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Declarations of non-infringement require particular strategy and procedure




Bin Zhang and Lei Fu of CCPIT evaluate the rules around non-infringement declarations, including those connected to warnings, jurisdiction and compensation

In the Chinese judicial system, declarations of non-infringement of intellectual property rights began around 17 years ago. On July 12 2002 the Supreme Court issued a reply to Jiangsu High Court. In the reply, the Supreme Court confirmed that declarations of non-infringement of patent rights could be used as a cause of action in the case Suzhou Longbao Bioengineering Industrial Company v Suzhou Langlifu Health Products Co., Ltd., the first non-infringement declaration case in the IP field.

Declarations of non-infringement of IP rights are generally regarded as connected to IP infringement. As a result, non-infringement declaration litigation has similar features to other IP infringement litigation, but also has its own characteristics in terms of cause of action, the basic requirements for initiating, jurisdiction and claims.

Cause of action

Non-infringement declarations of patent rights, trademark exclusive rights and copyright were included in the Provisions on the Cause of Action of Civil Cases issued by the Supreme Court in 2008 as fourth-level causes of action. In the 2011 amendment of the provisions, disputes over confirmation of non-infringement of intellectual property rights were added as a third-level cause of action under "disputes over IP rights and infringement". At present, non-infringement declarations of new plant variety rights, integrated circuit layout designs and computer software copyright are also included as fourth-level causes of action in the 2018 amendment of the Provisions on the Cause of Action of Civil Cases.

IP-related non-infringement declarations not listed as a cause of action, for example declarations of non-infringement of business secrets, can still be accepted by the courts, as long as they fulfil the requirements for acceptance of a civil case set forth in the Civil Procedure Law. The specific cause of action can be decided according to the IP right involved in the non-infringement declaration.

Basic requirements for initiating a non-infringement declaration

The purpose of non-infringement declaration litigation is to prevent IP owners from improperly utilising their IP rights, which would put third parties' rights and interests under threat. Certain requirements must be met before initiating a non-infringement declaration. Article 18 of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Patent Infringement Dispute Cases (Article 18 of Judicial Interpretation No. 2009-21) clearly sets forth requirements for initiating non-infringement declarations of patent rights. The Supreme Court pointed out in a civil ruling that Article 18 could also be applied to other IP-related non-infringement declaration litigation. Therefore, the basic requirements for initiating a non-infringement declaration can be summarised as follows:

  • The right owner gives a warning of IP infringement to the alleged infringer.
  • The party warned or an interested party of the party warned sends a written reply to the right owner, requesting it to withdraw the warning or initiate litigation.
  • The right owner neither withdraws the warning nor files a litigation within a reasonable period.
  • The party warned or an interested party of the party warned can file a litigation with the court requesting a confirmation of non-infringement of IP rights.

Scope of warning

In view of the above requirements, a qualified warning is crucial for the alleged infringer to initiate a non-infringement declaration. Whether the document from the IP owner or the action taken by the IP owner can be regarded as a warning is a key issue in non-infringement declarations. A warning is not limited to a warning letter, it also includes public announcements, complaints filed with local administrations and notification of detention of goods issued by customs, which could put the alleged infringer's right and interest in an uncertain status. To better explain the scope of warning, we would like to analyse some rulings and judgments issued by the different levels of the PRC courts.

A public announcement which does not have a specific target could be regarded as a warning to a specific party, who could then initiate a non-infringement declaration litigation within a certain time period after the announcement has been published. In the Supreme Court's civil ruling (2016) Zui Gao Fa Min Shen No. 351, the Supreme Court explained that a public announcement issued by the lawyer of the trademark owner would influence a plaintiff who uses the mark on its products, thus would certainly lead to the question of whether the plaintiff's use constitutes trademark infringement or not and put the plaintiff's right under uncertainty. Therefore, the plaintiff could initiate non-infringement declaration litigation if the IP owner fails to take further legal action after publishing the announcement.

In legal practice, besides directly sending a warning letter to the alleged infringer or publishing an announcement that might have influence on the alleged infringer, the IP owner could initiate an administrative complaint with the competent administrative authority, alleging third party IP infringement. A complaint filed with the administrative authority in bad faith could also be regarded as a warning under certain circumstances.

In a litigation concerning a declaration of non-infringement of patent right, the defendant filed an opposition due to patent infringement with the State Food and Drug Administration (SFDA) after the plaintiff filed an application for registration of its new medicine with the SFDA. The SFDA forwarded the defendant's opposition to the plaintiff who replied to the SFDA regarding the opposition and sent a letter to the defendant, requesting that it withdraw the opposition or initiate a litigation. The defendant did not take any action. As a result, the plaintiff initiated non-infringement declaration litigation. The court confirmed that the defendant's opposition filed with the SFDA could be regarded as a warning as it influenced the business activity of the plaintiff and had a similar effect to a warning letter. Consequently the plaintiff met the requirements for initiating non-infringement declaration.

