China is becoming an arena of significant importance where companies are taking advantage of patent portfolios against competitors. According to “2012 Intellectual Property Rights Protection in China” issued by State Intellectual Property Office of China, in 2012, local people’s courts around China accepted 9,680 patent civil cases, with year-on-year increase of 23.80%.
In this circumstance, we have been receiving more and more questions regarding patent infringement lawsuit in China. On one hand, some questions relate to remedies the Plaintiff may seek during the patent litigation. On the other hand, some questions relate to countermeasures the Defendant may take to withstand the attacks of the Plaintiff. Some of the questions include: Whether injunctions can be enforced before an appeal has concluded? Whether there is any preliminary injunction procedure in China to permit Plaintiff to enforce an injunction and shut down Defendant’s work before the conclusion of an appeal? What is the timing between any verdict of infringement and a patentee’s ultimate ability to enforce an injunction? How often Defendants with legitimate businesses are enjoined if they are found to infringe, as opposed to counterfeiters or other parties who are not likely able to satisfy a judgment?
To resolve the above questions, we produce this article. Particularly, we outline in this article all the possible remedies Plaintiff could seek against Defendant before the people’s court; analyze governing laws, judicial interpretations, and opinion of local appellate court (in this article, we take High People’s Court in Jiangsu Province as example) on these remedies; and finally comment on countermeasures Defendant could adopt to defeat all these remedies. In the end of the article, we will provide answers to the above questions.
REMEDY PLAINTIFF MAY USE TO DISRUPT DEFENDANT
According to different stages of the legal proceeding of patent infringement litigation, we can categorize the possible remedies that Plaintiff could seek against Defendant into pre-trial remedies, mid-trial remedies, and post-trial remedies. By “trial”, we mean a period after the court accepts the complaint and before the court decides the case.
1. Pre-Trial Remedy
A. General introduction of the pre-trial remedy.
Plaintiff could request the court to grant remedy in an urgent situation before the court accepts the complaint. The urgent situation indicates that, where Plaintiff believes that Defendant is conducting or will conduct the infringement act, failing to cease the act will result in irreparable harm to Plaintiff; failing to preserve evidence will result in damage or missing of the evidence; and failing to preserve property will result in insufficient execution of the court decision.
After the court grants the pre-trial remedy, Plaintiff should have the complaint accepted by the court within a prescribed time period. Otherwise, the court should dismiss the granted remedy. Therefore, the pre-trial remedy is a preliminary measure before the final decision on infringement comes into effective.
The pre-trial remedy includes (1) a pre-trial injunction for enjoining preliminarily certain act of Defendant; (2) a pre-trial evidence preservation for collecting evidence from Defendant for use in the trial; and (3) a pre-trial property preservation for distressing and attaching property of Defendant for execution after the trial.
B. Pre-trial injunction1.
To Plaintiff, sometimes enjoining the future act of Defendant may be more desirable than collecting monetary damage from Defendant. Therefore, Plaintiff may want to take advantage of the pre-trial injunction to stop and interrupt Defendant’s normal operation of business.
To obtain relief by the order of pre-trial injunction from the court, Plaintiff should satisfy following four preconditions, which are:
(a) Defendant constitutes or will constitute patent infringement with the on-going or upcoming act;
(b) Plaintiff would suffer irreparable harm without pre-trial injunction;
(c) Plaintiff provides a guarantee; and
(d) Court’s adoption of pre-trial injunction would cause no harm to the public.
To meet the precondition (a), Plaintiff should provide evidences showing its ownership of the patent and Defendant’s previous act or future act infringed or will infringe the patent owned by Plaintiff.
To meet the precondition (b), Plaintiff should provide evidences showing the harm would not be sufficiently compensated by the monetary damage if the pre-trial injunction is not granted. In practice, if Plaintiff could prove precondition (a), the court may presume the precondition (b) is also met considering that the term of the exclusive right of patent is limited and the harm to market share, commercial reputation, and other interests of Plaintiff is hard to assess.
To meet the precondition (c), Plaintiff should provide guarantee to ensure unreasonable harm to Defendant caused by improper grant of the pre-trial injunction would be compensated sufficiently.
To meet the precondition (d), Plaintiff should show adoption of the injunction will cause no substantial harm to the interest of the general public. Usually this precondition is presumably met in patent litigation, unless relevant product or method is related closely to the public health, environment protection, and other interests of the public, and grant of injunction would influence negatively the above interests.
