China: Litigation Strategies For Patent Infringement in China

Last Updated: 16 November 2016
Article by Zunxia Li

Patent infringement litigation has its own unique characteristics and technical complexities, and the key to success is to choose the appropriate litigation strategy. Zunxia Li provides this guide through the process.

Under the current Chinese patent legal system, where patent infringement occurs, one of the remedies the patent right holder most often chooses is to bring civil litigation for patent infringement before a competent court. Compared with other available approaches this judicial remedy can provide a more comprehensive protection on the patent right holder while at the same time act as a deterrent to potential infringers. However, compared with other common civil litigation cases, patent infringement litigation has its own unique characteristics and technical complexities, and key to the success of litigation will be for the plaintiff to choose the appropriate litigation strategy.

Generally, the plaintiff should make appropriate litigation strategies to conduct the patent infringement litigation based on at least the following two aspects: at the pre-litigation preparation stage; and at the litigation process stage. At the pre-litigation preparation stage, the strategy includes identification on basis of right for litigation, determination of defendant, determination of the competent court for litigation, determination of litigious claims and strategies for evidence collection. During the litigation process, the litigation strategy covers the choice of the time of action, reasonable use of relevant litigation procedures and strategies at the end of litigation.

Litigation Strategies at Pre-litigation Preparation Stage

Identification on Basis of Right Appropriate to Litigation

No right indicates no basis of action. In practice, once the plaintiff brings a lawsuit against patent infringement, the most common countermeasure that the accused may take is to file a request for invalidation before the Patent Reexamination Board of the SIPO (PRB) to invalidate the patent at issue. If it is declared invalid by the PRB, the patent will be deemed void from the beginning, and the infringement accusation of the plaintiff will lose the legal basis accordingly. It is the prerequisite of winning the litigation to make an evaluation on validity of the patent and then choose a relatively stable patent as the basis of right for litigation.

Except for an evaluation on the validity of the patent, when identifying the basis of right appropriate to litigation, the following factors should also be considered: the exact definition on scope of protection of patent; the market worth of the patent on the plaintiff; and the influence on the market by the patent infringement.  

Determination of Defendant

The choice of defendant is not only relevant to the evidence collection, but it also is closely related to the determination of the competent court. In practice the infringer may be a manufacturer, a seller, an offering for sale, or a user, and the infringement may be direct or contributory. When determining the defendant, the plaintiff should at least consider the following: the purpose of the action; the features of the infringement and the infringer; the strength of fighting against infringement; the exclusion of possible local protectionist interference; the reduction of difficulty in infringement recognizance; and the enforcement of effective judgment. Based on this, the plaintiff may choose one or more infringers as codefendants according to the situation case by case.

Determination of Competent Court

Choosing which court to handle the patent infringement is significant to the case trial.  Courts in different locations differ in their experience and capability of hearing a patent infringement litigation case. The plaintiff should, where possible, choose a competent court located in a developed region or a large city to handle the patent infringement. He should try to avoid choosing a court where the defendant is located to exclude the possibility of local protectionist interference with the case. In addition, the plaintiff should also avoid choosing a court which may be controversial in the jurisdiction to handle the patent infringement to prevent the defendant from delaying the case by filing an objection against the jurisdiction.

Determination on Litigious Claims

In patent infringement litigation, determining the appropriate litigious claims is very important to facilitating the litigation procedure and getting the support of the court. The litigious claims usually include the stopping of the infringement (also called a permanent injunction of the infringement) and compensation.

For claims of permanent injunction of infringement, it is usually applied to a continuous infringement. The plaintiff may claim definitely in the complaint based on the evidence collected. If the plaintiff has sufficient evidence to prove the existence of stock and molds specially used for manufacturing the infringing products, the plaintiff may also request the destruction or confiscation of them.

