The Supreme People's Court's Interpretation on How Law¡¯s Applied for Patent Infringement Trials

-Provisions on component infringement and method infringement.

Article 12 provides that where a product infringes upon an invention or utility model patent by incorporating a component or part in the development of another product, this constitutes "use" of the patented product under prevailing Patent Law. Thus the product user may be exempted from damages, because "use" does not constitute design patent infringement. Where a product infringing upon a design patent is used as a component or part in another product, this constitutes a "sale" of the patented product. Because a design patent protects only the appearance of a product, the incorporation of an infringing product component will not be considered as a "sale" of the design patent product if it provides only technical functions, as opposed to visual effects of the said product.

Article 13 defines "product directly obtained by a patented method" as the product obtained immediately after utilizing the patented method. The Court further explains that subsequent processing of the initial product to obtain a follow-up product is considered to be "use" of the product obtained directly from the patented method.

-Defenses which the accused infringer may attempt to apply

Article 62 allows for a prior art defense in a patent disputes. Additionally, Article 14 specifies the application rules of the prior art defense. To establish a prior art defense, the People's Court will examine whether the alleged infringers technical features fall within the patent claim, rather than all technical features of the allegedly infringing product. Technical features that are identical to the prior art, or the difference there between is minimal; the alleged infringer may be exempted from infringement liability based on prior use of the art. Additionally, a prior art defense may not be applied if the accused technical solution has a different subject matter from that of the prior art.

The People¡¯s Court also provided application rules for a "prior use defense," which aims to mitigate the unjustness of the "First-to-File" system. In order to encourage the filing of patent applications, the Court limits the prior use defense:

- to techniques illegally obtained cannot assert prior use defense;

-to circumstances in which a company "has made necessary preparations for manufacture and use¡±;

-when the "original production scope" is limited to "the production scale prior to the filing date or the production scale is achievable through full use of the existing production line or preparations"; and

-when the prior user cannot independently assign or license the technique or design concerned.

-Determination of damages

Article 16, mandates that damages should be awarded based on a calculation of the profit gained through the infringement. Additionally, damages will be limited to the proportion of the profits made due to the infringed patent, meaning profits generated through activities, such as marketing, will not be included in the damage calculation. If the alleged infringement is from a component found in a final product, damages will be awarded according to the value of the component and how it contributed to the profit of the final product.

-Determination of "New Product"

In patent suits involving a "new product,¡± the burden of proof will shift. Article 17 stipulates that a final product is not ¡°new¡± if the product or the manufacturing process of the product is already known to the public, either domestically or abroad, prior to the patent filling date. For pharmaceutical companies, disclosure of the structural formula of a product, not including specific physical and chemical properties or manufacturing process, will not disqualify the product as a "new product."

-Action for Declaratory Judgment of Non-infringement

Declaratory judgments for non-infringement have become a common tool for infringers. In order to avoid this type of injustice Article 18 limits the situations in which an action for a declaratory judgment may be raised. Article 18 provides that when a patent holder warns an allegedly infringing party to cease-and-desist, the alleged infringers or other interested parties, such as licensees or distributors, may respond in writing in order to push the patent holding party to initiate legal proceedings. If the patent holder does not withdraw his cease-and-desist, or proceed with legal action within one month of receiving a response, or within two months after the dispatch of the response, the warned parties or other parties of interest may move for a declaratory judgment of non-infringement. This process only pertains to actions in the People's Courts, and does not apply to other forms of relief, such as administrative investigation and seizure.

Article 19 is a provision meant for switchover from the Old and the New Patent Law. If an alleged offense took place before October 1, 2009, the People's Court will use the Old Patent Law; if it occurred after October 1, 2009, the People's Court will use the New Patent Law. As for damages, even those infringements before October 1, 2009 the Court will apply the New Patent Law.

Summation

The Interpretation is a summary of the judicial practice of the trial of patent infringement cases in the past decade in China. The Supreme People's Court identified the commonly accepted rules in patent infringement trials in the form of Judicial Interpretation to provide guidance for patent infringement litigations in different tiers of Chinese judicial system. But for controversial issues, such as the relationship between patent and national standard, the determination of contributory patent infringement, the Interpretation remains silent. Therefore, it is foreseeable that the rules of determining patent infringement will undergo continuous revision in China and more rules shall be developed in patent infringement field.



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