In-house counsel and lawyers believe that a decision by the IP tribunal at China’s Supreme People’s Court will help to give more consistency to patent litigation.
In a first-of-its kind patent case, the Supreme People’s Court made a combined ruling on the validity and infringement aspects of a patent.
In the case, Xiamen Power E Technology sued LG Electronics (Tianjin) for infringing its utility model patent, which LG tried to invalidate. Both cases were appealed to the Supreme People’s Court, in August and September 2019 respectively. On October 22, a joint pre-trial meeting was held combining both cases, and on October 23 a trial was held. On December 5, the utility model patent was held valid and LG was found not to be infringing.
From Berlin to Beijing
In China, patent cases adopt a bifurcated system which is modelled on the German regime. If a party sues another for infringement, a common defence used by the defendant is to try to invalidate the plaintiff's patent. But the invalidation procedure is not handled by the same court. Instead, it must start at the patent reexamination and invalidation examination department in Beijing. The decision on validity is appealable to the Beijing IP Court and the IP tribunal of the Supreme People’s Court.
From a patent strategy perspective, because both proceedings involve the same set of patent claims, an important issue to consider is how they should be construed in both proceedings and whether this should be done consistently.
According to an in-house counsel at a Chinese technology company based in Beijing, IP practitioners would like to see more consistency in patent decisions. “With the tribunal hearing both infringement and invalidation appeals in a consolidated case, it can help to create more certainty. However, as this is still the first consolidated case, it is unclear what will happen in the future.”
Stephen Yang, managing partner at IP March based in Beijing, adds: “Considering a proceeding at one level takes, on average, nine to twelve months, the validity issue alone can take three years to finish.”
If at some point the patent reexamination department's decision is overturned by a court, the case will be sent back for further examination and a declaration of validity, he adds.
He continues: “But this new decision is appealable to the Beijing IP Court and the Supreme People’s Court so there may be multiple rounds of litigation on validity. At the same time, the infringement case may or may not be stayed. If it is stayed, the whole procedure may be quite lengthy. If it is not stayed, infringement may be found by the infringement court but the patent may be held invalid later.”
Over the past year, there have been discussions about the pros and cons of combining the procedures and the bifurcation system. This case gives an indication that courts seem to favour the combination of the procedures.
“It could mean faster proceedings for enforcing patent rights,” says Yang. “It is fair to say that litigation in China proceeds very fast, even with the bifurcation system, but with the combined practice the procedure could be even faster which hopefully can reduce the cost of litigation as well. It also avoids the problem of contradictory decisions in litigation and validity where there is infringement found but a patent is held invalid.”
Impact unclear
An in-house counsel from a Chinese pharmaceutical company says that the decision will help to speed up and make the patent litigation system more efficient in China. However, they add that the lack of clarity on claim construction will influence patent strategy.
“There is a time lag between the infringement and invalidity decisions at the moment, so it’s possible to have an infringed patent that is invalid,” says the in-house counsel. “In the future, those with weak patents may not want to bring a case to court.”
While the Supreme People’s Court decision is novel, it is unclear whether it will be taken up as the norm. “We have yet to see whether other litigants can take advantage of the new procedural tool of having a consolidated case on appeal,” says Jill Ge, senior associate at Clifford Chance based in Shanghai. “Strategy wise, it would be worthwhile bearing in mind that claim construction could be heavily contested in patent litigation in China – not only because Chinese judges have shown an interest in claim construction, but because construction rules are also evolving.”
She continues: “When evaluating a case in China, it would be advisable to assess any potential claim construction issues early on from both an offensive and defensive point of view.”
Yang adds: “Those who are not confident about the validity of their patents may not be able to take advantage of the bifurcation system and obtain a positive result in infringement before an unfavourable validity decision is made. This may deter them from litigation.”
He continues: “However, I don't expect that the court that is handling infringement will handle validity. The combined procedure is only possible when the case is appealed to a court that is competent in handling complex patent cases. The patent reexamination department is still the best place to handle validity of patents as they more technically focused.”
