Patent case law in China and its
impact on protection of innovation
EPIP Maastricht, 10 Dec 2010
Thomas Pattloch
Intellectual Property Officer
Delegation of the European Union to China
Dr. Thomas Pattloch, LL.M.Eur.
Civil IP court case numbers
(per year)
T8. Statistics of IP Civil Cases in China 2004-2009
Number
35,000
30,509
30,000
23,518
25,000
20,000
17,395
13,393
15,000
10,000
IP-related case concluded
in first-instance.
14,056
8,332
Foreign-related IP case
concluded in firstinstance.
5,000
151
268
353
668
1,139
1,361
2004
2005
2006
2007
2008
2009
0
Year
2
Dr. Thomas Pattloch, LL.M.Eur.
Patent court enforcement
(per year)
T4. Statistics of Judicial Enforcement of Patent in China
2004-2008
Number
4,500
4,041
4,074
4,000
3,500
Administrative cases
accepted in first-instance
3,196
2,947
3,000
2,549
Civil cases accepted in firstinstance
2,500
2,000
1,500
1,000
500
0
377
335
2004
2005
458
2006
599
578
2007
2008
Dr. Thomas Pattloch, LL.M.Eur.
Year
3
Systemic problems in
legal system
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High formality requirements for foreign litigants (“Notarization and
Legalization”)
Difficulty to obtain evidence
Difficulty to secure experts and review expert opinions in court
Low accountability of officials neglecting their duties (misuse of “Li An”
system)
No mandatory black-listing of companies caught on trade fairs
Few withdrawal of business licenses
No deterrent sanctions (fines, prison terms)
Negligible sanctions in case of non-compliance with judicial and
administrative orders
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Dr. Thomas Pattloch, LL.M.Eur.
Patents
5
Dr. Thomas Pattloch, LL.M.Eur.
Revised Patent Law
•
•
In effect since 1st October 2009, revised Implementing Rules and Patent
Examination Guidelines in effect since February 1, 2010
Main changes:
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–
–
–
–
–
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Introduction of absolute novelty standard (patent quality)
Stronger protection of genetic resources
Enhanced rules on compulsory licensing
Chinese “foreign filing license” system established: Confidentiality examination
Introduction of Bolar exemption
Introduction of international exhaustion doctrine
Introduction of prior art defence
Strengthening of evidence preservation and interim injunctions
Slightly enhanced legal basis for administrative enforcement of patents
Higher statutory damages
New requirements on employee’s inventions
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Dr. Thomas Pattloch, LL.M.Eur.
Patent enforcement in
China
• Success rate of plaintiffs in litigation: estimated to be around 70%
• Conflicting data on availability of interim injunctions
• High risk of invalidation for foreign owned patents in key sectors,
strict application of standards under the revised Patent Law
• Communication by courts and outside influence: Rule of law and the
role of the Chinese Communist Party
• Damage awards low (around 15,000 € on average), usually based
on statutory damages (estimated more than 95% of all cases)
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Dr. Thomas Pattloch, LL.M.Eur.
Judicial Interpretation
• Interpretation of the Supreme People’s Court on Several Issues
Concerning Adjudication of Patent Infringement Dispute Cases, Dec.
21, 2009
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–
–
–
–
–
–
–
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File history estoppel adopted
Application serves as a dictionary for claims
Acknowledgement of doctrine of equivalence
All elements doctrine adopted
Normal consumer standard to determine design infringement
Prior art defence broadly defined
Prior use defence not applicable if technology obtained illegally
Standards for damage calculation
Warning letter and non-infringement declaratory action
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Dr. Thomas Pattloch, LL.M.Eur.
Patent invalidation and
enforcement
• Two track system (“German model”)
• No mandatory suspension of enforcement procedure during
invalidation
• Exemptions and defences:
– Prior art defence introduced, Article 62 Patent Law. Uncertainty about its
scope (likely to apply also to literal infringement)
– Bolar exemption Article 69(5) Patent Law: To be interpreted broadly, but
too early filing for approval of generic medicaments may not be covered
by exemption (e.g. 10 years before expiry of patent)
– Prior use defence Article 69(2) Patent Law: Unclear scope, but likely to
include sale, offer for sale and importation, may also apply to
distributers, not only manufacturers
– Legitimate source defence Article 70 Patent Law: To be narrowly
construed, not too many infringing products/large proportion of infringing
elements in a product
9
Dr. Thomas Pattloch, LL.M.Eur.
