China has a bifurcated patent system but joint infringement and validity hearings have been held. What does this mean for IP litigants in China?
In July 2021, in Guangdong Province (Foshan City), a joint hearing took place to determine patent validity and patent infringement. This was the first time such a joint hearing had been held in Guangdong Province: Does it signal a fundamental change in China's bifurcated patent system? And is it bad news for plaintiffs, good news for defendants? Or too early to tell?
The joint hearing in a single venue took place on 14 July 2021: The Foshan Intellectual Property Protection Centre1 (FIPPC) had organised a joint on-line hearing of the Patent Re-examination Board (PRB) of the China National IP Administration (CNIPA) (responsible for determining patent validity), and the Guangzhou Intellectual Property Court (Guangzhou IP Court) (responsible for determining infringement) at a single sitting.
The litigation had begun on 20 September 2020, when the plaintiff, a company from Jiangsu Province, filed a patent infringement lawsuit in the Guangzhou IP Court, which is the venue having jurisdiction to determine patent infringement actions in Guangdong Province. Later, in March 2021, while the infringement action was pending for a hearing, the defendant filed an application to invalidate the patent in question before the PRB of the CNIPA, the venue having jurisdiction over determining patent validity. As a result of the invalidation having been filed, the Guangzhou IP Court suspended the hearing of the infringement case pending the outcome of the patent invalidity proceeding.
In an effort to streamline the determination of the case, the FIPPC coordinated with the CNIPA and Guangzhou IP Court to have the patent validity hearing held on the morning of the 14th of July 2021, at which the validity of the patent was to be determined, and the infringement proceeding held on the afternoon of the same day. Both hearings were held online (the PRB convened in Beijing, and the Guangzhou IP Court in Guangzhou), the parties being hosted at the FIPPC's premises in Foshan City with the respective tribunals being connected remotely from Beijing, and Guangzhou, respectively.
As the PRB determined the patent to be invalid, at the morning hearing, the patent plaintiff withdrew its claims of infringement in the afternoon's infringement hearing, thereby resolving the infringement determination in favour of the defendant.
While at first sight it may seem that the FIPPC was able to merge the validity and infringement proceedings, this was not in fact the case, and no new basis for jointly determining validity and infringement has been created, or is intended to be created.
This case has been hailed as a "model hearing". However not the first of its kind, and indeed the Chinese system for IP protection and enforcement offers some latitude to responsible tribunals to coordinate how and when they hold hearings. These types of "coordinated" patent validity-infringement hearings have, for example, been held in 2018 (Ningbo), 2019 (Beijing, Suzhou & Changsha) as well as in 2021 (Shanghai), usually coordinated by the IP Protection Centres responsible for the respective locations.
Having said that, if they become "the rule" rather than "model trials", what could these joint hearings mean for foreign litigants in China? If these hearings become more widespread, they:
- Would speed up the patent infringement determination process as a whole - as issues of validity and infringement can be scheduled in quick succession;
- Would likely reduce the delay experienced by patent infringement plaintiffs should the infringement court wish to adjourn the infringement proceedings pending determination of validity;
- Would increase the likelihood that infringement courts adjourn, delay or halt patent infringement proceedings more readily than they would have in the past (in the past infringement courts have presumed the validity of granted patents and been reluctant to adjourn infringement proceedings as patents are 'examined' rights - as opposed to utility models which are not); and/or
- Could also signal a general trend away from the bifurcated patent system, towards a joint-hearing / single-venue system where validity and infringement are addressed in a single hearing - this would arguably make the outcome of patent infringement proceedings less certain and may advantage defendants.
So what does this mean for IP litigants in China?
The current bifurcated system offers plaintiffs the advantage of certainty: that the infringement tribunal will in the ordinary course not address issues of validity of patents: the system inherently assumes that the defendants will have had the opportunity to contest the validity of the patent in a separate (for that purpose, specialised and skilled) venue. Infringement court, are largely bound to this division of responsibilities even if the patent in issue appears to have prima facie defects.
Allowing validity and infringement to be determined on the same day, with the infringement tribunal potentially able to witness the assessment of validity, raises the stakes for plaintiffs; at the same time providing greater certainty to defendants in the ensuing infringement proceedings. In this sense, it potentially tilts the "playing-field" (not unfairly mind you) in the defendants' favour. Plaintiffs may find that in order to maintain their leverage in infringement proceedings, they will want to have the validity of their patent "tested and confirmed" before they commence infringement proceedings.
Even if these "model hearings" end up leading to a completely merged system for patent disputes, it will not, however, deal a "blow" to patent plaintiffs; it will simply mean that the Chinese patent litigation system has re-aligned from one that mirrors that in many civil law countries, to one that has found more favour in common law countries. Whether that would be a good or bad thing for patent disputes remains TBD - to be determined - in the meantime we will continue to watch this space.
1 The China (Foshan) Intellectual Property Protection Center (FIPPC) was established in June 2018 as an institution of the Foshan Municipal Government, and approved by the CNIPA. The FIPPC provides a "green channel" for rapid patent review for local companies in two industries, namely Smart Device and building & construction materials (both significant branches for Foshan industry). The FIPPC's functions are: dealing with matters of patent pre-examination, patent filing acceptance on behalf of the CNIPA, patent infringement assessment, intellectual property rights protection, as well as other patent prosecution related services - in other words functioning in some way as one of the "sub-offices" of the CNIPA.
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