At a glance: patent enforcement proceedings in China

Patent enforcement proceedings

What legal or administrative proceedings are available for enforcing patent rights against an infringer? Are there specialised courts in which a patent infringement lawsuit can or must be brought?

A patentee can enforce patent rights against an infringer by filing a patent infringement lawsuit with the civil court or file a patent law violation accusation to the local offices of the China National Intellectual Property Administration (CNIPA). CNIPA offices will decide whether there is an infringement, and if an infringement is found, the local CNIPA office can ask the infringer to stop the infringement, but it has no jurisdiction over damages for patent infringement.

There are specialised IP courts in Beijing, Shanghai and Guangzhou, in which a patent infringement lawsuit in each of these three jurisdictions must be brought to the corresponding IP court. There are also some specialised panels within local intermediate courts in which a patent infringement lawsuit must be brought. Where there is such a specialised court or panel, patent litigation within their jurisdictions (assigned by the Supreme Court) must be brought to these specialised courts or panels. Where there is no specialised court, the patent infringement lawsuit must be brought to the intermediate court of the city where the provincial government is located or the intermediate court that is designated by the Supreme Court. According to latest new rule from the Supreme Court, all appellate case of patent litigation shall be directly appealed to the Supreme Court.

Just for clarification, the patent infringement cases we discuss in this chapter do not include standard essential patents litigations, for which there are some special rules.

What is the format of a patent infringement trial?

In a patent lawsuit, all the parties must follow the guidance of the court. Each party may produce evidence and affidavits to the court, and the judge will make all decisions. The court usually focuses on the determination of infringement and damages. Statutorily allowed types of evidence are:

• statements of the parties;
• documentary evidence;
• physical evidence;
• videos and voice records;
• electronic data;
• witness testimony;
• the opinion of judicial appraisal; and
• investigation notes.

To that end, judicial appraisal opinion that compares technologies and live testimony made by technical experts are admissible and very persuasive to the court.

Cross-examination of witnesses is permitted, and without cross-examination the testimony of a witness will not be taken into consideration by the court. Experts are used in many patent cases. Each party can hire experts to explain specific technical matters. Judicial appraisal is also widely used by the court to assist the judge in determining the technical issues. All disputed issues will be decided by a judge, and there is no jury system in China. In some courts, technical investigation officers will assist the judge in making decisions related to technology.

The Civil Procedure Law provides that the first instance shall be finished within six months, but time spent on judicial appraisal will not be calculated in this time limit. Depending on the content and complexity of the case, it usually takes one-and-a-half to two years for a patent lawsuit to finish the first instance and obtain judgment.

What are the burdens of proof for establishing infringement, invalidity and unenforceability of a patent?

The patentee bears the burdens of proof for establishing each constitutional element of infringement, which means the patentee must prove that:

• its patent is valid;
• the accused product or process falls within the protection scope of the patent claims; and
• the accused infringer conducts at least one of the activities of manufacture, importing, offer for sale, sales or use of the accused product or process.

For a process patent to manufacture a new product, the accused producer should bear the burden of proof to produce evidence to prove the difference between the accused process and the patented process.

Anyone including the accused infringer can challenge the validity of a patent before the CNIPA. The party that challenges the validity of the patent has the burden of proving the patent is invalid by showing the patent’s lack of novelty or creativity, among other invalidation grounds.

There is no unenforceability issue of a patent in China, and all patents are enforceable unless the invalidity is proved.

Who may sue for patent infringement? Under what conditions can an accused infringer bring a lawsuit to obtain a judicial ruling or declaration on the accusation?

The patentee or the exclusive licensee (or both) may individually or jointly sue for patent infringement against an infringer. A non-exclusive licensee may also sue for patent infringement with special authorisation by the patentee; the non-exclusive licensee may join the patent infringement lawsuit initiated by patentee as co-plaintiff.

