations of the related parties or other factual factors; and c) this time point should be an earlier legal one so as to increase the likelihood where the invalidation decision may play a retroactive role. Identifying the decision date as the time when the patent right is declared invalid not only meets the requirements for public awareness and ascertainable, but also increases, to some extent, the possibility where the invalidation decision could play a retroactive role for justice. Therefore, the date when a patent right is declared invalid shall be determined as the decision date when the decision on the invalidation request of the patent is made.

Remarks

Article 47 of the Chinese Patent Law (2009) provides a general rule that the invalidation decision is retroactive with an exception of no retroactivity on any judgments or mediation decisions of patent infringement, any administrative decisions on a dispute over patent infringement, any license contracts for exploitation of patent, and any assignment contracts of patent right, which have been executed or performed prior to the declaration of the patent right invalid. The exception facilitates maintenance of any society order that is already formed and stabilized by compromising the justice of result. This case sets a rule that the timing when a patent right is declared invalid should be determined as the decision date when the decision on the invalidation request of the patent is made, which is an earlier legal time point involved in the invalidation proceeding, resulting in a greater possibility of retroactivity the invalidation decision may have. It is positive in terms of pursuing the justice of result.

In the draft of Interpretations of the Supreme People's Court on Certain Issues Concerning the Trial of Patent Infringement Disputes posted by the Supreme People's Court on July 31, 2014, it is provided in Article 35 that "'prior to the declaration of the patent right invalid' in Article 47, Paragraph 2 of the Chinese Patent Law (2009) means prior to the decision date disclosed by the decision on the invalidation request of patent..." Therefore, we are expecting that the Supreme People's Court will soon stipulate expressly in the judicial interpretation that the date when a patent right is declared invalid, in terms of the retroactivity of the invalidation decision, shall be the decision date of the corresponding invalidation proceeding.

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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