Once the ruling of pre-trial injunction is made to stop Defendant’s act, the ruling will be enforced immediately.
C. Pre-trial evidence preservation2.
Pre-trial evidence preservation aims to preserve the evidence that might be destroyed or hard to obtain, including evidence showing making and selling of the infringing product for proving patent infringement, and evidence showing amount of the infringing product for proving liability.
To obtain relief by the order of the pre-trial evidence preservation, Plaintiff should show satisfaction of following three preconditions:
(e) the evidence to be preserved might be destroyed or would be difficult to obtain in the future;
(f) Plaintiff would provide guarantee upon request from the court; and
(g) Plaintiff could not obtain the evidence by itself without help from the court.
If the court rules to adopt preservation measure, the ruling will be enforced immediately.
D. Pre-trial property preservation3.
Pre-trial property preservation aims to preserve the property relevant to the infringement act to avoid insufficient compensation of the harm. The property includes the infringing product and the property of Defendant that can be executed to compensate the harm. To obtain relief by pre-trial property preservation order, Plaintiff may assert Defendant would hide and decrease the property in a bad faith to avoid the liability.
Plaintiff must show that the court’s final decision may not be executed or properly executed without preserved property to ensure sufficient compensation of the harm.
Upon grant of the order for the property preservation, the court may seal-up, distrain, and freeze relevant property of Defendant.
2. Mid-trial Remedy
A. General introduction of the mid-trial remedy.
Plaintiff could request the court to grant remedy in the urgent situation after the complaint is accepted by the court and before the court makes final decision on infringement.
The mid-trial remedy similarly includes (1) a mid-trial injunction; (2) a mid-trial evidence preservation, and (3) a mid-trial property preservation.
B. Mid-trial injunction.
The mid-trial injunction is not explicitly prescribed in the Chinese Patent Law and judicial interpretation issued by the Supreme Court of China. The Civil Procedure touches implicitly the mid-trial injunction by stipulating the prior execution in Article 97, paragraph 34. In practice, the court will examine the request for mid-trial injunction by referring to Article 66 of the Chinese Patent Law regarding the conditions for granting the pre-trial injunction.
Article 98 of the Civil Procedure further prescribes the precondition for adopting the prior execution, requiring clear right and liability between the parties and serious influence to business of the petitioner without the injunction5.
The mid-trial injunction and the pre-trial injunction are similar in following features:
(a) both are preliminary measures;
(b) if the injunction is wrongly granted and causes harm to Defendant, Plaintiff should compensate; and
(c) if breaking the order, Defendant may be subjected to criminal liability6.
Differences between the mid-trial injunction and the pre-trial injunction are list as follows:
(a) the pre-trial injunction has a 15-day period after grant of the injunction; if Plaintiff fails to have complaint accepted within such period, the court should lift the measure, while there is no such period in the mid-trial injunction; and
(b) the pre-trial injunction may be granted upon Plaintiff’s request without notifying Defendant beforehand, while usually the mid-trial injunction will be issued with notice to the adverse party.
In this sense, the pre-trial injunction in China corresponds to the Temporary Restraining Order in the U.S., while the mid-trial injunction corresponds to the Preliminary Injunction.
C. Mid-trial evidence preservation.
The purpose and precondition for adopting the mid-trial evidence preservation are similar to that of the pre-trial evidence preservation. To obtain relief by the mid-trail evidence preservation, Plaintiff should submit a request 7 days before the due date set for adducing evidence7. Furthermore, Plaintiff may execute a right of information to obtain from Defendant information regarding making and selling of the alleged product8.
D. Mid-trial property preservation.
The purpose, precondition for adopting the mid-trial property preservation are similar to that of the pre-trial property preservation.
3. Post-trial Remedy.
A. General introduction of the post-trial remedy.
Post-trial remedy may come with the final decision made by the court asking Defendant to bear the liability, which is the permanent measure.
Besides the monetary damage, the post-trial remedy further includes (1) a permanent injunction; (2) capturing and destroying infringing product and related materials; and (3) elimination of ill effect caused by the infringement.
B. Permanent injunction.
The court may adopt permanent injunction when:
(a) Plaintiff claims for relief in the complaint or before closure of the argument stage of the first instance; and
(b) patent infringement is found.
Again, break of the order of permanent injunction may incur criminal punishment as stated above.
