About China Patent Infringement & Patent Litigation
In 2004, China saw 353,807 patent applications filed at the State Intellectual Property Office ("SIPO"). SIPO granted 190,238 patents in 2004, an increase of 4.4 percent over 2003. Of these, 151,328 went to Chinese applicants and 38,910 to foreign applicants. In China, as elsewhere, more granted patents inevitably mean more Patent litigation. In 2004, holders of Chinese patents filed 2,549 new patent suits, an increase of about 20 percent over 2003 (and only 506 fewer than the number filed in the U.S. that year). While foreign parties have brought fewer than 5 percent of these cases so far, they increasingly are becoming involved in such litigation as either defendants or plaintiffs. It is likely that in the foreseeable future, patent litigation will become an important part of business strategy for multinational companies operating in China. Therefore, it is essential for multinational companies to understand how to litigate patents in Chinese courts.
China Patent Litigation Procedure Overview
The Court System. China's judicial system consists of four levels of courts: (1) the Basic People's Court, (2) the Intermediate People's Court, (3) the Higher People's Court, and (4) the Supreme People's Court.
The Supreme People's Court is the highest court in China. Along with handling appeals from the Higher People's Courts, it serves an administrative role, in which it issues judicial interpretations that are legally binding upon lower courts. There is one Higher People's Court in each province and autonomous region (e.g., Tibet), as well as certain large cities that have the rank of province, such as Beijing, Shanghai, and Tianjin. Each major Chinese city has one or two Intermediate People's Courts, and each county, or district, in each major city has one Basic People's Court. China has a "two-instance" judicial system¡ªthe decisions of the court of first instance can be appealed to the court at the higher level, which makes what essentially is a final decision.
Because of the complexity of patent cases, the Supreme People's Court has designated approximately 50 courts around the country (mostly Intermediate People's Courts) as first-instance courts for adjudication of china patent infringement claims. If the damages claimed are above CNY 100 million (about US$12 million), Higher People's Courts are the courts of first instance for such cases.
Jurisdiction. China patent infringement cases must be filed where the infringer is domiciled or in the place of infringement. Places of infringement include not only the places where the infringing acts actually have occurred but also any place affected by the consequences of infringement. To avoid litigation in a defendant's home court, plaintiffs may wish to join distributors of the infringing product located in jurisdictions more favorable to the plaintiffs as additional defendants.
Limitations Period. China has a two-year statute of limitations for patent infringement, which runs from the date on which the patentee knew or should have known about the infringement. For continuing patent infringement, the patentee can usually obtain an injunction against the infringement even if it failed to investigate within the two-year limitations period, provided that the patent rights are still in force, but damages will be limited to those suffered in the last two years.
Bifurcated Proceedings. China is a civil-law country and has adopted many aspects of the German patent law system. For example, like Germany, China has a split system, with infringement determined by the courts and invalidity challenges heard by SIPO's Patent Reexamination Board. (For more information on Chinese invalidation proceedings, please see "Are Your Chinese Patents At Risk?" in the January 2005 issue of Intellectual Property Today.) Some patent infringement actions can be stayed in favor of SIPO invalidation proceedings¡ª generally those involving design patents or utility model patents (which are not substantively examined by SIPO prior to grant)¡ªbut courts are less likely to stay infringement actions involving invention patents (which are substantively examined before grant). Therefore, invention patentees should expect parallel infringement and invalidity actions in the courts and SIPO, respectively. A patent infringement action will last between six and 18 months in the first instance if not stayed, and it is not anomalous to find judgments of infringement on patents that subsequently are invalidated by the slower SIPO invalidation proceedings.
Preliminary Injunctions on Patent Litigation
Timing. Article 61 of the Chinese Patent Law authorizes courts to issue injunctions before or during patent infringement actions: "Where any patentee or interested party has evidence to prove that another person is infringing or will soon infringe its or his patent right and that if such infringing act is not checked or prevented from occurring in time, it is likely to cause irreparable harm to it or him, it or he may, before any legal proceedings are instituted, request the people¡¯s court to adopt measures for ordering the suspension of relevant acts and the preservation of property...."
Upon receiving a request for a preliminary injunction, a court must make a ruling within 48 hours if it finds that all procedural requirements have been met properly. Once issued, the injunction is enforceable immediately. The patentee, if it has not done so already, must then initiate a patent infringement action in the court within 15 days of issuance of the injunction, or the injunction automatically will be lifted. Either party may request the issuing court to reconsider its decision, which is an administrative procedure within the court. However, the injunction will remain enforceable during reconsideration and any subsequent proceedings until final judgment.
Substantive Factors. Chinese courts must consider the following factors in determining whether to issue preliminary injunctions:
Whether there is patent infringement.
Whether the patent holder will be irreparably harmed in a manner for which monetary damages are inadequate compensation if the infringing act is not enjoined.
Whether the patent holder has provided an adequate bond.
Whether issuance of a preliminary injunction would prejudice the public interest.
A Difficult Reality. In practice, however, obtaining a preliminary injunction in most china patent infringement cases has always been difficult and is becoming even more so. Both infringement and irreparable harm must be clearly proven¡ªa burden that is not easy to meet in China, given the stringent evidentiary requirements and lack of discovery procedures. Moreover, the Supreme People¡¯s Court recently has tempered any early enthusiasm