China Supreme Court clarifies patent infringement proceeding

China’s latest Judicial Interpretation brings a raft of changes to patent trials, as Stephy Tang explains

The Supreme People’s Court of China issued the second part of Judicial Interpretation (text in Chinese) on patent trials in March and it came into effect on April 1. The Interpretation is binding upon lower courts.

The Interpretation introduces new rules regarding the shift of burden of proof and patent indirect infringement mechanism, and also seeks to streamline the patent trial procedure. "The second Interpretation responds to many perceived problems to enforce patent rights in China," said Allen Tao of Liu Shen Associates, "It’s very practical."

More burden on defendant
The problem of low damages awarded in patent infringement lawsuits has long been a headache for patentees, and is largely attributed to lack of sufficient evidence obtained by plaintiffs in a tort action.

Previously in a civil lawsuit, the burden of proof was on the plaintiff, but Article 27 of the Interpretation switches part of these responsibilities to the defendant.

It states: "In the situation that a patentee already provided preliminary evidence proving certain profits infringers have gained is due to patent infringing activities, and accounting documents and relevant materials are mainly controlled by the infringers, the court has the right to order the infringers to submit the accounting documents and relevant materials."

Tao explained that the new rules put a lot of pressure on the defending party. "This means the defendant cannot just stand aside. They are obliged to do something, for example, to provide their accounting documents."

The new indirect infringement mechanism
In the Interpretation, the Supreme Court for the first time introduces an indirect patent infringement mechanism to handle infringement matters where there are not only direct infringers involved.

Article 21 of the Interpretation recognises two types of indirect infringement activities, including contributory infringement and inducing infringement, which practitioners compare to the provisions in the US (35 USC § 271(b)&(c)).

Guanyang Yao at Liu Shen Associates clarified the mechanism using example of a raid action against a patent infringer on an exhibition that didn’t succeed. The infringer manufactured and sold infringing devices to the market in a normal business situation. However, it "deliberately" removed a spring element, which was defined in the patent claim, from that device to circumvent the on-site raid examination. The lack of this element meant the device would not meet the "all-element rule" and therefore would not constitute a tort action. "With Article 21, lawyers now have a solid weapon to tackle these tricky cases," said Yao.

Exceptions for functional features
Yanfeng Xiong of China Patent Agent (HK) participated in discussions on the latest Interpretation organised by the Supreme Court. He pointed out that Article 8 is particularly important for corporations in the electronic, telecommunication, and computer industries. It provides exceptions for functional features where "the technical feature with a technical content can be determined directly and explicitly from reading the claims, specification and drawings by those skilled in the art"

"This would help limit the likelihood of a recurrence of the Nokia v Shanghai Huaqin case", said Xiong

Nokia lost that case as the Chinese court delineated a narrower scope for functional features, considering a particular form of means-plus-function features with guiding words such as "configured to". The State Intellectual Property Office takes a broader approach

Article 8 provides exceptions and opportunities for these high-tech companies to better prosecute patents with functional features, according to Xiong.

Stephy Tang, Hong Kong