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Lessons Learned
It has been an interesting year for Chinese intellectual property jurisprudence, as Ude Lu and Eddy Kao of Purplevine IP Group explain.
On February 28, 2022, the Intellectual Property Court of the Supreme People’s Court (IPC) of the People’s Republic of China released 48 selected representative cases from a pool of 3,460 cases concluded in 2021. We analyze three of the most interesting cases and provide key takeaways.
Case 1 – Scope of Patent Protection and Doctrine of Equivalents
Lessons Learned
For patentees to argue infringement based on the doctrine of equivalents, it is essential to disclose all potentially applicable fields for the technical solutions provided by the invention in the specification of the patent.
This requires patent owners to carefully strategize the drafting of patent applications with potential litigation in mind. The Court explained the reasons why the specification of the patent-in-suit does not warrant the application of the doctrine of equivalents against defendants.
Background
Company C, the patentee, accused Company A and B of patent infringement, and the patent-in-suit involves the technology of automatic hedge trimmers. Company A claimed it purchased only the blades of the patent in question from Company B and the latter acknowledged the transaction. However, Company B argued no infringement on its side because it was Company A that assembled the blades with other parts and resold the finished products – a behavior that would constitute infringement. Company C obtained a judgment from the district court in its favor by applying the doctrine of equivalents.
On appeal to the IPC, both Company A and B asserted the blades in question can only be used in gasoline-powered hedge trimmers (the patent-in-suit is about electrically-driven hedge trimmers); therefore, the technology was substantially different from the patent-in-suit.
Outcome
The IPC overruled the district court judgment and explained the adoption of the doctrine of equivalents in patent litigation.
There are certain limits to applying the doctrine of equivalents:
- A product is only equivalent if it performs the same function in the same way to achieve the same result as the patent-in-suit.
- If the patentee knows there is another technical solution which relates to the invention when drafting the patent application but does not include the technical solution in the specification of the patent application, the doctrine of equivalents cannot be used in infringement litigation as a way to expand the protection scope.
- The patentee’s intention to include a certain technical solution for an invention when drafting the patent application is determined by how a person having ordinary skill in the art would interpret the patent application after studying all the documents submitted by the patentee.
In this case, the patent involved has a subject title: “electric hedge trimmer.” The subject title has confined the technology solution it applied: “electric.” In the introduction of the specification, there is a clear disclosure about its characteristic: an “electric machine.” In the specification, the patentee argues that environmentally friendly is a rather new concept and the patent involved is entirely “electrically driven,” not gasoline powered. A person with ordinary skill in the art would determine the patentee had no intention to include a gasoline-powered hedge trimmer within its protection scope.
To conclude, the doctrine of equivalents was wrongly applied by the district court, and the IPC has provided guidance on how the doctrine of equivalents should be applied.
Case No.:(2021) Supreme Court Intellectual Civil Final No. 192
“For patentees to argue infringement based on the doctrine of equivalents, it is essential to disclose all potentially applicable fields for the technical solutions provided by the invention in the specification of the patent.”
Ude Lu (pictured) and Eddy Kao, Purplevine IP Group
Case 2 – Liabilities and Damages Caused by Offer for Sale
Lessons Learned
Prior to this case, Chinese courts generally did not take the position that “offer for sale” actually causes damage to patentees, and they would not order compensatory damages. However, the IPC adopted a different analysis in this case. The Court started to consider the negative impacts of “offer for sale,” intending to strengthen IP policy in China. This is no doubt good news for patentees. Infringer will be stopped at the offer for sale stage, and patentee will be awarded compensatory damages.
For defendants, litigation strategy should align with the new developments. During litigation, defendants must put forward a legitimate defense to mitigate the risk of paying a large sum of compensatory damages.
Background
Company A, the accused infringer, produced vertical secondary construction column pumps. It displayed the products on its Alibaba online store and website, which amounted to an “offer for sale.”
In the district court, Company A had no objection to the judgment that its products fell within the protected scope of the patent held by Company B, the patentee. The court ordered Company A to terminate its sales of the product and pay a compensatory damage of RMB30,000 (US $4,709) to Company B.
Company A then appealed, arguing it had removed the products from its Alibaba online store and website before receiving the summons from the district court. Company A also claimed no financial gains for itself, nor economic losses to Company B. Therefore, it said, paying compensatory damages to Company B lacked a legal basis.
Outcome
The IPC upheld the district court’s judgment and provided analysis of the negative impacts of the offer for sale.
