To further improve and expand prohibitory injunction procedures in intellectual property (“IP”) disputes, the PRC Supreme People’s Court (“SPC”) issued on 12 December 2018 the Provisions on Several Issues Concerning the Application of Law in Examining Cases Involving Prohibitory Injunctions in Intellectual Property Disputes (“Provisions”). The Provisions took effect on 1 January 2019. Below is an overview on the key aspects of the Provisions.
To implement the provisions on interim measures in the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”), relevant provisions on stopping infringements of IP rights before initiating a lawsuit have been included in relevant IP laws and interpretations of China, already in 2001 and 2002. Since then, the courts have accumulated some judicial experience on stopping infringements of IP rights before initiating a lawsuit. In 2012, the revised PRC Civil Procedure Law included provisions on prohibitory injunctions extending the prohibitory injunction to all kinds of civil cases. According to incomplete statistics referred to by Wang Chuang, Vice-Presiding Judge of the SPC’s Civil Adjudication Tribunal No 3 (IP Right Division), in a press conference on the Provisions on 13 December 2018 in Beijing, from 2013 to 2017, the People’s Courts received 157 applications for preliminary injunctions and 75 applications for interlocutory injunctions, and the ruling rate granting such injunctions was 98.5% and 64.8% respectively. In order to strengthen the protection of IP rights and further improve the system of prohibitory injunctions, the SPC started drafting of the regulations on prohibitory injunctions in IP disputes already in 2013. Prior to the issuance of the Provisions, the SPC had issued on 26 February 2015 the Interpretation of the Supreme People’s Court on Several Issues concerning the Application of Law in the Review of Cases Involving Prohibitory Injunctions for Intellectual Property Rights and Competition Disputes (Draft for Comment) (“Draft Interpretation”) regarding prohibitory injunctions in IP disputes. However, the Draft Interpretation never came into effect. The Provisions are regarded as an updated version of the Draft Interpretation and provide more clarity and practical guidance.
2. Key Aspects The Provisions include four key aspects:
a) the procedural rules, such as who can be the applicant of a prohibitory injunction, the competent court, the application form, the examination procedures and review, etc.; b) the substantive rules, such as the considerations of the necessity of the prohibitory injunction, the bond to be provided, the duration of the prohibitory injunction, etc.; c) the identification of a wrongfully made application and compensation lawsuit, and the termination of the prohibitory injunction; d) other issues such as application fee, treatment for applying for the different types of injunction / preservation at the same time, five typical prohibitory injunction cases.
3. Procedural rules
a) Applicants of Prohibitive Injunctions The following parties are entitled to apply for a prohibitory injunction:
(1) The parties of IP and competitions disputes as set forth below can apply for a prohibitory injunction before the judgement, ruling or arbitral decision takes effect:
disputes over IP right contracts; disputes over ownership and infringement upon IP rights; disputes over unfair competition; and anti-monopoly disputes.
(2) The licensee of an IP licensing contract, specifically:
the licensee of an exclusive license contract may file the application in its own name; the licensee of a sole license contract may file the application in its own name if the rights owner does not file the application; the licensee of a non-exclusive license contract may file the application in its own name upon express authorization by the rights owner.
b) Court of Jurisdiction An applicant shall apply to the People’s Court:
(1) with jurisdiction over an IP dispute at the domicile of the respondent; or (2) with jurisdiction over the corresponding disputes between the applicant and the respondent.
c) Review Procedure
(1) Prior Inquiry Since the prohibitory injunction has a great impact on the interests of both parties, it is clearly stipulated that before deciding to grant a prohibitory injunction, the People’s Court shall make an inquiry with the applicant and the respondent, except where the situation is urgent or the inquiry may affect the implementation of the prohibitory injunction. (2) Application Form and Necessary Evidence An applicant shall submit an application form and the corresponding evidence to apply to the People’s Court for the prohibitory injunction. Especially if the application is based on a utility model or design patent, the applicant shall submit a search report or a patent evaluation report issued by the China National Intellectual Property Administration (“CNIPA”), or a decision of the Patent Reexamination Board of CNIPA to maintain the patent. (3) Review Period The term of the review period is not stipulated in the Provisions. Thus, Article 101 of the PRC Civil Procedure Law applies, i.e. the People’s Court shall decide within 48 hours of receipt of the application. (4) Reconsideration A party concerned who refuses to accept a ruling on prohibitory injunction can apply for reconsideration. The People’s Court shall review the application for reconsideration and render a ruling within ten days of receipt of the application. (5) Termination of Injunction without Filing an Action for the Case Also for prohibitory injunctions, Article 101 of the PRC Civil Procedure Law applies, i.e. where the applicant fails to institute lawsuit or to apply for arbitration within 30 days after the People’s Court issued the prohibitory injunction, the People’s Court shall terminate the prohibitory injunction.
4. Substantive Rules
a) Considerations on the Necessity of Prohibitory Injunction Before the Provisions were promulgated, Articles 100 and 101 of the PRC Civil Procedure Law stipulate that where a party concerned whose legitimate rights and interests, due to an urgent situation, would suffer irreparable damage if the party fails to petition for preservation promptly, may apply to the People’s Court for preservation measures. The Provisions clearly stipulate the factors to be considered in reviewing an application for prohibitory injunctions, especially further interpretations on how to judge the stability of the validity of the concerned IP, to identify the “urgent situation” and the “irreparable damage”, which makes it more operable to decide a prohibitory injunction.
(1) Factors for Consideration When reviewing an application for prohibitory injunction, the People’s Court shall comprehensively consider the following factors:
whether the applicant’s request has a factual basis and a legal basis, including the stability of the validity of the IP requested for protection; whether failure to issue a prohibitory injunction will cause irreparable damage to the legitimate rights and interests of the applicant, or cause difficulty in the enforcement of the ruling for the case, or cause other damage; whether the damage caused by the failure to issue a prohibitory injunction will exceed the damage caused by the prohibitory injunction to the respondent; whether issuing the prohibitory injunction will damage public interests; and other factors that shall be considered.
