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China Patents: Supreme Court frustrates forum-shopping tactics




Online shopping is very popular in China due to the great variety of products and cheap or even free product delivery. As a tactical choice, some IP owners begin to purchase infringing products online and have the process of product delivery notarised. In this way, the plaintiffs attempt to bring lawsuits in a venue having jurisdiction over the place where the delivered product is received or the place where they reside, so as to gain home court advantage or win a favourable edge over the defendants. However, this could cause unfairness and inconvenience to the defendants.

No clear jurisdiction rules

The current relevant laws and regulations are unclear as to whether such forum shopping is proper. According to the Civil Procedure Law (effective as of 2015), a lawsuit arising from acts of infringement may be brought in a court having jurisdiction over a place where an act of infringement is committed or where the defendant resides. There are three relevant articles in the Judicial Interpretations of the Civil Procedure Law released by the Supreme Court (SPC), but they seemingly have some overlap. Article 24 provides that places where acts of infringement are committed include a place where an act of infringement is performed and a place where the result of infringement occurs. While common understanding can be reached for the meaning of the place where an act of infringement is performed, disagreement has arisen about places where the result of infringement occurs.

As to the question whether a place where the delivered product is received can be understood as a place where the result of infringement occurs, there are a lot of controversies. Articles 20 and 25 make things more complicated: according to Article 20, for a sales contract concluded via information networks, the place where the contract is performed may be one where the purchaser resides or one where the purchased product is received; according to Article 25, a place where an act of information network infringement is performed includes a place where the computer performing the accused act of infringement is located, and a place where the result of infringement occurs may be one where the right holder resides.

Some plaintiffs rely on Article 20 or Article 25 to argue that they are entitled to bring a civil action in a court having jurisdiction over a place where the delivered product is received or where they reside. Several such IP cases emerged across the country during the past two years; different courts have different decisions. For example, such forum shopping tactics were supported by courts in Shanghai, Jiangsu, and Zhejiang, but were rejected by courts in Beijing and Guangdong.

SPC's position

In two recent cases, the Supreme People's Court (SPC) said no to such forum shopping tactics and held that patent or trade mark infringement cases are not governed under Article 20 or 25.

In a design patent infringement case No 2016-MinShen-731, the SPC held that the acts of patent infringement alleged by the plaintiff are essentially inconsistent with the acts of infringing online dissemination rights and thus the plaintiff's residence cannot be used as a link for venue choice. Although no detailed explanation is given in the court decision, SPC believes that an act of IP infringement is not an act of information network infringement and thus Article 25 is not applicable for venue purposes in patent infringement cases.

In a more recent trade mark infringement case No 2016-MinXiaZhong-107, the SPC made more clarifications. The SPC reasoned that the rationale behind Article 20, which sets a further provision regarding the place where the contract is performed, is that for a sales contract concluded via the information network, it's difficult to determine the place where the defendant resides or the place where the contract is performed. The SPC implied that IP infringement cases should not be subject to Article 20 since it's easy to determine the place where the defendant resides or the place where the contract is performed. In the SPC's view, a case arising from breach of contract largely differs from an IP infringement or unfair competition case: the former merely concerns particular acts and particular parties, while the latter is not directed to the particular product, but to all products embodying a particular IP right. For the latter, the allegations of the plaintiff are not directed to the other party to a contract, but to all parties suspicious of infringement relating to the product of concern under relevant laws. In consideration of these differences, the SPC concluded that IP infringement or unfair competition cases shall be subject to their respective particular provisions, and it's improper to apply Article 20 even if the accused infringing product is purchased via online shopping.

Implications

First, when it comes to forum shopping, the nature of patent and trade mark infringements remains unchanged in spite of the internet. For such cases, the place where an act of infringement is performed or the place where the defendant resides can be determined without much difficulty. Therefore, IP owners are not allowed to establish venue as in cases involving contracts concluded via information networks and infringements occurring via information networks.

Second, for IP cases, random forum shopping is not advocated and "centralised control" is the future trend. During the past three years, China launched a pilot programme to set up three specialised IP courts in Beijing, Shanghai and Guangzhou, and to further include four new IP tribunals in Nanjing, Suzhou, Wuhan and Chengdu. All these measures are taken to avoid dispersing IP cases (especially patent cases) across the country, so as to avoid inconsistent decisions for similar cases to be reached at different courts. This is also supported by the case guidance system developed by the SPC and embraced by the Beijing IP Court. With these in mind, it would be easy to understand why the SPC is unwilling to empower jurisdiction of IP cases to all courts whose judicial districts can be reached via delivery or shipment.

Treloar-Peter-100 Treloar-Peter-100
Steve Song Christina Qi

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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