Patent invalidation
• Decision by PRB can be challenged in two instances before the
Beijing court (Intermediate No. 1 and Beijing High People’s Court)
– Problem scope of decision and applicable procedure law Article 54
Administrative Procedure Law: (ii) Judgement shall be withdrawn or
partially withdrawn and a ruling may be made for the defendant to
reconsider the particular administrative action if one of the following
instances is judged to exist:
• 1. insufficiency of essential evidence;
• 2. incorrect application of laws or regulations;
• 3. violation of legal procedure;
• 4. exceeding of authority;
• 5. abuse of power.
– PRB is not required to make a comprehensive finding on all factors that
invalidate a patent, cases can be remanded and reappear in front of the
administrative court (“circular suits” – Viagra case)
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Dr. Thomas Pattloch, LL.M.Eur.
Circular actions
• Criticism on the effects of the two track system: Delays in
infringement procedure, PRB or defendants entering into circular
lawsuits can de facto invalidate value of a patent through delays
(malicious use of abuse of the invalidation system without risk for
the defendant?)
– Waggonbau Elze KG and Shanghai Zhongji Refrigerating Container Co.
Ltd v. Shanghai Shengshi Congelating Containers Co. Ltd. with a delay
of five years and four decisions on the validity of the patent in two
instances before settling in 2008
11
Dr. Thomas Pattloch, LL.M.Eur.
Patents case law
• Assignment of a patented product before the date of filing without
confidentiality agreement leads to loss of novelty: Jiangxi BoccaroWare Technology Co. Ltd. v. PRB and Xiong Lusheng, Beijing High
Court 2008
• Novelty should be assessed according to being identical or
substantially similar in terms of technical field, technical problem to
be solved, technical solution and expected effect. Novelty should not
be denied merely by generally holding that the technical features of
the invention patent are “equivalent to” technical features of the prior
art, IROPA Co. Ltd. v. PRB and Cixi City Taiyang Textile Equipment
and Materials Co. Ltd., Beijing High Court 2008
• If an invention with some essential features of the existing
technology can achieve the same or even better technical effect, it
may be determined to possess inventiveness. But if the deletion of
some essential features of the existing technology results in a loss
of the corresponding effect, there is no inventiveness, Sichuan
Guangyou Industrial Group Co. Ltd. v. PRB and Sichuan Baijia
12
Foodstuff Co. Ltd., Beijing High Court 2008
Dr. Thomas Pattloch, LL.M.Eur.
“New product” and shift of
burden of proof
• Shift of burden of proof to the defendant for process patents: BASF
v. Nantong Shizhuang Chemical Engineering Co. Ltd., Beijing High
Court, 9 Oct 2008:
– “New product” refers to one manufactured for the first time in China (at
the date of filing for the patent), as opposed to a first “appearance” on
the market. That requires that the product should be obviously different
from the products of the same class already made available before the
date of filing of the patent concerning its components, structure, quality,
performance and function. Previous registrations with other ministries,
such as Farm Pesticide Testing Institute of the Ministry of Agriculture,
are regarded as making available to the public.
– In this case, BASF could not shift the burden of proof on the defendant
as the product was not regarded as “new” product.
13
Dr. Thomas Pattloch, LL.M.Eur.
Evidence and burden of
proof: The Schneider case
• Zhengtai Group Co. Ltd. v. Ningbo Schneider Electric Co. Ltd Leqing
Branch, Schneider Electric (Tianjin) Co. Ltd.
• Utility model infringement for a circuit breaker: First instance court
decision by Wenzhou Intermediate Court on 26 September 2007,
mediation settlement on 15 April 2009, resulting in payment of more
than € 16 million from Schneider to Chint
– Role of national champions?
– Public perception of foreign right holders and non-discriminatory
treatment?
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Dr. Thomas Pattloch, LL.M.Eur.