Article 11 of China’s Patent Law prohibits the offer for sale of infringing products. Also, Article 65 states that if the losses of the patentee, benefits of the infringer, or royalties of the patent are all hard to determine, the People’s Court may, based on factors such as the type of patent right, nature of the infringement, and seriousness of the case, determine the amount of compensation ranging from RMB10,000 to RMB 1 million (US $1,569 to US $156,988).
Although Company B could not provide proof of its loss due to Company A’s offer for sale, the Court explained that:
- The civil liability of an offer for sale does not rely on whether actual damage occurs.
- There are foreseeable impacts of the offer for sale, such as
a) The prices of the infringing products are usually lower than that of the patented products, and this adversely affects the reasonable pricing of the patented products; or
b) Consumers will turn away from the patented products and purchase from the infringer instead, causing delays or even reduction in sales of the patented products.
3. The purpose of ordering an infringer to compensate the patentee in the case of an offer for sale is to promote innovation and protect patent rights.
4. The difficulty of accurately proving the specific damage caused by the offer for sale should not become an excuse; otherwise, it would ruin the legislative purpose of the patent laws. This is when Article 65 should be properly considered by the court in determining the loss of patentee.
In conclusion, the compensatory damages for offer for sale ordered by the district court is reasonable and legitimate.
Case No.: (2020) Supreme Court Intellectual Civil Final No. 1658
“The standard of proof for the patentee should be lowered when it comes to patents related to the Internet.” Ude Lu and Eddy Kao (pictured), Purplevine IP Group
Case 3 – Burden of Proof and Jurisdiction on Internet-Related Patents
Lessons Learned
The IPC lowered the burden of proof for patentees with respect to Internet or programming-related patents. Also, Chinese courts recognise extra territorial jurisdiction regarding the global Internet. Companies are advised to conduct a global search of prior art to avoid potential disputes.
Background
Company A, the patentee, created an international logistics tracking system (a website) and alleged Company B had infringed its patent by creating a similar system with a similar set of programming and steps. The district court ruled in favour of Company A and ordered Company B to stop the infringement and pay damages of RMB 2 million (US $313,981) due to the economic loss suffered by Company A.
Company B appealed and argued its tracking system has several distinctive features compared to what was described in the claims of the asserted patent. In addition, Company B has its server outside of mainland China, and for this reason, it said, it did not practice the patent-in-suit in China.
Outcome
The IPC upheld the judgment of the district court and commented on two key disputed points of Internet-related patents:
1. Standard of proof should be lowered for patentee In practice, the patentee has limited access to the source code of the website in the backend to fully and accurately restore the dynamic implementation process of the alleged infringing website. Therefore, it is unfair to place an excessive burden of proof on the patentee beyond the technical reality. On the contrary, the alleged infringer has full knowledge of the specific steps and technical details of its own website as well as a thorough understanding of its system. Such unbalanced information warrants a shift of the burden of proof in the litigation proceedings.
Therefore, as long as the company with the Internet-related / online programs patent has obtained preliminary evidence in its best reasonable efforts which can prove the technical features of the alleged infringing website are consistent with or likely equivalent to the claims of the asserted patent, then the patentee has passed the complaint threshold.
2. The fact that the server location is outside the jurisdiction where the court is located does not overturn the judgment that the accused infringer has infringed the asserted patent, because:
a) The location of the server of the accused infringing website is not the only factor in judging where the infringing act was carried out.
b) The Internet coverage features data transmission and interaction which are beyond the boundaries of countries. If the court decided the location of an infringing act based only on the location of the website server, it would significantly limit the scope of protection of such a patent.
c) There is also evidence to infer that the infringing act took place in mainland China:
i. The registered address of the accused infringer is in Shenzhen, China.
ii. The majority users of the accused infringing website are from mainland China.
iii. A considerable part of the logistics information comes from enterprises located in mainland China. Thus, one can infer the relevant data transmission and interaction occurred in mainland China.
To conclude, the standard of proof for the patentee should be lowered when it comes to patents related to the Internet. Also, the Court has a far-reaching jurisdiction on Internet-related patents.
Case No.: (2020) Supreme Court Intellectual Civil Final No. 746
Ude Lu is a Chief IP Counsel at Purplevine IP Group based in Washington D.C.. He can be contacted at ude.lu@purplevineip.com
Eddy Kao is a senior manager in the patent prosecution department at Purplevine IP Group based in Taipei. He can be contacted at eddy.kao@purplevineip.com
Video courtesy of Envato Elements / twinsterphoto
Sunday, May 1, 2022
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