(2) Urgent Situation Under any of the following situations, if failure to issue an immediate prohibitory injunction is serious enough to harm the applicant’s interests, such situation shall be considered to be an urgent situation:
trade secrets of the applicant are to be illegally disclosed; the applicant’s right of publication or privacy and other personal rights are to be infringed; the IP in dispute is to be illegally disposed of; the applicant’s IP is being or will be infringed during a time-sensitive occasion such as a trade fair; a time-sensitive popular show is being or will be infringed; or other situations requiring an immediate prohibitory injunction.
(3) Stability of the Validity of the IP Rights When reviewing and judging whether the validity of the IP requested by an applicant to be protected is stable, the following factors shall be comprehensively considered:
the type or nature of the rights involved; whether the rights involved have been substantively examined; whether the rights involved are in the invalidation or cancelation procedure and declared invalidated or canceled; whether there is a dispute over ownership of the rights involved; and other factors that may lead to instability of the validity of the rights involved.
(4) Irreparable Damage Any of the following circumstances shall be deemed to be “irreparable damages”:
the behavior of the respondent will infringe the applicant’s rights of goodwill, publication or privacy and other personal rights and cause irreparable damage; the behavior of the respondent will lead to uncontrollable infringement and significantly increase the damage to the applicant; the respondent’s infringement will result in a significant reduction in the relevant market share of the applicant; and other irreparable damage caused to the applicant.
Bond A bond must be provided as security when applying for the prohibitory injunction. The amount of bond shall be equivalent to the loss possibly to be suffered by the respondent as a result of the execution of the prohibitory injunction, including reasonable loss of sales proceeds and custody expenses of the products involved. Corresponding bonds will be ordered to be added by the People’s Court where during the execution of prohibitory injunction, the respondent may suffer losses exceeding the amount of the applicant’s bond. If the applicant refuses to increase or add the bond, he or she may decide to terminate or partially cancel the prohibitory injunction. If the applicant fails to increase or add the bond, a ruling may be rendered to terminate or partially terminate the prohibitory injunction. The prohibitory injunction issued by a People’s Court shall generally not be terminated by the bond provided by the respondent, except where the applicant agrees to the termination.
Duration of Prohibitory Injunction The prohibitory injunction shall come into force immediately once the application is accepted by the People’s Court. The duration of the prohibitory injunction shall be determined by the People’s Court according to the applicant’s request or the specific circumstances of the case. The validity of the ruling to stop the infringement shall generally be maintained until the ruling for the case takes effect. Renewal of the prohibitory injunction may be ruled by the People’s Court according to the applicant’s request, additional bonds and other situations. The applicant’s requests to renew the prohibitory injunction shall be made within seven days upon expiration of the duration.
5. Wrongfully Made Applications Article 16 of the Provisions adopts the principle of objective imputation of responsibility for the determination of “wrongfully made applications”, regardless of whether the applicant subjectively is at fault or not. This imposes strict liability on the applicant and is aimed to encourage the applicant to act prudently in initiating the injunction procedure and to reduce the damage caused to others due to indiscriminate prosecution.
a) Circumstance of Wrongfully Made Applications Any of the following circumstances shall be deemed to be a “wrongfully made application”:
no lawsuit or arbitration is filed by the applicant within 30 days after act preservation measures are taken; the IP requested for protection is declared invalid; the effective judgment considers that no infringement or unfair competition is constituted; or other circumstances where the application is made wrongfully.
b) Lawsuit for Compensation for Wrongfully Made Applications If an application is made wrongfully, the applicant shall compensate the respondent for any loss incurred as a result of the wrong injunction. Where the respondent files a lawsuit for compensation, the case shall fall under the jurisdiction of the People’s Court that issued the prohibitory injunction or of the People’s Court that accepted the lawsuit.
c) Termination of Prohibitory Injunction If an application is made wrongfully, the party concerned can apply for the termination of prohibitory injunction. The People’s Court shall within five days of receipt of the application, terminate such injunction. Other circumstances under which the prohibitory injunction shall be terminated are as specified in Article 166 of the Interpretation of the Supreme People's Court on the Application of the PRC Civil Procedure Law:
the applicant revokes the application for injunction; the lawsuit or claim of the applicant is overruled by a valid judgment; or other circumstances under which the People's Court deems that the injunction shall be removed.
6. Other issues
a) Application Fee It is clearly stipulated in the Provisions that the application fee shall be paid in accordance with the provisions of the Measures for the Payment of Lawsuit Fees on the application for prohibitory injunction. The relevant provisions of the Measures for the Payment of Lawsuit Fees on preservation measures are only provisions on maritime injunction at present, so fees shall be charged in accordance with the provisions on maritime injunction, which are RMB 1,000 to RMB 5,000 for each case.
b) Treatment for Different Types of Injunction / Preservation Where an applicant applies for prohibitory injunction, property preservation or evidence preservation at the same time, the People’s Court shall separately examine whether the different types of injunction / preservation applications meet the conditions and may decide the order of execution of different types of injunction / preservation.
7. Five Typical Prohibitory Injunction Cases Published by the SPC Together with the issuance of the Provisions, the SPC also published five typical prohibitory injunction cases, which involve prohibitory injunction in lawsuits of infringement of trade secret, copyright, patent and unfair competition. These cases are useful as precedents in implementing the Provisions.
As can be seen from the above, the Provisions set up a more practical and operable prohibitory injunction system. The provisions will play an important role in preventing infringement of IP rights and obtaining judicial relief.