The Supreme Court of China (SPC) has recently published a new judicial interpretation with regards to the applicability of relevant laws when patent infringement cases are handled, which took effect from April 1, 2016. It is a further development of SPC's judicial interpretation on the trial of patent infringement cases. The first part of the interpretation has been implemented since January 1st, 2010, and has been an important source of authority for lower courts in dealing with patent infringement cases. This second part covers more aspects of the patent litigations and would likely produce significant impacts on patent litigation practice.

In this new judicial interpretation, the SPC provides guidance on issues related to claim construction, determination of infringement and tests for defense, contributory liability, standard essential patents, which may be applicable to all invention, utility model and design patents. Some of the provisions were drawn from the judicial practice of guiding cases in recent years, some have been heavily debated since the amendment of the current Patent Law, and some others are new rules, e.g., those dealing with standard essential patents, which may cause some controversies.

The major issues covered by the new judicial interpretation are summarized as follows.

1. Procedural issues

First of all, a plaintiff has to state explicitly which claim is being infringed in the submitted complaint. The court will request the plaintiff to indicate the allegedly infringed claims if no such information is available. If the plaintiff still does not make a clear statement under such circumstances, the court may reject the suit.

If a claim that the patentee tries to assert rights thereof has been invalidated by the Patent Reexamination Board (PRB), the competent court can reject the case. However, if there is evidence showing that the invalidation decision by PRB is overruled by an effective administrative decision, the patentee may file another suit.

If the patent at issue is being challenged based on Arts. 26.3 and 26.4 of the Chinese patent law, i.e. the description is allegedly not clear or enabling, or the claims are allegedly not clear or not being supported by the specification, the court may stay the proceedings. In case the validity of such a patent is not challenged, the court may determine the scope of protection based on the claims.

2. Claim construction

In constructing a claim, both the preamble part and feature part of an independent claim and the reference part and limitation part of a dependent claim will be considered.

A divisional or parent application of the patent at issue and the related file wrapper and binding decisions regarding the validity of the patent at issue may be considered during claim construction. The file wrapper includes documents submitted by relevant parties, decisions and communications, interview meeting minutes, oral hearing records issued or made by SIPO and PRB during the prosecution, re-examination and invalidation proceedings.

3. Determination of Infringement

When 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.

For claims characterized by functional features, features in the alleged infringing technical solution which use substantially the same technical means to realize the same function and achieve the same technical effect, and which can be envisaged by one skilled in the art without creative work at the time the infringing act takes place, will be considered the same as or equivalent to the functional features.

In case 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.

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.

4. Prosecution history

In case a patentee evidences that restrictive amendments or statements made during prosecution were not accepted, the court shall decide that amendments or statements do not give up relevant technical solutions.

5. Infringement determination with regards to designs

The concept of "freedom of design" is introduced for the first time in Article 14 of the new judicial interpretation, which 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 the same as or close to that of the design patent at issue when the infringing act takes place shall be considered.

For a design patent covering a set of products, the design patent is considered infringed as long as the design of one of the products is infringed.

For a design of an assembled product with a fixed assembly relationship, the design patent is considered infringed when the alleged infringing product is the same as or similar to the design under its assembled state.

For a design of an assembled product without assembly relationships or with no fixed assembly relationships, the design patent is considered infringed only if each and every part of the alleged infringing product is the same as or similar to the parts of the design at issue. Otherwise, the court shall determine that the design patent is not infringed.

6. Indirect liability

Criteria for finding contributory and inducement liabilities are defined. Specifically, 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.

7. Non-infringement defense

In prior art/design defense test, the courts shall determine prior arts/designs in accordance with the patent law being in force before the application date of the patent at issue.

Non-infringement defense against a patent granted at an earlier date by using a patent owned by the alleged infringer granted at a later date is not supported.

8. Standard essential patents

The SPC allows the courts not to issue injunctions against a patent infringer, if the patentee violates the FRAND principle and negotiates in bad faith. However, the rules are not clear enough, which arguably may expose legitimate patent owners to the risks of reverse patent hold-up. The SPC also allows the standard implementers to ask the courts to determine the patent royalty if the patentees and the licensees fail to reach agreements. The industries are concerned whether this will open the door for the potential licensees to convert any licensing negotiations into lawsuits.

9. Permanent injunction

Permanent injunction may not be issued by the court in case such injunction will damage the state or public interest. Instead, the court may decide that a reasonable royalty fee shall be paid by the infringer.

10. Damage calculation

In case the actual loss suffered by the patentee is difficult to determine, the patentee shall provide evidence to prove the profit made by the infringer. When the patentee supplied preliminary evidences and account books and information related to the infringement activities are under the control of the infringer, the court can order the infringer to provide such account books and information. If the infringer refuses to comply with the request by the court, the court can determine the profit made by the infringer based on the patentee's claim and evidences.

11. Preliminary protection after publication

When a patentee requests a third party implementing the technical solution of the patent application after it is published and before the allowance for compensation, the courts may decide an appropriate compensation with reference to royalty fees.

However, the new judicial interpretation also provides that if the granted patent has a scope different from that of the published patent application, the courts will only decide that the alleged infringer employs the patent application after publication and before allowance when the alleged infringing technical solution falls into both the scope of the issued patent and the published patent application.

The above summaries major issues covered by the new judicial interpretation, which will hopefully streamline the patent litigation procedures to come.

(This article was originally published in the INTA Special of Asia IP)

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