Chinese laws do not provide that the accused infringer may bring a lawsuit on the accusation, and in practice, the Supreme Court sets the rules that the accused infringer, under certain prerequisites, may bring a lawsuit to obtain a judicial ruling to declare and confirm that the accused products will not infringe on the patentee’s right. The prerequisites to initiate a non-infringement declaration are:

• that the patentee has sent a warning letter to the accused infringer or the distributors of the accused products;
• that the accused infringer urges the patentee to enforce the patent rights with proper jurisdiction; and
• that the patentee does not file a patent infringement lawsuit nor withdraws the warning letter within a reasonable period (one month after accused infringer received the warning or two months after the patentee sent out the notice).

To what extent can someone be liable for inducing or contributing to patent infringement? Can multiple parties be jointly liable for infringement if each practises only some of the elements of a patent claim, but together they practise all the elements?

The Patent Law does not provide for indirect infringement of a patent, and in practice, the court may find indirect infringement under certain conditions. There are three typical scenarios in which a party will be jointly liable for patent infringement:

• the party knows the product or process is protected by patents but still actively induces another party to implement such patented products or processes;
• the party knows that the products at issue are materials, equipment, parts or intermediates specially used to implement a patent, but still provides such products to another party to implement the patent; and
• the party conspires with other parties in patent infringement, and each party practises only some of the elements (or steps) of a patent claim, but together they practise all the elements (or steps).

In general, the inducing or assisting party will be jointly liable for patent infringement when there is actual patent infringement by the induced or assisted party. However, if the induced or assisted party is not liable for patent infringement owing to special defences, the inducing or assisting party may still be liable for patent infringement.

Can multiple parties be joined as defendants in the same lawsuit? If so, what are the requirements? Must all of the defendants be accused of infringing all of the same patents?

Multiple parties can be joined as defendants in the same lawsuit. The requirements to join the defendants are that the defendants are essential to the lawsuit for the court to determine the key issues of the case and have a connection to the infringement on the same patent. The defendants that are making, using or selling the same products can be joined as defendants in the same lawsuit. Meanwhile, if the patentee only sues the seller of the accused product, the manufacturer may request to join the lawsuit so as to provide effective defence arguments. However, if the plaintiff opposes the decision to join the multiple defendants, the court may decide to join the related party as a third party in the lawsuit.

In China, courts will hear each patent as a separate case, so all the defendants must be accused of infringing the same patent.

To what extent can activities that take place outside the jurisdiction support a charge of patent infringement?

Owing to the territoriality of patent rights, activities that take place outside of China will not be subject to the jurisdiction of a Chinese court. To violate China’s patent law, one of three conducts must happen in the territory of China: importation, offer for sale, use or sales. Therefore, a patentee has the right to prevent, for example, the import of a product protected by a Chinese product patent or process patent, even if such product is manufactured outside the jurisdiction of China.

To what extent can ‘equivalents’ of the claimed subject matter be shown to infringe?

The Patent Law does not have provisions on the infringement by equivalents. The Supreme Court of China has issued an interpretation on the infringement by equivalents. According to this interpretation by the Supreme Court, an equivalent will be found if the technical feature in the accused product or process uses similar means, realises similar functions, achieves similar effects as the technical feature in the claim, and an ordinary person in the art may conceive such feature without creative work when the alleged infringement occurs.

What mechanisms are available for obtaining evidence from an opponent, from third parties or from outside the country for proving infringement, damages or invalidity?

There is no discovery of evidence process in the Chinese judicial system. For obtaining evidence from an opponent, from third parties or from governmental authorities, the party may file a motion to request the court to collect evidence from the opponent, third parties or governmental authorities.

In some courts, such as Beijing courts, the lawyer may also request the court to issue an Evidence Investigation Order so that the lawyer may collect the relevant evidence from the above parties. Recently, Beijing courts have started to explore the possibility of establishing an evidence discovery rule. For evidence outside the country, the party with the burden of proof should obtain such evidence from the foreign country. The court may also request a foreign court to assist in the collection of evidence based on a reciprocal principle or international treaty in which China has participated.

What is the typical timetable for a patent infringement lawsuit in the trial and appellate courts?