15
Dr. Thomas Pattloch, LL.M.Eur.
Schneider: The invalidation
• Schneider’s request for invalidation of the utility model ZL
97248479.5:
– Prior patent application 97125489.3, filed 1996 in France, destroying
claims 1 and 3 for lack of novelty
– Schneider’s poster of the circuit breaker made and published in France
– Contracts, receipts of Schneider’s C60 sales from Schneider subsidiary
in Hong Kong to China Machinery Cooperation and Citron JV in Wuhan
China (proving prior use in China, in the absence of absolute novelty
standard applicable to the case)
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Dr. Thomas Pattloch, LL.M.Eur.
Schneider: The invalidation
• The decision of the Beijing No. 1 Intermediate People’s Court:
– On the poster the evidence submitted (configuration picture/poster draft,
testimony of the date of public display of inner structure of C60 model,
confirmed bill of 7500 posters for the price of 31750 Francs) was
rejected on the following grounds:
• No correlation between the three pieces of evidence: The draft
contained a date and time printed on it, but in a different font from
the other parts of the draft. The testimony on the publication of the
draft on November 26, 1996 was not seen as necessarily relating to
the draft – the model number used in the testimony was not
referring to the precise model number (“C60” instead of “C60N”),
and the font of the distributed brochures/posters were different from
the draft.
• “According to common sense, the letters “26/11/96 16:54”on the
advertising brochure of Evidence 11 [the draft] should be the time of
production or fax transmission of the draft of said advertising
brochure, but not the publishing time [of evidence 12 the posters].”
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Dr. Thomas Pattloch, LL.M.Eur.
Cont’d
– Testimony of “being exhibited on November 26, 1996” of the “circuit
breaker C60” was rejected, it could not prove that the draft was the
same as in the posters mentioned in the bill. The court demanded more
evidence that the bill concerned indeed the draft sample and denied a
link between the bill for 7500 published posters and the draft.
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Dr. Thomas Pattloch, LL.M.Eur.
Cont’d
• Regarding the import of C60N models into China, proving prior use:
– The court demanded to see the customs declaration and authorized
representation contract for the customs contract to prove that the
models had really entered into Chinese territory and could be
considered
– The court doubted the authenticity of the evidence provided: A notarized
witness statement of an importer named Zhou Bingzhi was seen as
irrelevant, criticizing “lack of seals” on all but one invoice,
inconsistencies in model numbers
– Evidence such as accounting vouchers, telegraphic money transfer,
special invoices, list of incoming accounts, transaction itemized
accounts etc. with China National Machine Tool Corp and Shen Long
Car Co. was seen as insufficient: The model numbers only appeared in
attachments which in the view of the court did not completely match the
content of the contract, “incongruous evidence”
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Dr. Thomas Pattloch, LL.M.Eur.
Cont’d
– Notarized pictures taken of the models C60N, L when being dismantled
could only prove the configuration of the models, not the time when the
pictures were taken
– Evidence from Shenlong Car Co. Ltd. featuring amplified pictures of
circuit breaker models which was notarized by a Haidian notary office in
Wuhan was alleged to have violated the Notarization Law and thus not
admissible, with the lack of notarization the evidence was found to be
not admissible
• Admission of novelty destroying evidence was denied almost in full.
• Extremely high burden of proof, demanding official irrefutable proof
of identicalness and a link between a sample draft, a brochure
printed the related invoice to prove novelty destroying prior
publishing.
20
Dr. Thomas Pattloch, LL.M.Eur.
Cont’d
• Prior patent publication in France by Schneider:
– Novelty was confirmed as the utility model tried to overcome the defect
that inconsistencies in manual operation speed causes negative
influence on the movable contact; the invention would thus increase the
lifetime of the circuit breaker, whereas the prior Schneider patent made
sure that all the ionization gas from the aperture of the front plate can be
expelled through the vent of the rear plate of the shell: These would be
different technical fields, different technical solutions and different
expected effects, excluding novelty destroying effects.
– The court determined that “written description cannot be found on some
of the drawings of D1 [prior patent application] and it is impossible for
those skilled in the art to directly and unambiguously determine the
above mentioned technical features from the drawings”
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Dr. Thomas Pattloch, LL.M.Eur.