In practice, rare circumstances, such as the general public’s interest to be harmed by the permanent injunction prevails over Plaintiff’s interest, may preclude the adoption of the permanent injunction.
C. Capture and destroy infringing product and related materials9.
These are permanent injunction related liabilities. The court may rule to capture the special tools for infringing act and destroy the infringing product.
D. Elimination of ill effect10.
Upon Plaintiff’s request, the court may order Defendant to issue public statement to eliminate the ill effect caused by alleged infringing act.
COUNTERMEASURE DEFENDANT COULD USE TO DEFEAT PLAINTIFF
We have outlined all the remedies by which Plaintiff may disrupt Defendant and provided relevant laws and conditions for adopting the remedies. Below we will discuss in detail the countermeasures Defendant could adopt to defeat Plaintiff.
1. Strategy for Defeating Plaintiff against Pre-trial Injunction.
Where Plaintiff seeks relief by pre-trial injunction; in case hearing, exchange of evidence, or investigation is chaired by the court to determine facts regarding infringement and irreparable harm11; or in case the injunction is granted by the court12 and the reconsideration is filed by Defendant 13 , Defendant may present following counter arguments or initiate separate proceedings to defeat Plaintiff.
A. Defendant’s possible counter arguments.
(a) No literal infringement17.
The alleged product of Defendant lacks essential feature of Plaintiff’s patent.
(b) Prior user right18.
The alleged product of Defendant has already been made, sold, and used before filing date of Plaintiff’s patent.
(c) The product forms part of prior art19.
The alleged product of Defendant forms part of prior art, resulting in non- infringement of making, selling, and using the product.
(d) No occurring or future act can be considered as infringing20.
Defendant has already stopped making and selling the product for a long time, resulting in grant of injunction moot.
(2) No irreparable harm21.
In practice, Defendant may argue from the following perspectives to show no irreparable harm to Plaintiff:
Plaintiff’s filing of the request for pre-trial injunction is delayed unreasonably after Defendant launched the product in the market known to Plaintiff, so the harm is reparable otherwise Plaintiff would file the request promptly.
(b) License history.
Plaintiff has licensed the patent to other licensees, showing the harm could be compensated by the monetary damage.
(c) Non-practicing entity.
Plaintiff did not reduce the patent into practice, so no harm to market share, commercial reputation, etc.
(3) Harm to public22.
(a) Social instability and harm to employee’s interest.
Shutdown of Defendant’s facility will cause harm to a great number of employees and therefore serious problem of social instability.
(b) Irreparable harm to legitimate business.
Injunction will cause irreparable harm to legitimate business of Defendant and its customers.
(4) Invalid of the guarantee provided by Plaintiff.
Defendant may challenge validity of the guarantee provided by Plaintiff to defeat the request for injunction order. Furthermore, although providing counter guarantee would not result in direct dismissal of the injunction ruling23, Defendant may consider
providing guarantee and showing willingness to reach an agreement with Plaintiff regarding alternative for injunction24.
B. Defendant’s possible separate proceedings.
(1) Lawsuit to ascertain non-infringement25.
(2) Request for invalidation of Plaintiff’s patent26.
In case the court maintains and executes the injunction after reconsidering the injunction ruling27, Defendant may request the court to raise level of guarantee Plaintiff posted28; and Defendant may request to decrease the scope of the injunction29.
In case Plaintiff fails to file complaint within 15 days from ruling of injunction30; in case the scope of injunction requested by Plaintiff is overly broad, causing unnecessary
losses of Defendant; or in case the court makes final decision of non-infringement, Defendant may request for compensation from Plaintiff31, including direct losses and indirect losses.
2. Strategy for Defeating Plaintiff against Pre-trial Evidence Preservation.
Where Plaintiff seeks relief by pre-trial evidence preservation, Defendant may argue there is no risk of destroy or loss of evidence32; argue Plaintiff could collect evidence by itself; and request the court to ask for guarantee from Plaintiff to compensate possible property losses of Defendant 33.
3. Strategy for Defeating Plaintiff against Pre-trial Property Preservation.
Where Plaintiff seeks relief by pre-trial property preservation, Defendant may file request for reconsideration34, and may argue non-infringement and non irreparable harm as stated above on defeating pre-trial injunction, and provide counter guarantee to defeat Plaintiff35.