The court will arrange a timetable for a patent infringement lawsuit as follows:

• both parties to produce evidence, witnesses and experts, which may take several months for multiple rounds;
• cross-examination, which may take one to two months;
• judicial appraisal and cross-examination of the judicial appraisal report, which may take three to five months;
• court arguments, which may take one to two months; and
• the court issues the judgment of first instance.

It will usually take 18 to 24 months for a patent infringement lawsuit in trial proceedings. For appellate proceedings, the process is quite similar to the first instance proceedings, but usually there will be no further judicial appraisal process. Appellate proceedings usually take about 12 months.

What is the typical range of costs of a patent infringement lawsuit before trial, during trial and for an appeal? Are contingency fees permitted?

For a patent infringement lawsuit, the typical costs include three parts:

• court fees to be charged by the court, which are calculated according to a gradient table, but are generally 0.2 per cent of the targeted amount of the subject matter;
• attorney fees, which will vary for different law firms, ranging from tens of thousands to millions of US dollars, depending on the complexity of the case; and
• investigation costs, judicial appraisal costs and other relevant costs.

Contingency fees are permitted, but it is not a common practice for patent lawsuits in China.

What avenues of appeal are available following an adverse decision in a patent infringement lawsuit? Is new evidence allowed at the appellate stage?

Following an adverse decision in a patent infringement lawsuit, a party may appeal to a higher-level court of the first instance court; the appellate court will be clarified in the judgment, usually at the end of the judgment. All appellate patent infringement cases (not including design patent cases) are subject to the jurisdiction of the Intellectual Property Division of the Supreme Court.

If new evidence was found after the first instance hearing, such new evidence is allowed at the appellate stage in China.

If the evidence existed and can be found and submitted by the appellant during the first instance proceedings, but the appellant did not submit the evidence on purpose or due to gross negligence, the court may refuse to consider such evidence in the appellate stage; for evidence that can prove fundamental facts of the case, the court may still allow such evidence but may impose certain penalties, such as a fine, on the appellant..

To what extent can enforcement of a patent expose the patent owner to liability for a competition violation, unfair competition, or a business-related tort?

If the patent owner enforces a patent in a wilful way, the patent owner will be exposed to liability for competition violation, unfair competition or a business-related tort, depending on the specific activities of the patent owner. For example, if the patent owner enforces the patent against other competitors knowing that the patent lacks novelty or inventive steps against prior art, the patent owner will be exposed to liability for a business-related tort.

In addition, the Anti-Trust Law provides that abuse of IP rights may possibly constitute monopolistic conduct. The State Administration for Market Regulation (SAMR), formerly the State Administration of Industry and Commerce, specifically promulgated ‘Rules Prohibiting Abuse of IP Rights to Exclude or Restrict Competition’, which provide that a market operator having a dominant position shall not in exercising its patent right exclude or restrict competition by restricting transactions, tying, adding unreasonable transactional conditions, discriminating in treatment or conduct the joint operation of patent rights to exclude or restrict competition. For violation of the above rules, the SAMR has the power to order a halt to the violation activity, confiscate illegal gains and impose a fine equal to 1 per cent to 10 per cent of the violator’s annual sales income of the previous year. The state may also issue further new guidance on anti-monopoly aspects of IP rights.

Further, the conduct of filing a lawsuit for patent infringement can also constitute an abuse if:

• the plaintiff knew that its patent was invalid, but still wilfully filed the lawsuit; or
• the plaintiff obtained preliminary injunction in the lawsuit, but the court eventually denied the accusation of patent infringement (the plaintiff should then pay the defendant damages caused by the injunction).

To what extent are alternative dispute resolution techniques available to resolve patent disputes?

For patent validity disputes, alternative dispute resolution measures such as arbitration, are not allowed; the parties can only resolve the validity disputes before the CNIPA. For patent disputes regarding infringement, ownership or damages, there is still different views whether the parties may submit disputes for arbitration; the majority opinion is that the parties can reach an arbitral agreement to resolve disputes through arbitration. For patent licence disputes, the parties may choose arbitration in the agreement to resolve disputes.

Law stated date

Give the date on which the information above is accurate.

13 April 2021.