In order to facilitate the implementation of the PRC Patent Law, back in 2010, the PRC Supreme People’s Court issued the Judicial Interpretations on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases (“2010 Interpretations”).

In the past five years, the number of patent infringement cases in China has increased rapidly and many new issues have occurred. In order to clarify these new issues, which often occur in judicial practice but are not covered by the current PRC Patent Law and the 2010 Interpretations, on March 22, 2016, the Supreme People's Court issued the Judicial Interpretations on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases (II) (“2016 Interpretations”). The 2016 Interpretations took effect on April 1, 2016. Their major content is as follows:   

  1. Confirmation of the “contributory patent infringement” Principle

In the past, it was a controversial issue as to whether the so-called “contributory infringement” (i.e. provision of raw materials or intermediate products, which can only be used for producing infringing products, to the producer of the infringing products) constitutes a patent infringement. 

The 2016 Interpretations firstly confirm that such contributory infringement constitutes a patent infringing activity. The 2016 Interpretations provides that the supplier of such raw materials and/or intermediate products for producing infringing products and the producer of the finished infringing products shall be jointly liable for patent infringement. 

The above interpretation will strengthen the protection of patent rights in the PRC since it will enable the patent owner to cut off the supply source of the raw materials or intermediate products for producing the infringing products.

  1. Mitigation of the burden of proof of the patent owner 

According to PRC law, in order to obtain damages from an infringer, the patent owner shall present evidence proving the profits (“Illegal Profits”) gained by the infringer arising from the patent infringement. However, in practice, it is difficult for the patent owner to collect such evidence. Therefore, in a patent infringement lawsuit, the patent owner usually cannot obtain sufficient compensation from the infringer due to the difficulty of evidence collection. 

According to the 2016 Interpretations, if the patent owner has presented preliminary evidence proving the Illegal Profits of the infringer, the burden of proof will be shifted to the infringer. I.e. the court is empowered to request the infringer to present its accounting books or other financial documents which are relevant to the patent infringement. If the infringer fails to provide such documents or produce false documents, the court can order the infringer to compensate the damages which are claimed by the patent owner.

A similar “shifting of burden of proof” principle has been stipulated in Article 63 of the amended PRC Trademark Law, which took effect on 1 May 2014. The 2016 Interpretations now also introduce this principle into the PRC patent legal framework. This can mitigate the burden of proof of the patent owner and can enable the patent owner to obtain more compensation from infringers.

  1. Clarification of “sales activities” under the PRC Patent Law

According to the PRC Patent Law, no one is allowed to sell patented products without the prior consent of the patent owner. The 2016 Interpretations make it clear that the conclusion of a valid sales contract between the infringer and a third-party buyer also constitutes “sales activities” under the PRC Patent Law.

This is in favour of the patent owner. Based on the above stipulation, the patent owner is entitled to order the infringer to stop delivering infringing products to the third-party buyer and, thus, can prevent the infringing products from entering the market.

  1. Broadening of the scope of “legitimate source” defense 

According to the PRC Patent Law, a patent owner is entitled to order the infringer to stop its infringing activities and claim damages from the patent infringer by instituting a lawsuit against the infringer. However, the infringer can make a “legitimate source” defense, which enables the infringer to be exempted from paying damages to the patent owner, if the following conditions are met:  

  1. the infringer proves that it did not know that the products sold or used by the infringer are infringing products; and
  2. the infringer proves that the infringing products are obtained through a legitimate channel (e.g. the infringing products are purchased through a sales contract).

Despite the above “damages” exception, the infringer shall still stop its infringing activities.

The 2016 Interpretations broaden the scope of the “legitimate source” defense. I.e. in addition to meeting the above mentioned conditions, if the user of the infringing product can also prove that it has paid a reasonable purchase price for purchasing the infringing products, it can not only be exempted from paying damages but can continue to use the infringing products by itself as well. However, in any event, such user is not allowed to re-sell the infringing products to any third parties. According to remarks of the presiding judge of the IP tribunal of the PRC Supreme People’s Court, i.e. Mr. Song Xiaoming reported in public media, this aims at protecting the interests of the “good-faith” user and at avoiding excessive protection of patent rights.

Except for broadening the scope of the “legitimate source” defense, the 2016 Interpretations are favourable for patent owners and will help them to enforce their patent rights in the PRC. The PRC legislation authority is in the process of making the fourth amendment of the PRC Patent Law. According to the presiding judge of the IP tribunal of the PRC Supreme People’s Court, i.e. Mr. Song Xiaoming, the relevant stipulations under the 2016 Interpretations might be included into the amendment. It remains to be seen what new changes will be brought by the amended PRC Patent Law in the near future.