In a trademark non-infringement declaration litigation, the plaintiff initiated the non-infringement declaration litigation after the trademark registrant (defendant) filed a complaint with a competent administrative authority, but before the administrative authority made any decision. The court held that the administrative complaint could prove an existing conflict caused by trademark use and the uncertain status of legal rights. Due to the plaintiff's prior use of the mark and the reputation of the mark among consumers obtained through use, the plaintiff needed a non-infringement declaration and its request for declaration of non-infringement of the defendant's trademark right met the requirements and thus could be accepted by the court.

Another kind of warning is customs seizure based on an application filed by the IP owner who has recorded an IP right with customs, and the Notification of Detention of Suspected Infringing Goods issued by customs. The court holds that though the warning is in the form of a notification, it is addressed to the alleged infringer and contains the content that the alleged infringer's goods are suspected of constituting IP infringement, which places the alleged infringer's processing of the goods under uncertainty and has an influence on the alleged infringer's business activities. The alleged infringer has the right to initiate a non-infringement declaration against the party who files the application for detention of the goods with customs, and the litigation can be initiated before customs issues its decision on whether the goods are infringing or not.

Jurisdiction

Non-infringement declarations are initiated by the alleged infringer against an IP owner and are therefore generally considered a kind of IP infringement dispute. As a result, the prevailing opinion is that both the court at the place "where the infringement was constituted" or "where the defendant has its domicile" should have jurisdiction over non-infringement declaration cases, as stipulated in Article 28 of the Civil Procedure Law of the PRC.

Article 24 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law further explains that "where the infringement was constituted" includes the place where the infringement is committed and the place where the consequences of the infringement occur. The plaintiff can choose a competent court to initiate the litigation in accordance with the laws and regulations.

Requests for compensation in non-infringement declarations

Based on current legal practice, we have the opinion that in non-infringement declarations the plaintiff can request compensation from the defendant for damage to business reputation or damage to other legal interests caused by a warning from the defendant.

Non-infringement declarations deal with the issue of whether IP infringement is established or not, while claims for compensation relate to whether the defendant's warning caused damage to the plaintiff's business reputation or constituted unfair competition. Non-infringement declarations and claims for compensation are two different legal principles, which are closely related and are a prerequisite for one another. If the plaintiff's act is declared non-infringing, the warning from the defendant that placed the plaintiff's right under uncertainty will possibly have caused damage to the plaintiff's business reputation or other legal interests. If the court reviews the two issues in the same trial, the plaintiff in the non-infringement declaration action is in a better position to exercise the right to claim for compensation and moreover, it adheres to the principle of fairness and convenience. In fact, there are judicial interpretations on dealing with the two legal issues in one case. For example, Article 13 of the Interpretation of the Supreme People's Court on the Application of Law for Stopping the Infringement of Trademark Exclusive Right and Evidence Preserving before Filing a Lawsuit states that "if an applicant fails to file a lawsuit or files a wrong application, thus causing any loss to the respondent, the respondent may file another lawsuit to the court with jurisdiction so as to claim compensation against the applicant, or claim compensation in the lawsuit filed by the trademark registrant or interested party against the trademark infringement, and the court may handle the matters together".

Circumstances in which to bring an action

When receiving a warning from an IP owner, if the alleged infringer feels that its legal rights and interests are placed under uncertainty as a result of the warning, it can consider initiating non-infringement declaration litigation after analysing the status of its rights. If there is solid ground, the alleged infringer can proceed with the non-infringement declaration litigation and choose the competent court for the litigation, so that its legal rights and interests can be protected in China.

Bin Zhang
  Mr Bin Zhang is deputy director of the legal department at CCPIT Patent and Trademark Law Office. He is a senior trademark attorney and a qualified lawyer. He graduated from Wuhan University with an LLB in international law in 1989 and joined CCPIT Patent and Trademark Law Office in the same year. He obtained his LLM in intellectual property law from UNH School of Law in the US in 2003. By 2018, he had successfully handled a great number of IP cases covering trademark, copyright, licensing, unfair competition, customs protection, trade dress, trade name and cybersquatting through litigation, administration and negotiation. He has published many articles in periodicals and newspapers. He is also co-author of the textbook Practice of IP Lawyers (2006).

Lei Fu
  Ms Lei Fu joined CCPIT in 2006 and passed the National Judicial Examination (bar examination) in 2009. She received a training course on IP from a US Law Firm in 2013. Currently Ms Fu focuses on trademark infringement and unfair competition cases, including online infringement cases. She handles litigation relating to trademark infringement, copyright infringement and unfair competition, as well as domain name complaints.


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