Peter Ollier, Hong Kong
The Supreme People's Court has issued an Interpretation on patent trials that will change how damages are calculated and give comfort to IP owners who want to send cease and desist letters.
The Court promulgated the Interpretation on December 28 last year and it came into effect on January 1 2010. Judicial interpretations are binding on lower courts. It is the last of a series of interpretations and opinions on IP issued by the Court in 2009 (see box).
"The Interpretation has embraced a lot of international concepts," said Zhao Yan, of counsel at Foley & Lardner in Shanghai.
Article 16 of the Interpretation considers the way that damages are calculated. According to a translation obtained by Managing IP, it states that when a product infringing a patent is a component of another product: "the People's Court shall reasonably determine the amount of compensation in accordance with the value of the component per se and its function in achieving the profits of the finished product."
George Chan, a consultant for Rouse in Beijing, said this would help limit the likelihood of a recurrence of the Schneider trial.
In that controversial case the French electronics maker lost a utility model patent infringement case and was told to pay $46 million in damages. The figure was particularly high because the court looked at the overall profits made by Schneider to calculate the damages, rather than assessing the value of the component covered by the utility model patent. In April last year the company settled the case for $23 million.
"Lawyers now have to carefully give evidence to judges to explain about damages," said Jiang Zhipei, former Chief Justice of the IP Tribunal of the Supreme People's Court and now a senior adviser at Fangda Partners.
Article 18 of the Interpretation deals with cease and desist letters. At present, patent owners in China craft cease and desist letters very carefully or do not use them at all, says Chan.
This is to prevent a situation in which a company receiving a warning letter immediately files for a declaration of non-infringement at their local court, a move that is generally considered to give them home advantage and can make it more difficult for the patent owner to win the case.
The Interpretation states that a company that receives a warning letter can reply to the patentee asking them to take action or withdraw the accusation, but it has to wait one month after the patent owner has received the letter or two months after sending the letter before it can file a declaration of non-infringement.
"With this interpretation you will have more latitude in terms of how you use your cease and desist letters," said Chan.
Zhao added that this article "may give the patentee significant advantages over the accused infringer in terms of forum shopping".
The Interpretation also clarifies how courts should construe claims and confirms that prosecution history estoppel applies in litigation in China. This means that if the patent owners narrowed the claims of a patent during prosecution, they cannot then try to assert broad claims in court.
The Supreme People's Court circulated a draft version of the Interpretation for comment in June last year. Zhao says that parts of the final Interpretation have either been simplified or removed.
Those parts that have been omitted in the final version include a controversial section that explained how courts should set licensing fees for patents included in standards and a section setting out the doctrine of equivalents.
Jiang said that the section dealing with standards was omitted because the Standardisation Administration of China published draft Provisions on the Administration of Formulating and Revising National Standards Involving Patents at the end of last year.
Jiang predicted that in 2010 the IP Tribunal would produce long-awaited rules on how the section of the country's Anti-Monopoly Law that deals with IP should be interpreted and will update an Interpretation on copyright protection on the internet that was originally promulgated in 2000.
The Supreme People's Court and IP |
In 2009 the Supreme People's Court issued a series of important interpretations and opinions aimed at improving and refining IP enforcement in China. April 21 Opinion on Certain Issues with Respect to Intellectual Property Judicial Adjudication Under the Current Economic Situation. This encourages courts to be cautious in issuing preliminary injunctions and sets out when they should consider not granting injunctive relief even after finding evidence of infringement. April 23 Interpretation on Several Issues Concerning the Application of Law to the Trial of Cases of Civil Disputes over the Protection of Famous Trade Marks. This restricts the circumstances in which China's courts will grant well-known status. It was published at the same time as SAIC rules that allow trade mark owners to use evidence from abroad to prove well-known status using the administrative route. June 22 An announcement consolidates the jurisdiction of certain types of first instance IP appeal cases, including appeals from the China Trade Mark Office and the Trademark Review and Adjudication Board to the IP Tribunal of the Beijing no 1 Intermediate People's Court. December 30 Judicial Interpretation on Some Issues Concerning the Application of Laws to the Trial of Patent Infringement Disputes On the agenda for 2010 Copyright infringement on the internet and IP and the Anti-Monopoly Law |
