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China Patents: IP courts under review

At the end of August 2017, the Supreme People's Court of China released a special report about the intellectual property courts that was launched three years ago. Back in 2014, the legislature called for a review of the newly established IP courts three years before deciding what is next to do. The three IP courts were widely considered a big experiment of China's judiciary reforms.

The SPC report has a positive conclusion about the value and contribution of the three IP courts. According to the report, the three IP courts have in total accepted 46,071 IP cases and decided 33,135 cases since 2014. Among the concluded civil IP cases, 21% are patent cases, 4% are trade mark infringement cases, and a majority of cases relate to copyright. In some IP infringement cases, the three IP courts granted high damages to the IP right owners, by Chinese standards. Probably more importantly, the Beijing IP court has taken on some new measures, such as the introduction of a technical investigator, experimenting with an amicus brief-type submission, and launching an IP guiding case research centre, all of which are considered as important reformative steps to increase consistency and transparency.

As to the next step of the judiciary reform, the SPC proposes having sole-judge benches deciding on simple civil and administrative IP cases, in order to reduce heavy burden on the judges and increase efficiency. Also, the SPC recommends establishing a specialised IP court at appellate level, which will be a significant success, once it becomes reality. But the details of such an appellate IP court are unknown yet.

With respect to accomplishments made by the Beijing IP Court, an online report made by a judge in the court is particularly interesting. The report, which was publicised on the Beijing IP Court's Wechat account, should reflect an official view.

The report is based on data from 668 concluded patent infringement cases by the Beijing IP Court from November 6 2014 to June 30 2017. Some key facts worth noting:

(1) High win rate for patentees

Out of the 668 cases, 142 were concluded by judgment while the rest were either settled or were dismissed because of an invalidity decision by the Patent Reexamination Board (PRB).

Among the cases with court judgments, the win rate for patentees is 81.7%. A very high percentage of these cases (82.2%) were filed by he mainland China patent owners. Among the cases filed by foreign patent owners, the win rate is 76.9%. Foreign patentees won 10 cases won out of 13 decided cases.

Arguably, this data reflects a tendency favouring patentees, either domestic or foreign, in general, although the overall number of decisions is relatively small.

A majority of cases were withdrawn upon settlement. This is probably not surprising. The other cases were dismissed due to invalidity decision by PRB. Notably, in China, where patentees choose to appeal an invalidity decision to the courts, the court handling infringement trials may dismiss the case without prejudice and patentees can sue again once validity is confirmed.

(2) Increased damages

The damages awarded to patentees increased greatly, by Chinese standards. The average damages per case rises each year, from $54,000 in 2015, to $158,000 in 2016 and then to $170,000 in the first half of 2017.

In a recent USB key patent infringement case decided by the end of 2016, the Beijing IP Court awarded the patentee $7.54 million as damages and an additional $154,000 to compensate the reasonable expenses incurred to the patentee. As China does not have discovery in trials, it was hard for patentees to prove damages. This case is the beginning of legal reform aiming at reducing burden of proof on patentees to prove damages.

(3) Injunctions almost always available

In Chinese patent practice, patentees can almost always obtain injunctions if they prevail, except in exceptional circumstances such as national security or public interest. The statistics of the Beijing IP Court show the court did not order a permanent injunction only in nine cases, mostly because of procedural reasons. None of them are because of national security or public interest. Among the nine cases, the patentee's patent expired before end of trial in three cases and so the injunction issue was moot. In three other cases, the defendants were resellers, who did not directly engage in infringement activities. For the remaining three cases, there was no injunction either because the plaintiffs did not claim injunction and/or the defendant had stopped the infringing conduct.

What is interesting is what the Beijing IP Court will do in SEP cases. In the case between IWNCOMM and SONY, the court granted a permanent injunction in the SEP case. With the increase of SEP cases, it is noteworthy whether the court would break the current record on permanent injunction in the future.

The judge's report sends out a strong pro-IP signal. Anecdotal evidence shows that more patentees are now filing cases in Beijing. It is hoped that the judiciary reform will continue or even expedite, so the judges will have enough resources to handle the bigger docket.

What is encouraging is that this year witnessed the establishment of 10 new specialised IP tribunals in seven provinces with cross-regional jurisdiction over patent cases etc. These IP tribunals function very similarly to the IP courts. All this gives more choices for IP owners, and also provides a great foundation for the specialised IP court at appellate level.

He Jing Cao Hui

AnJie Law Firm
26/F, Tower D, Central International Trade Center
6A Jianguomenwai Avenue, Chaoyang District, Beijing 100022, PR China
Tel: +86 10 8567 5988
Fax: +86 10 8567 5999


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