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Analysing non-infringement declaration litigation in China

Bruce Tang of China Patent Agent examines non-infringement declaration litigation, looking at a range of issues including the different steps involved in such disputes, burden of proof, the scope of the claim and jurisdiction

With the growth and development of China's IP system, an increasing number of right holders are actively enforcing their IP rights to gain competitive advantages. In addition to the pursuit of judicial and administrative protection, right holders often use infringement warnings (for example, a cease and desist letter) to protect their rights and interests. While infringement warnings work as an economical way of protecting rights, they could easily be abused. For example, if the right holder, after sending a warning of infringement, takes no follow-up action, neither bringing a lawsuit nor withdrawing the warning, the normal production and operations of the warned party will be affected.

To prevent the abuse of infringement warnings and balance the interests of the right holder and the warned party, the Supreme People's Court (SPC) formally gave judicial endorsement for non-infringement declarations of IP rights in China in a written reply in 2002. In the Provisions on Causes of Action of Civil Cases issued by the SPC in 2008, the causes of action for civil cases were extended to cover disputes over declarations of non-infringement of IP rights, with the IP rights therein including patent, trademark and copyright.

Article 18 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Trial of Patent Infringement Dispute Cases issued in 2009 (the 2009 Interpretation) sets down three requirements for initiating patent-related non-infringement declaration litigation as follows: (1) the right holder issues a warning of infringement; (2) the warned party or an interested party sends a written reminder asking the right holder to exercise its right of action; and (3) the right holder neither withdraws the warning nor exercises its right of action within one month after the receipt of the written reminder or within two months after the issuing of the written reminder.

Although the provisions above are directed to declarations of non-infringement relating to patent rights, the SPC indicated in a copyright retrial case Digital Heaven Information & Technology Co., Ltd. v Nanjing Fiberhome Starrysky Communication Development Co., Ltd. (No. Mintizi 48/2011) that the requirements for initiating non-infringement declaration litigation concerning other types of IP rights should be reviewed by reference to the above-mentioned Article 18 of the 2009 interpretation. It is therefore evident that the said requirements in the 2009 interpretation are applicable to non-infringement declarations on various types of IP rights. Below we will take a closer look at the above-mentioned three requirements and some other important aspects of China's non-infringement declaration litigation in the context of relevant cases.

Infringement warning of right holder

An infringement warning may be given by the owner of an IP right or a third party with authorisation. In the case of patent-related non-infringement declarations, the warning may be issued by a patentee, a licensee with an exclusive licence, or the licensee of a sole or non-exclusive licence duly authorised by the patentee.

The infringement warning can be addressed to a competitor, or its upstream or downstream businesses. For example, in VMI Holland B.V. ("VMI") and Cooper (Kunshan) Tires Co., Ltd. ("Cooper") v Safe-Run Huachen Machinery (Suzhou) Co., Ltd. ("Safe-Run") (No. Zuigaofazhiminzhong 5/2019), a case concerning a patent non-infringement declaration, the IP Tribunal of the SPC ruled that Safe-Run's complaint with the Suzhou IP Office regarding Cooper's infringement of its patent rights should be considered as a warning of infringement against the supplier of Cooper, i.e. VMI.

While an infringement warning may typically take the form of a cease and desist letter, the coverage of the warning should be understood in a broader sense. That is, it should also include the right holder's complaints, objections or the like filed with the administrative authorities, customs, or e-commerce platforms. In VMI and Cooper v Safe-Run, the IP Tribunal of the SPC also held that although Safe-Run's complaint with the Suzhou IP Office targeted the behaviour of Cooper only, the production and operations of VMI, as the supplier of Cooper, would definitely be affected as a result of the complaint, and therefore, Safe-Run's complaint with the administrative authority constituted a warning of infringement against VMI.

In the patent non-infringement declaration case of Ninghai Yiqun Plastic Co., Ltd. ("Yiqun") v Jianzhong Wang ("Wang") (No. Zheminzhong 294/2016), the Zhejiang High Court ruled that Wang's complaint to Alibaba.com about Yiqun's allegedly infringing products had resulted in the removal from Alibaba.com of the web links related to the products, thus affecting Yiqun's interests to some extent, and hence, the complaint to Alibaba.com constituted an infringement warning to Yiqun.

In a trademark non-infringement declaration case No. Huyizhongminwu(zhi)zhongzi 130/2011, the Shanghai Court held that the written notification from the Shanghai customs had identified the warned party and specified the products' alleged infringement of the registered trademark, leaving the notified party uncertain as to whether it could continue the acts at issue. As such, the notified party had the right to initiate non-infringement declaration litigation.

