China's IP court report reveals new trends
He Jing and Dong Ning of GEN Law Firm discuss China Supreme Court's IP annual report that analyses the characteristics of IP cases in 2021
The Intellectual Property Court of the Supreme People's Court (IP Court) released its annual report on February 28 2022, summarising its findings of IP cases and highlights in 2021.
This report is critical as it is arguably the best representation of the accomplishments of the IP Court in the last three years. In parallel to this report, the IP Court also selected 48 key cases, from which it published 55 'key summaries of decisions'. Although these 55 rules are neither law nor judicial interpretation in nature, they will undoubtedly become an essential part of the body of IP rules in China.
Highlights of the report are summarised below.
The number of cases continued to increase in 2021. Civil cases at appeal increased by 32%, and administrative cases (invalidation appeals and patent reexamination-related appeal) increased by 92.5%. The IP Court believed this reflected the strong demand for judicial protection of IP rights due to technological development.
The areas involved in the cases comprised many cutting-edge technologies. Over a quarter of the cases involved strategic emerging industries such as new-generation information technology, biomedicine, high-end equipment manufacturing, energy conservation and environmental protection, new materials, and new energy, and the growth rate accelerated significantly. More than half of the cases received by the IP Court came from the three IP courts in Beijing, Shanghai and Guangzhou, but there were also cases appealed from other major industrial cities, such as Zhengzhou, Chengdu and Wuhan.
Characteristics of patent, technical secret and antitrust cases
The court report analysed the characteristics of different types of IP cases.
Among patent cases, claim interpretation remains the main difficulty in such cases. How to distinguish claim elements, determine equivalent features, identify functional features, and environmental features of use are challenging. The IP Court suggested that the scope of claim protection should be determined in such a way that its strength matches the inventive contribution made by the patentee over the prior art. Among non-infringement defenses, legitimate source defenses and prior art defenses were predominant, and there were cases where defenses were raised against the validity of the patent rights. This means that Chinese courts can play a more active and confident role in determining the validity of patent rights.
As for trade secret cases, the number of cases continued to grow and involved a wider range of technical fields. The procedural issues mainly involve jurisdictional disputes, including the findings of the place of infringement, the determination of the duplicate filings and the determination of jurisdiction when the liability for breach of contract and infringement liability are competing. Substantive issues include the determination of the scope of technical secrets, the amount of compensation and the determination of confidentiality measures, apportionment of technical secrets, etc. The high amount of compensation awarded cases increased significantly. Following the top-tier award of five times punitive damages of more than CNY 30 million ($4.7 million) in the technical secret infringement case handled in 2020, the IP Court awarded CNY 159 million in a technical secret infringement case in 2021.
As for antitrust cases, there was an increase in the intertwining of antitrust issues with IP issues. Such cases involved the abuse of dominant market position behaviour issues related to patent rights and horizontal monopoly agreements such as pay-for-delay, market division and sales restriction. The cases are becoming increasingly difficult and complex.
New practices and judicial policies
The IP Court declared growing importance and urgency to enhance policy guidance nationwide, suggesting that it realised the strong need to reduce inconsistencies in how different courts handle cases of the same nature.
In terms of institutional development and capacity building, the IP Court mentioned its hiring of more technical investigation officers, the combined use of technical experts, technical consultation and technical appraisal to make critical technical findings.
In terms of burden of proof, which has long been held as the most challenging aspect of China patent litigations, the IP Court mentioned the timely shifting of the burden of proof, reasonable use of the rules of excluding barriers to produce evidence in order to guide the parties to provide evidence proactively and honestly.
The IP Court also highlighted that in a trade secret case involving semiconductor chips, it granted a preliminary injunction while remanding the case to the lower court for retrial. In doing so, the infringement can be timely and effectively stopped. In another case, the IP Court came up with a three-step test to determine the conspiracy act in the context of a technical secret license contract and ordered the defendant to return RMB 200 million.
Another highlight is to stop dishonest behaviour in litigation effectively. In a utility model patent infringement case, the IP Court imposed heavy penalties on the defendant for obstructing the court's evidence discovery process. In some patent infringement cases targeting many small retailers instead of the manufacturer, the IP Court determined fairly reasonable amounts of compensation to protect the survival and development of such small retailers.
Foreign-related cases continued to grow rapidly, and some cases were intertwined with foreign litigation. The IP Court highlighted that in 2021, it received 382 new foreign-related cases, accounting for 8.8% of its total new filings, and concluded 246 cases. In particular, the IP Court mentioned its award of RMB 20 million damages in favour of a foreign medical device company, as the defendant refused to submit its account book.
The IP Court has been using IT technologies to facilitate the proceedings. More than 3,000 cases were heard online in 2021. The IP Court also explored the application of 3D imaging of physical evidence online, effectively solving the problem of online cross-examination of physical evidence.
The IP Court widely adopted electronic services in 2021. More than 98% of the cases were served electronically, as 26,443 people were served electronically throughout the year, with a success rate of 96.4% and an average service cycle of only 12.7 hours.
China is set to review the next steps in the reform of the IP Court systems. The newly issued IP annual report provides a wealth of information to see the trends.
Patent attorney, GEN Law Firm
Patent attorney, GEN Law Firm