Conclusion of Judgment

If the allegedly infringing products were made, sold or imported during the provisional protection period from the publication date to the allowance date of a patent application, they can be continually used, offered for sale and sold after the patent is allowed even without the patentee’s agreement, and such exploitation activities are not deemed as infringing upon the patent. However, the patentee is entitled to request the exploiter to pay reasonable fees for the exploitation during the provisional protection period.

Case Brief: Siruiman Co. v. Kengzi Co. et al. for Invention Patent Infringement Disputes

According to the Provisions on Case Guidance issued on November 26, 2010, the Supreme Court regularly selects representative and instructive precedents from a great number of effective judgments in order to summarize trial experience, unify application of law, enhance quality of trials and maintain judicial justice. Since the first set of guiding precedents were published on November 20, 2011, the Supreme Court has issued twenty two precedents in 5 sets, including only one patent precedent as discussed below.

History of the Case

Siruiman Fine Chemical Co., Ltd. (hereinafter “Siruiman”) filed a patent application about a device for making high purity chlorine dioxide before the SIPO on Jan. 19, 2006, which was published on July 19, 2006 and granted a patent right on January 21, 2009 with a patent number ZL200610033211.0 (the ‘211 patent). On October 20, 2008, Shenzhen Kengzi Running Water Co., Ltd. (“Kengzi”) reached a purchase agreement with Shengzhen Kangtailan Water Treatment Device Co., Ltd. (“Kangtailan”) that Kengzi would purchase a set of chlorine dioxide generator at the price of RMB 260 thousand, and Kangtailan would be in charge of technical support and post sale services including installation, experiment, repair and maintenance of the device. 

On March 16, 2009, Siruiman brought the patent infringement suit before Shenzhen Intermediate Court, alleging that the chlorine dioxide generator made by Kangtailan and sold to Kengzi fell into the scope of the ‘211 patent, and requesting the two defendants stop infringement activities and afford losses of RMB 300 thousand and litigation costs. In the complaint, however, Siruiman did not request the defendants pay for use of the patent during its provisional protection period. On January 6, 2010, Shenzhen Court made a first instance decision, deciding that the defendants mutually collaborated to use the accused generator without Siruiman’s licensing and infringed upon the ‘211 patent. In the decision, Kangtailan was ordered an injunction and to compensate Siruiman’s losses for RMB 80 thousand jointly with Kengzi.

Both defendants appealed to Guangdong High Court, which dismissed the appeal and upheld the lower court’s decision. Opined by the High Court, the accused infringing product was covered by claim 1 of the ‘211 patent, and that Kengzi should have had knowledge on the technique and device in question because it was located in the same region and did the same business as Siruiman. after being sued, Kengzi should have had realized that the device in question infringed upon the ‘211 patent, but it had not stopped using the device, therefore its arguments that the device was purchased via a legitimate supply channel, under an ordinary purchase agreement and at a reasonable price could not stand.

Being dissatisfied with the second instance decision, Kengzi requested the Supreme Court to review the suit. On December 20, 2011, the Supreme Court made a judgment dismissing the first and second instance decisions as well as the complaint of Siruiman.

Judicial Reasons of the Supreme Court

Since Siruiman did not request the two defendants pay reasonable fees of using the ‘211 patent during the provisional protection period, the Supreme Court focused the disputes of the suit on two points:

  1. Whether Kengzi infringed upon the ‘211 patent by using the accused infringing product, which was supplied by Kangtailan during the provisional protection period, after the ‘211 patent was granted; and
  2. Whether Kangtailan infringed upon the ‘211 patent by supporting Kengzi’s use of the accused infringing product with post sale services after the ‘211 patent was granted.

According to the time the accused infringing activities occurred, the Supreme Court applied the Patent Law (2000) in its judgment. As stated in Articles 11.1, 13 and 62, a patent applicant may request reasonable royalties in the event that a company or an individual puts his invention into practice during the provisional protection period from the publication date of the application to its allowance date, but he is not entitled any right to prevent others from exploiting the application during the period. Therefore,any exploitation to the invention during the provisional protection period is not forbidden by the Patent Law. Following this conclusion, the Supreme Court considered that the allegedly infringing product made, sold or imported during the provisional protection period of the ‘211 patent, could be subsequently used, offered for sale or sold after the ‘211 patent was allowed even without permission of the patentee. In another words, the patentee had no rights to prevent others from subsequent use, offering for sale or sale of the allegedly infringing product, which was made, sold or imported during the provisional protection period. Nevertheless, the patentee could still request the royalties of reasonable amount that should be discretionally decided by the court. Moreover,If the seller or the user could prove that the accused products were supplied via a legitimate source, he would not be liable for any reasonable fees even though the products were made, sold or imported during the provisional protection period. 

It meets the legislative purpose of the Patent Law that the Supreme Court did not consider any subsequent use, offering for sale and sale of the products, which were exploited during the provisional protection period after the patent is granted, as infringing activities. On one hand, since the patentee exchanges the exclusive protection by disclosing his invention, and is entitled to enforce his patent rights only after the invention is patented, any exploitation of the invention in question before the publication date of the patent application does not infringe upon the later granted patent, thus the subsequent exploitation shall also be permitted. During the period between the publication date and the allowance date, the patent application is protected with limited rights, and exploitation activities of the invention are not prohibited by the Patent Law. For the same reason, products obtained by exploiting the invention during the period shall also be permitted to be kept on exploiting after the period,and the applicant for the application has a right to request the exploiter pay reasonable fees during the period after he is granted the patent. Otherwise, the Patent Law would protect non-disclosed or non-granted technologies, disobeying its legislative principle.

On the other hand, the prior user rights of the Patent Law allow a prior user to continue to make identical products or use identical methods within his original scope, but does not state that the subsequent exploitation of the products such obtained would be allowed or not. However, the subsequent exploitation shall not be deemed as infringing just because the Patent Law does not have a clarified statement in this regard, or else the prior user rights would make no sense.

In this case, the allegedly infringing product sold by Kangtailan was made during the provisional protection period of the ‘211 patent, and the Patent Law does not prohibit the making activities. Under this circumstance, Kengzi’s subsequent use of the products shall also be allowed, therefore Kengzi does not infringe upon the ‘211 patent. For the same reason, the post sale services provided by Kangtailan for Kengzi does not infringe upon the ‘211 patent.

See2011Min Ti Zi Judgment No. 259.

Articles of the Patent Law (2000) cited in the Judgment

11. 1, After the patent right is granted for an invention or a utility model, unless otherwise provided for in this Law, no unit or individual may exploit the patent without permission of the patentee, i.e., it or he may not, for production or business purposes, manufacture, use, offer to sell, sell, or import the patented products, use the patented method, or use, offer to sell, sell or import the products that are developed directly through the use of the patented method.

13. After the application for an invention patent is published, the applicant may require the unit or individual that exploits the said patent to pay an appropriate amount of royalties.

62. The period of limitation for action against patent right infringement shall be two years, commencing from the date when the patentee or interested party knows or should have known of the infringement.

If an appropriate royalty is not paid for using an invention during the period from the publication of the invention patent application to the grant of the patent right, the period of limitation for taking legal action by the patentee for requesting payment of royalties shall be two years, commencing from the date when the patentee knows or should have known of the use of that patent by another person. However, the period of limitation for action shall commence from the date when the patent right is granted, if the patentee knows or should have known of the use before the patent right is granted.