Beijing High Court issues a final judgment in March 2018 on a high profile SEP infringement case IWNCOMM v. Sony (（2017）Beijing Civil Final No.454). The judgment of first instance is made by Beijing IP Court in March 2017, attracting extensive attention in the whole IP field. Some legal issues in this case are rather controversial and pioneering, with few precedent cases. Although this final judgment affirms injunction and damages determined by the first instance judgment, opinions of Beijing High Court on some legal issues are different from those of Beijing IP Court.
What acts constitute Infringement on a use method patent
One of legal issues reversed by Beijing High Court relates to what acts of Sony should be basis for infringement on IWNCOMM's WAPI use method patent. Beijing IP Court finds that all of acts of designing and developing, manufacturing and factory inspecting the products are using this patented method without authorization. As to designing and developing acts, Sony directly confirms that this patented method has been used. While regarding the manufacturing and factory inspecting acts, Sony denies to have used this patented method. Beijing IP Court relies on evidence "Quality Management System Requirements" submitted by IWNCOMM, an official standard published by Chinese government, to infer that this "Quality Management System Requirements must be followed during manufacturing and factory inspecting phases. Sony does not submit counter evidence against this inference. In this situation, the patented method is decided to be used and infringed by Beijing IP Court, with the belief that such inference is reasonable and logical.
Based on Sony's self-admission, Beijing High Court upholds that designing and developing acts of Sony are using the patented method, but the High Court does not agree with the inference of Beijing IP Court on manufacturing and factory inspecting acts. Beijing High Court believes that the implementation of the patented WAPI use method is rather complicated and much time is needed to download and install software in cell phones to implement the method, therefore, during factory inspecting phase, the testing of WAPI function on every cell phone is actually not efficient for industrial production lines. Moreover, as Sony argues, such Quality Management System Requirements are only recommendatory but not mandatory, and even if they are adopted, modifications may be made for practical needs. In view of above considerations, Beijing High Court finds that the inference of Beijing IP Court is not appropriate.
This divergence shows that Beijing IP Court tends to be nice to patentees. Burden of proof of patentee on some facts in this case is even replaced by "reasonable inference" of this Court. However, Beijing High Court is somewhat conservative. From facts finding perspective, the Beijing High Court considers more actual circumstances during factory inspecting phase, and from legal perspective, the Court demands solid evidence to support alleged infringing acts.
Maybe it is hard to evaluate which position is better from the view of advancing science & technological development currently, but just from the view of balance of interests, the opinion of Beijing High Court seems to be more convincing. For the patentee, this finding does not influence the enforcement of the patent right since the patent infringement based on designing and developing acts can still be constituted and even if there are other more infringing acts, such infringing acts would generally not bring more damages. For potential implementers, this would also be helpful to clarify what types of acts could be found to infringe a use method patent, which makes them aware of the best timing or phase to start to design around. Especially for the use method patent in this case, it is rather clear that, at the very beginning, in the designing and developing phase, much attention should be paid by implementers in consideration of patent infringement possibilities.
Another legal issue also reversed by Beijing High Court is on patent contributory infringement. There are different standings between Beijing High Court and Beijing IP Court regarding this issue. Different from the above direct infringement on "designing and developing acts," acts involved in the contributory infringement are "using by end users," which raises at least two legal challenges.
First, such using acts by end users are actually legally not patent infringement since the purpose of such using acts is not for "production and business." Such "production and business" purpose is regulated in China Patent Law as basis of infringement, which seems to be somewhat not adaptive to social and legal developments. In this case, both courts are on the same standing to move forward, and Beijing High Court even clearly points out that if large quantities of use method patents on communications and software could not be enforced efficiently or sufficiently because end users' using acts are not considered as patent infringement due to lack of "production and business" purpose, it would discourage technological innovation and adversely affect patentees' interests.
The second challenge is about determination on "contributory infringement," which is more controversial. Since implementation of the use method patent in this case necessarily requires three units, access point (AP), authentication server (AS) and mobile terminal (MT), to be cooperative with each other, no single party including end users is able to carry out the whole use method solution independently. Sony only provides MT, while AP and AS are from other companies. The question is that to constitute "contributory infringement," whether it is mandatory for the Patentee IWNCOMM to prove that there are intentions shared by all parties for cooperative running of AP and AS with MT.
The answer of Beijing IP Court is "no." Beijing IP Court believes that fact of "use of infringing products in a preset manner covers all elements defined in the use method patent" is sufficient to decide that Sony constitutes patent contributory infringement. This shows that Beijing IP Court is again favorable to the Patentee. Burden of proof on Patentee is greatly reduced since it seems only necessary to prove "a preset manner" so that patent infringement may be established for patent claims involving multiple parties.
On the contrary, the answer of Beijing High Court is "yes." Beijing High Court holds that in this case there are no evidence presented to prove that there are directing or controlling intentions from single party imposed on other parties to implement the use method solution, and no evidence presented to prove that there are multiple parties coordinating to implement the patented solution either. In this situation, it does not comply with nature of "contributory infringement" to find only Sony to be one MT provider as "contributory." Beijing High Court reasons that this enlarges the protection on patentee and inappropriately harms public interests.
Inspirations on drafting software claims
Compared with Beijing IP Court, Beijing High Court is holding back to conservatively balance the burden of proof between the patentee and the accused implementers. This sends a signal to those inventors in communication and software field that it is preferable for one claim to involve only one operating party, which helps the proof of infringement. Beijing High Court believes that it is the drafting skills that need to be enhanced to avoid patent claims to be drafted as involving multiple parties because it would be rather difficult to enforce such patents at infringement aspects. It is also advantageous to establish a whole systematic framework in a patent to include such as a device claim involving one side, a system claim involving several sides, a method claim for whole technical concept and so on. Each claim has its own function, some for strengthening patent validity, some for easy detection of patent infringement and some for patent licensing.
There are other interesting legal issues in this final judgment worthy of notice, such as exhaustion of patent right on method claims, FRAND liabilities, and determination on damages. Both courts generally share almost the similar opinions on these issues. Some of the IP practitioners have the question: In determining the damages or license royalties, should the actual range of commercial use be considered ?Although this SEP patent technology is mandatory standard in China, it is a "sleeping" technology without actual end users? As a landmark case in SEP infringement, the IP society is curious to see whether the Supreme Court would retry the case to make ultimate findings on controversial legal issues.