Schneider: The
infringement procedure
• Court-ordered investigation into evidence to determine amount of
damages
– Obtaining (valid) evidence as the main difficulty in China in legal
procedures
• Local subsidiary of Schneider refused to provide information on
costs
– Differing penalties and standards on accounting books and
disadvantages for foreign right holders
• Wenzhou court on notarized evidence on the posters (prior art
defence): “Notarization cannot prove the authenticity of original
documents, so it cannot absolve the possibility that the original
documents are forged or some related content is added.”
– Role of notarization in Chinese lawsuits and impact on foreign right
holders!
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Dr. Thomas Pattloch, LL.M.Eur.
Court decision on
standard-related patent
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•
In July of 2008 Third Civil Division (IPR Division) of the Supreme People’s
Court issued an Instruction Letter to the High Court of Liaoning Province on
“Patents Used for Standards Setting Constitutes Infringement “:
“Regarding the current reality that China's standard setting organizations
not yet have established patent information public disclosure and use
systems for standards, where the patent right holder participates in the
standard setting or following his consent, where the patent is included in the
national, industry or local standard, it is deemed that the patent holder
licenses others to implement the standard and concurrently use the
patent, relevant behaviour of others using the standard is not
regarded as a patent infringement behaviour as stipulated in Article 11
Patent Law. The patent holder can request the implementing person to pay
a certain usage fee, but the paid amount must be significantly lower
than a normal licensing fee; where the patent holder has promised to
waive the patent usage fee, it shall be proceeded according to his promise.”
– Supreme People’s Court of the Republic of China Letter to Liaoning Higher
People’s Court on whether it constitutes patent infringement that Chaoyang
Xingnuo Corporation exploits patent in standard in doing design and construction
according to “Ram-Compaction Piles with Composite Bearing Base,” an industrial
standard issued by Ministry of Construction (July 8, 2008), Min San [No. 3 Civil
Division or IPR Division] Ta Zi No. 4.
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Dr. Thomas Pattloch, LL.M.Eur.
Patents – case law
• Guangzhou Jinpeng Industrial Co. Ltd. v. Ma Yi’an “Self-connecting
Light Steel Keel” Yichang Intermediate People’s Court 2007
– Retailers are not obliged to conduct patent searches on products they
market. If they lack subjective knowledge on the infringement and
purchased the infringing goods through customary channels, a patent
infringement is denied.
• Jingyuan vs. Fushihua and Huayang 2008/2009 (Fujian High
Court/SPC)
– Denial of automatic injunction in case of infringement, and granting of a
compulsory license in effect by the court: “In this case, if Huayang
company stopped to use the desulphurization equipment, it would
produce a negative impact on the local economy and livelihood of
citizens. In order to balance the interests of the right holder and
the public interests of society, this court cannot sustain the claim
against Huayang Co. to cease and desist further use. But Huayang
Co. also must pay a use fee to Jingyuan Co. as of machinery sets No. 1
and 2 are commercially employed meaning used as patent infringement
of the pure sea water desulphurization method and apparatus, until the
related invention patent ceases to be in force.”
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Dr. Thomas Pattloch, LL.M.Eur.
Patents – case law
• Difficult cases
– Schneider case: National champions and junk patents
– OBE case: Industry-wide significance of patented technology and courtdriven patent law interpretation
– Philips patent pool invalidation: Politically motivated actions by
universities
– Jingyuan v. Fushihua power plant related technology: Adoption of public
policy considerations to exclude right to claim injunctive relief
– Pfizer Viagra case: Health-market related patenting
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Dr. Thomas Pattloch, LL.M.Eur.
Thank you!
Dr. Thomas Pattloch, LL.M.Eur.
Intellectual Property Officer
th
4 Floor Qian Kun Mansion, Sanlitun Xi Liu Jie 6, Beijing 100027, PRC
Tel. +86-10-8454 8131
Fax. +86-10-8454 8011
Thomas.Pattloch@ec.europa.eu
Dr. Thomas Pattloch, LL.M.Eur.