Often the first battle that parties face in an intellectual property infringement dispute is determining which court has jurisdiction to hear the dispute. For many reasons, the plaintiff will usually wish to initiate proceedings at the court where the plaintiff has its domicile or at a court relatively experienced in intellectual property disputes. A plaintiff will generally try to avoid initiating proceedings at the court where the defendant has its domicile. When determining jurisdiction, the parties and the court should seek to determine the places with the most significant connection to the dispute. Apart from where the defendant has its domicile, the other place that will have a connection with the dispute will be the place of infringement. In an online environment, there have been many cases that have considered whether the place of receipt in an online transaction can be considered as the place of infringement. However, no uniform understanding has yet been reached in judicial practice. As a result, there have been a large number of jurisdictional challenges.

1. Verdicts from various courts

Having combed through verdicts from the last two years from courts nationwide, we have found that different courts hold conflicting opinions as to whether the place of receipt can be considered as the place of infringement. Sometimes the same court or even the same collegiate panel has arrived at conflicting decisions in different cases. Furthermore, even in decisions where courts have found that the place of receipt is the place of infringement, the reasoning in support of the findings is different. For example, some courts have held that the place of receipt is the place where the infringing act has its results, while other courts have held that the place of receipt is the place where the infringing act occurs.

Opponents of the theory argue that the place of sale of an infringing product should be the place of dispatch or where the seller has its domicile, and should not include the place where the buyer takes delivery of the product. They claim that the underlying idea is to determine the place of sale according to the principle of “actor sequitur forum rei”. Proponents of this approach argue that, if courts determine the place of receipt as the place of sale, then the plaintiff would be able to forum shop by requiring the defendant to send the infringing products to any pre-arranged location. This would undermine the principles of territorial jurisdiction in tort cases.

Supporters of the theory believe that the action of sale is only complete when the buyer takes delivery of the infringing product. As a result, the place of receipt is also part of the place of sale, or is the place where the sale has its results. Therefore, the place where the buyer actually takes delivery of the product should constitute the place of sale of the infringing products under Article 5.2 of the Several Provisions of the Supreme People’s Court on Issues concerning the Application of Law in the Trial of Patent Dispute Cases (Judicial Interpretation on Patent Cases), and the court at such place should have jurisdiction over the patent case in question.

We note that, although different courts hold different opinions, some of the higher courts in China are beginning to form uniform views on this issue. In rulings on appeals of jurisdictional challenges last year and the beginning of this year, the High People’s Court of Jiangsu Province and the High People’s Court of Guangdong Province both held that, in an online transaction, the court at the place of receipt had jurisdiction. However, their reasoning for reaching such a conclusion was not entirely consistent. The High People’s Court of Jiangsu Province held that the place of receipt is the place of delivery in an online transaction, and thus is the place where the infringing act has occurred.[1] The High People’s Court of Guangdong Province held that the place of receipt was the place where the infringing act has its results.[2]

2. The place of receipt in an online transaction should be deemed as the place of infringement

Firstly, to recognize the place of receipt in an online transaction as the place of infringement is appropriate when considering the characteristics of online transactions. Nowadays with highly advanced online networks, a buyer and a seller can easily complete a transaction without having to take a step outside of their houses. The buyer can browse and select goods, place orders, and make payments online. The seller will only need to deliver the goods to the place specified by the buyer, and the transaction will be complete once the buyer takes delivery. The parties do not need to meet, and may not even know the identity of the other party. The place appointed by the buyer becomes the most important tangible point of connection in an online transaction. At the same time, online networks are also changing the way business is conducted. Businesses with on online platforms often need only a site for inventory (such as a temporary warehouse), and do not need a fixed place of business operations (such as a physical store). Warehouses can be established anywhere, or there may not even be the need for a warehouse, and the seller can arrange for dispatch directly from the factory. The address that such businesses provide to third-party platforms may be a registered address, a family address, or any other address. Such addresses may not have anything to do with the actual business operations. This question becomes more pronounced in cases where buyers in China make purchases from abroad. In these cases, only the place of receipt is within Chinese territories; the seller’s domicile and the place of dispatch are usually abroad. If the seller’s domicile and the place of dispatch are deemed to be the place of infringement, there would be a significant hurdle in safeguarding the buyer’s rights. Therefore, where online transactions are involved, it is preferable to recognize the place of receipt as the place of infringement, rather than the place of the seller’s registered address or the address of dispatch.