Written reminder from warned party

The obligation of a written reminder is put in place to prevent the warned party from inconsiderately instituting a declaratory judgment action and to guide the parties concerned towards resolution of disputes through infringement litigation as far as possible. Therefore, it is generally considered that the warned party's issuance of a written reminder to the right holder should serve as a requirement for instituting a declaratory judgment action. For example, in the patent non-infringement case of Xiamen Gudeli Zinc Steel Fence Co., Ltd. ("Gudeli") v Xiamen Shouchuang Junhe Patent Co., Ltd. ("Shouchuang") (No. Minminzhongzi 1084/2014), the Fujian High Court held that Gudeli initiated an action for patent non-infringement declaration on the third day after receipt of the infringement warning with no evidence showing that it had reminded the patentee. Its failure to remind in writing thus became the reason that it was stopped from initiating a declaratory judgment action.

However, to require a written reminder from the warned party rigidly is not only unnecessary on some occasions, but also not in line with the purpose of putting in place the obligation of issuing a reminder. This explains why some courts have deemed that a written reminder is not needed under certain circumstances. For example, in the case of Kun Shan M-bridge Machinery Autotech Co., Ltd. ("M-bridge") v Tien Heng Machinery Co., Ltd. ("Tien Heng") (No. Suminzhong 610/2016), Tien Heng, despite having dropped the infringement suit and expressed its willingness to withdraw its warning to M-bridge and clients thereof, still indicated that it reserved the right to bring an infringement charge. The Jiangsu High Court held that such withdrawal of complaint and warning with reservation could not completely eliminate the negative effects of the infringement warning, and left M-bridge in an uneasy state under the threat of infringement from Tien Heng. Therefore, requiring M-bridge's issuance of a written reminder to Tien Heng just added pointless length to the procedure and was no longer necessary.

In a trademark non-infringement declaration case Xinxiang Wang ("Wang") v Shanghai Hehui Safety Products Manufacture Co., Ltd. ("Hehui") (No. Hu73minzhong 207/2016), the Shanghai Court rejected Wang's appeal on the grounds that the institution of the non-infringement action did not fulfil the legal requirements due to the absence of a written reminder. In this case, Wang issued a warning letter to Hehui, and Taobao.com also subsequently received a pertinent complaint and upon that removed the information about the allegedly infringing products. Hehui did not file the case with the first-instance court until eight months after the receipt of the warning and after the online sales of its alleged infringing products had been affected. The Shanghai Court held that although Hehui did not take the explicit action of sending a reminder in writing, Wang's filing of an infringement suit against Hehui revealed that he had no intention of withdrawing the warning of infringement, and although Wang subsequently sought to drop the infringement suit, Hehui was still rendered uncertain as to whether the alleged infringement would be established. In these circumstances, it was not improper for the court to proceed with the non-infringement declaration litigation.

As can be seen from the cases above, in certain situations where a written reminder is obviously no longer necessary, the court will not automatically consider the written reminder as a prerequisite for the initiation of a non-infringement declaratory action.

Right holder fails to exercise its right of action

In China's IP system, the right holder may either file an infringement suit with the court or request the administrative authority to resolve an infringement dispute. It was argued that, in terms of non-infringement declaration litigation, the only way for the right holder to actively exercise its rights of action was to file an infringement suit with the court. "Exercising its right of action" in the 2009 interpretation should be understood as filing an infringement action with a civil court. In other words, the right holder requesting the administrative authority, within a certain period of time after the written reminder, to resolve an infringement dispute would not hamper the initiation of a non-infringement declaratory action from the warned party.

Currently, the prevalent opinion is that the right holder should have the right to choose whether the dispute is resolved by the administrative authority or by the court. For example, in the trademark non-infringement declaration case of Beijing Tianlong Health Care Tea Co., Ltd. ("Tianlong") v Changzhou Kakoo Tea Foodstuff Co., Ltd. ("Kakoo") (No. Gaominzhongzi 2555/2010), the Beijing High Court held that since Kakoo had filed a complaint with Nanjing Industry and Commerce Bureau, meaning that it had taken measures within a reasonable period of time after the infringement warning, Tianlong could seek confirmation of whether its act constituted infringement through administrative procedures, and therefore Tianlong did not meet the requirements for initiating a non-infringement declaratory action.

