Litigation / Foreign Patent Litigation / China

Patent Litigation in China

Scope of Patent Protection

Article 59(1) of the patent law provides that the scope of protection is determined by the claims and that the specification may be used to interpret the claims. Article 62 provides that a patent can not be applied against someone who before the priority date of the patent made the identical product, used the identical process or made necessary preparations to do so.

For patents granted under the 1994 law amendment, a process patent may be used to prevent importation of the direct product of that process where the process is being carried out abroad.

Enforcement

Infringement may be dealt with earlier by requesting the administrative authority for patent affairs to order cessation of infringement and award damages or by an action in the People's Court. The limitation period for infringement is 2 years from the date when the patentee or any interested party obtains knowledge of the infringement or the date when they should have obtained such knowledge.

On February 26, 1995, the United States and China reached an agreement to avert implementation of trade sanctions between the two countries. The agreement includes the provisions that China will enforce its intellectual property laws through judicial and administrative procedures, permit U.S. audio-visual and software companies to establish joint ventures in China, prohibit the export of infringing products and establish an effective customs enforcement system. Whether this agreement has been properly implemented remains a matter foe debate.

Patent infringement in China is a matter of both civil and criminal law. Criminal proceedings may proceed in parallel with civil proceedings and are instituted following a complaint by the patentee to public security department, the procurator or the court itself.[1]

Patent infringement matters in China are a matter for the Intermediate People's Court in which the infringement occurs or where the defendant has its residence. Appeal lies to the Higher People's Court (effectively the provincial appeal court) whose decision is final, but in very rare circumstances subject to reconsideration by the same court.

Chinese civil practice differs from Japanese practice in placing greater emphasis on conciliation rather than a legal determination of the party's rights and parties can opt to replace the legal proceedings with conciliation at any time up to the final determination of the case. Court procedure itself is similar to that in Japan in that there is no consolidated trial but rather a series of hearings before a judge during which facts are elucidated and arguments submitted. Both evidence and argument are normally submitted in writing.

China has no discovery procedure whereby documents must be disclosed to the opposing party. However the court itself in its role as a fact finder can and does question the parties, order production of documents and conduct inspection of premises. If evidence of infringement is found, its removal may be ordered for consideration during a court hearing.

Remedies for infringement are an injunction or damages, the latter being calculated as the profits made by the defendant, a reasonable royalty or the actual economic loss suffered by the plaintiff.

Patent invalidity is not a defense to an infringement, the right to decide upon the validity being confined to nullity proceedings in the Patent Office. If nullity proceedings are pending in the Patent Office, the court has the right to stay its proceedings until the Patent Office reaches its decision. In the case of infringement actions relating to utility models and designs, such a stay is almost automatic. In invention patent cases, however, such stays are not so common.

There is no formal preliminary injunction procedure in China, although the courts can in cases of emergency order "advance execution" which can give relief similar to that of a preliminary injunction. The court also has the power to make orders for preservation of evidence or property prior to a decision if this is necessary. Such relief is, however, rare in patent infringement cases and requires that the plaintiff provide a guarantee, normally equal to the value of the evidence or property "preserved".

Patent infringement trials in China typically take from two to four years and cost less than $100,000. There is no provision for the loser to pay the costs of the winner, but the plaintiff will normally include its costs for the action in the damages it claims.