Secondly, by analogy to the most recent judicial interpretations on the place of contract performance in an online transaction, the place of infringement in an online transaction should be deemed as the place of receipt. Article 20 of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China promulgated in 2015 (2015 Judicial Interpretation on the Civil Procedure Law) clearly provides that, in a sale of goods contract formed through information networks, unless otherwise agreed by the parties, and unless the subject of the contract is delivered through the information network, “the place of receipt shall be the place where the contract is performed”.[3] This is a special rule enacted by judicial bodies to resolve the difficulty buyers face in safeguarding their interests in online transactions, in locating the seller’s domicile, and in determining the place of contract performance. In patent infringement cases, plaintiffs also purchase goods through online platforms. In proving the sale of an infringing product, the plaintiff is often proving the execution and performance of the sales contract at the same time. There are many points of connection in a sales contract, including the domiciles of parties to the contract, the place of contract execution, and the place of contract performance. As in a contract dispute where “the place of receipt shall be the place where the contract is performed”, in a patent infringement lawsuit, the place of receipt should also be the place of infringement.

Lastly, rapidly developing information network technology allows the infringing act to be concealed. As the seller may not have a fixed place of business, it is difficult to verify its true identity. Under such circumstances, it is necessary for the courts to decide the issue of jurisdiction in a way that permits victims to pursue their claims effectively. To determine the competent court in a patent infringement case under the general principle of “actor sequitur forum rei” not only conflicts with the inherent logic of the 2015 Judicial Interpretation on the Civil Procedure Law, but is also inconsistent with the present needs of society. The place of receipt in a specific online transaction is certain, and to recognize the place of receipt as the place of infringement would be consistent with the principle of jurisdictional certainty.

3. Other relevant questions

  • How should courts define the scope of online transactions? Article 2 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law to Trial of Civil Dispute Cases of Infringement of Information Network Transmission Right provides that the term “information network” includes such information networks as the internet, broadcast and television networks, landline communication networks, and mobile communication networks that use computers, televisions, landline phones, mobile phones and other electronic devices as terminals, as well as local area networks that are open to the public. Therefore, sales contracts executed through such media should be deemed to be executed through an information network as provided by Article 20 of the 2015 Judicial Interpretation on the Civil Procedure Law. If a buyer purchases an infringing product from a seller through an information network as defined by the Supreme People’s Court, the place of receipt should be deemed as the place of infringement.
  • Is the place of receipt in an online transaction the place where the infringing act occurs or the place where the infringing act has its results? Pursuant to Article 5.2 of the Judicial Interpretation on Patent Cases, the place of infringement includes the place where the infringing sale occurs and the place where the infringing sale has its results. However, in judicial practice, there are different opinions on whether the two places can be distinguished. Some believe that the place where the infringing act occurs is also the place of the results, and there is no need to distinguish the two. In contrast, others believe that it is necessary to distinguish the two terms, but fail to define the standards for doing so. We believe that the place where the infringing act has its results means the place where the infringing act has its direct results, and when the infringing sale occurs, its results occur simultaneously. Therefore it is not necessary to further distinguish the two actions. As for online transactions, the place of receipt is the place where the infringing act occurs in the legal sense, as well as the place where the infringing act has its results.
  • In online transactions, how should courts determine the place of sale of infringing products when the place of performance stipulated in the contract differs from the actual place of receipt? Regarding the place of performance of a sales contract executed through information networks, Article 20 of the 2015 Judicial Interpretation on the Civil Procedure Law provides “where the contract stipulates the place of performance, such agreement shall prevail”. That is to say, the parties to a contract can exclude the default rule in the 2015 Judicial Interpretation on the Civil Procedure Law by way of agreement (i.e. the place of receipt is the place of performance). In this case, should courts determine the place of infringement or the place of sale of the infringing product as the place of performance as stipulated in the contract? Our understanding is that the place of infringement should be determined by the actual act of infringement, and cannot be changed by the parties’ agreement. Therefore, if the place of performance as stipulated in the contract is different from the actual place of receipt, the place of the sale of the infringing product should still be determined by the actual place of receipt (i.e. the actual place of performance).

4. Conclusion

We believe that Article 20 of the 2015 Judicial Interpretation on the Civil Procedure Law will further drive the various courts to the understanding that the place of receipt in an online transaction is the place of infringement in patent infringement lawsuits. The positive effect of such an understanding is self-evident, and we hope that the Supreme People’s Court will promulgate a judicial interpretation based on a summary of the judicial practice of various courts soon.

(This article was originally written in Chinese, the English version is a translation.)