China: Beijing IP Court Heavily Fines Company For Resisting Evidence Preservation Order

Last Updated: 31 January 2017
Article by David Huang

The Beijing Intellectual Property Court recently made a decision fining the defendant in a patent infringement suit RMB 1 million (~US$ 144K) for failure to comply with the court's order to turn in its financial records and samples of the accused product. The amount is the upper limit of fines a court may impose in a civil action as provided in the PRC Civil Procedures Law for such an offense.

The decision is an obvious signal from this IP court that it now takes its evidence preservation order seriously. For many years, it has been a common complaint (largely from IP right owners) that Chinese courts were so soft in enforcing their evidence preservation orders that many companies simply ignored the orders.

The decision should also be read with the larger background that Chinese courts intend to put more efforts on damages calculation. The PRC Supreme People's Court has formally codified into a judicial interpretation that when the plaintiff in a patent infringement suit asks to calculate damages based on the defendant's illegal profits, the defendant should turn in its financial records when it is impractical for the plaintiff to obtain the records (otherwise the court can award damages primarily based on prima facie evidence the plaintiff has tried to collect). This decision is a forceful implementation of the spirit of the judicial interpretation, and is further to a judgment issued by the same court less than one month ago where the court made proactive use of various evidentiary rules to award damages and legal fees of RMB 50 million.

The patent in dispute is Chinese utility model patent No. 200720022658.8 owned by Qingdao Ke Ni Le Mechanical Equipment Co., Ltd. (青岛科尼乐机械设备有限公司). The defendant is Qingdao Di Kai Mechanical Equipment Co., Ltd. (青岛迪凯机械设备有限公司). Both companies are located in Qingdao, Shandong Province.

Based on evidence collected in a trade show held in Beijing, the plaintiff filed the infringement suit with the Beijing Intellectual Property Court. Likely based on the plaintiff's application, the court issued the initial order to the defendant to turn in its financial records and samples of the accused product. When the judge served the defendants onsite, the defendant refused to submit the requested records or samples. The judge then asked the defendant to turn in the materials within 3 days. The defendant's employees stated that they are clear with the court's request but refused to sign the court official conversation transcripts.

Two months later, in a pre-trial court session, the judge again asked the defendant to turn in the requested materials within 3 days, but the defendant still did not comply. In the subsequent trial hearing, the defendant still refused to comply.

The court then issued the subject decision, invoking relevant provisions in the PRC Civil Procedures Law and holding that the defendant's behavior amounted to an offense of "refusing to comply with an effective court decision".

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