In terms of compensation, the higher the amount the plaintiff claims, the higher the litigation fee the plaintiff will pay, so it is not necessarily better to claim a large compensation. In considering litigation costs, the plaintiff may determine a reasonable amount of compensation based on the evidence collected and the purpose of litigation. If more evidence relating to compensation is revealed with the assistance of the court or other competent authorities in the legal proceedings, the plaintiff may apply to change the amount of compensation which is claimed when filing the litigation. When determining the compensation claim, the disbursement that the plaintiff spends for stopping the infringement could also be claimed, and usually could be supported by the court as long as such claim is within a reasonable range.

As a patent infringement dispute relates to property, rather than personal right, claims such as apologizing will not be supported by the court, while, if the infringement causes harm to the commercial credit of the plaintiff, the plaintiff may claim for elimination of ill effect.   

Strategy on Evidence Collection

Evidence collection has a close relation to the cognizance of infringement facts, to the determination of defendant, to the determination of competent court and even to claims (particularly compensation claim). So, when collecting evidence, it will be important to ensure the integrity of the material collected and the evidence chain. Under current the Chinese legal system, notarized evidence is considered the most effective unless contrary evidence could undermine it. The plaintiff should collect evidence under the witness of a notary, and supplement the evidence with the assistance of the competent court or other authority. This will enhance the strength of the evidence in support of the plaintiff's litigious claims     

Strategies at the Litigation Process Stage

Choice of Time of Action

In practice some infringements just occur, some infringers have strong market competition, while other infringers may be preparing for IPO. Therefore, during the pre-litigation preparation, the plaintiff needs to consider when it is appropriate to start legal proceedings. For example, whether the cease and desist letter should be sent before litigation, whether negotiations should be held before the action, or whether initiating litigation first will increase the weight of any negotiation. The choice of appropriate time for action should be determined by the plaintiff according to specific circumstances of the case and the purpose of the litigation.

Reasonable Use of Litigation Procedures 

The infringer often uses invalidation procedures to delay a trial. Under the current Chinese legal system, the plaintiff may apply to the court for a preliminary injunction before or when filing the patent infringement litigation, and if accepted, the infringement will be stopped before the end of the patent infringement litigation. In practice, the preliminary injunction must meet strict requirements such as clear evidence of infringement, no irreparable loss caused to the plaintiff if the infringement could not be stopped immediately, and a certain amount of warranty. 

An infringer is always secretive and aware of the infringement, so it can be very difficult for the plaintiff to collect sufficient evidence by himself to support his litigious claims, particularly when collecting the evidence relating to a process patent infringement and compensation. In this instance, the plaintiff may, based on preliminary evidence collected, apply to the court for its investigation and evidence collection, evidence preservation or scene investigation before or when filing the patent infringement litigation, and with the assistance of the court, the plaintiff may then get more solid evidence to support his claims.      

Strategy at End of Litigation

In consideration of the purposes of litigation, costs and progress, not all litigation carries on to the end and gets a decision from the court. In practice, the plaintiff may choose when and how to end the litigation, for example, for plaintiffs which are large scale enterprises, the purpose of litigation is to increase leverage when negotiating with a competitor, particularly for patent crossing-licensing, with the negotiation reached, the plaintiff may withdraw the lawsuit.  Where the defendant immediately stopped the infringement and agreed to make settlement with the plaintiff when the litigation is filed, the case may be settled to end under the witness of the court.         

Conclusion

Due to the uncertainty in a trial and the complexity of patent infringement litigation, no fixed pattern of litigation strategy can be followed by the patent right holder when choosing to file patent infringement litigation as a remedy to infringement. The patent right holder needs to choose the appropriate litigation strategy for the preparation and the execution of the litigation based on the following considerations: the actual situation of the case, the patent, the infringement, the progress of the case, and the purpose of litigation. On such a basis, this remedy approach could prove the most effective and provide the best protection of the rights and interests of the plaintiff.

(This article was originally published in the Asia IP June/July Issue, Vol. 8 Issue 6, Page28-30)

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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