In case Plaintiff filed the petition in error; in case the scope of preservation requested by Plaintiff is overly broad, causing unnecessary losses of Defendant; or in case the court makes final decision of non-infringement, Defendant may request for compensation from Plaintiff36, including direct losses and indirect losses.
4. Strategy for Defeating Plaintiff against Mid-trial Injunction.
Where Plaintiff seeks relief by mid-trial injunction order, in case hearing, exchange of evidence, or investigation is chaired by the court to determine facts regarding infringement and irreparable harm; or in case the injunction is granted by the court and the reconsideration is filed by Defendant, Defendant may argue non-infringement, no irreparable harm, harm to public, and invalid of the guarantee as stated above regarding pre-trial injunction; and file request for invalidation of Plaintiff’s patent.
Similar to the situation in pre-trial injunction, in case the court maintains and executes the injunction after reconsidering the injunction ruling, Defendant may request the court to raise level of guarantee Plaintiff posted; and Defendant may request to decrease the scope of the injunction. In case the scope of injunction requested by Plaintiff is overly broad, causing unnecessary losses of Defendant; or in case the court makes final decision of non-infringement, Defendant may request for compensation from Plaintiff, including direct losses and indirect losses.
5. Strategy for Defeating Plaintiff against Mid-trial Evidence Preservation.
Where Plaintiff seeks relief by mid-trial evidence preservation, Defendant may argue there is no risk of destroy or loss of evidence; argue Plaintiff could collect evidence by itself; and request the court to ask for guarantee from Plaintiff to compensate possible property losses of Defendant.
6. Strategy for Defeating Plaintiff against Mid-trial Property Preservation.
Where Plaintiff seeks relief by mid-trial property preservation, Defendant may file request for reconsideration, and may argue non-infringement and no irreparable harm as stated above. Defendant may also provide counter guarantee to dismiss the measure of property preservation.
In case Plaintiff filed the petition in error; in case the scope of preservation requested by Plaintiff is overly broad, causing unnecessary losses of Defendant; or in case the court makes final decision of non-infringement, Defendant may request for compensation from Plaintiff, including direct losses and indirect losses.
7. Strategy for defeating Plaintiff against Permanent Injunction.
Where plaintiff seeks relief by permanent injunction in the complaint, defendant may prove non-infringement, no irreparable harm, and harm to public as stated above to prevent grant of permanent injunction.
It should be aware that, if the permanent injunction is granted, and Defendant is continuing relevant act, Plaintiff may request for criminal punishment against Defendant as stated above.
8. Strategy for Defeating Plaintiff against Capture and Destroy Infringing Product and related materials.
To defeat Plaintiff’s such claim, Defendant may argue in line with the opinion of the Supreme Court37 and the Jiangsu High Court38 that: (1) the tool is not mainly used for infringement; (2) destroying the product will cause unnecessary waste to the public resource; (3) the harm caused by infringement is not serious; (4) irreparable harm to Defendant and employees; (5) monetary damage available; and (6) laches.
9. Strategy for Defeating Plaintiff against Elimination of Ill Effect.
Against request for elimination of ill effect by Plaintiff, Defendant may argue: (1) there is no harm to Plaintiff’s business reputation; (2) Plaintiff fails to prove specifically what kind of ill effect and the scope of the ill effect; and (3) Defendant will pay the monetary damage, so this is no need for elimination of ill effect, otherwise double recovery to Plaintiff.
Sometimes Plaintiff may claim for Defendant’s apology. However, it has been well agreed academically that apology has no place in patent infringement case, which involves Plaintiff’s property right instead of Plaintiff’s personal right.
From the above, we believe answers to the questions at the beginning of the article are obvious. A pre-trial injunction and a mid-trial injunction will be executed immediately after the ruling is granted by the court. Either filing reconsideration and or providing counter guarantee would not remove the measure of the injunction. However, a permanent injunction granted with the court decision of first instance would not be enforced until an appeal has concluded. Notably, Defendant may be subjected to criminal liability if breaking the order of injunction.
Usually, the injunction will be granted upon request if infringement is found, no matter whether the adverse party has legitimate businesses or is just a counterfeiter. However, Defendant with legitimate businesses may raise counterarguments as elaborated above. Moreover, the scope and measure of injunction will be limited only to the purpose of stopping infringement. The legitimate businesses of Defendant are not supposed to be harmed; otherwise, Defendant may obtain compensation.