Jurisdiction of non-infringement declaration litigation

According to the Notice of the Supreme People's Court on Designation of Jurisdiction in Honda Motor Company Limited v Shijiazhuang Shuanghuan Motors Co., Ltd. et.al, a non-infringement declaratory action should be deemed infringement litigation. Through a combined understanding of this notice together with the Civil Procedure Law and relevant judicial interpretations, it is clear that the competent court can be either that of the place where the defendant is located (i.e. the domicile of the right holder who issued the infringement warning) or the place where the infringing act was committed (e.g. the place where the product at issue of the warned party was produced or sold).

The SPC notice also pointed out that a patent declaratory action and a patent infringement action that involve the same facts are independent lawsuits brought by the two interested parties at different stages to protect their respective rights and interests under the Civil Procedure Law, and the action filed by one party for declaratory judgement will not be absorbed by the infringement action initiated by the other party. However, to prevent cases involving the same facts from being adjudicated inconsistently, the court of a later infringement suit should transfer the relevant case to the court of the earlier non-infringement declaration suit for combined adjudication.

Scope of the non-infringement claim

The scope of the non-infringement claim in a declaratory action shall not exceed that of the relevant infringement warning. The infringement warning issued by the right holder provides the basic premise for the initiation of a non-infringement declaratory action, and thus any non-infringement claim that exceeds the scope of the infringement warning should generally not be included in the scope of adjudication of the non-infringement declaratory action.

For example, in the above-mentioned VMI and Cooper v Safe-Run, the IP Tribunal of the SPC deemed that Safe-Run's infringement warning related to the MAXX model only, and its use of the term "including but not limited to" would not mean that its request could be extended without limitation to other models, such as to the VMI245 model. Hence, VMI was not allowed to file a non-infringement claim beyond the scope of the infringement warning, and its claim should not include the VM1245 model.

Burden of proof

There are primarily three types of evidence involved in non-infringement declaration litigation: firstly, evidence of the defendant's infringement warning to the plaintiff; secondly, evidence of the IP right of the defendant; and thirdly, evidence as regards whether the plaintiff's act infringed the pertinent IP right. Since the premise of a non-infringement declaratory action is the plaintiff's belief that it has received an improper warning, the plaintiff should provide the first type of evidence as related to the infringement warning to justify the necessity of its action. Conversely, the second type of evidence is more difficult for the plaintiff, relative to the defendant, to obtain, and thus the burden of proof of the IP right (including the ownership and legal status thereof) asserted by the defendant should fall on the defendant.

The third type of evidence is more controversial. Some are of the opinion that the general principle of burden of proof, i.e. "he who asserts must prove", should be followed, and thus the plaintiff should provide the evidence. For instance, in patent non-infringement declaration litigation, it should be the plaintiff who proves by way of claim chart etc. that its act falls outside of the scope of the patent right or its act should be deemed as non-infringement.

Another opinion holds that since the declaratory action is only a response to the right holder's allegation of infringement, the infringement allegation should be proved by the right holder who gives the infringement warning. For example, in Benhuan Wang ("Wang") v Ningbo Wentai Sports Equipment Co., Ltd. ("Wentai") (No. Zhezhizhongzi 204/2011), the Zhejiang High Court held that since Wang issued a warning to Wentai alleging that the latter was guilty of patent infringement, Wang should bear the burden of proof for the alleged infringement.

Despite the controversies above, in judicial practice, it is usually the plaintiff who supplies the evidence to prove its non-infringement. In patent cases, for instance, if the patentee does not provide a claim chart in its warning, the warned party itself may provide a claim chart and evidence of non-infringement to expedite the trial.

Leveraging declaratory judgment actions

If a warned party does not take measures after receipt of the warning of infringement, whether its act constitutes an infringement will remain uncertain, thus affecting its normal production and operations. In view of this, with solid grounds, the warned party should consider proactively bringing a declaratory judgment action on the basis of professional analysis, in order to gain advantages in infringement disputes, such as choosing a more favourable forum for adjudication.


Bruce C Tang

Bruce received his BSc in electronics and information engineering from Tongji University and his MSc in communication engineering from the Technical University of Munich. Bruce joined China Patent Agent (H.K.) Ltd. in 2007.

Bruce focuses on patent reexamination, invalidation and litigation in the fields of electronics, telecommunications and mechanics, and has a successful track record at the Chinese courts and the Patent Reexamination Board of the CNIPA. In particular, he has experience in handling standard essential patent (SEP) cases for multinational companies. One of his cases was recognised by the Beijing IP Court as a representative case. Bruce's practice also encompasses patent infringement/ invalidity reviews, IP licensing, FTO analysis, patent landscape analysis, IP transactions and import/export of technology.

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