The Supreme People's Court (SPC) has promoted the judiciary's leading role in IP rights enforcement since the promulgation of the National IP Strategy in 2008. Three IP courts were created in Beijing, Shanghai and Guangzhou. More recently, the SPC IP Court was established to avoid the issuance of contradictory decisions. The SPC IP Court will hear all appeals of first-instance judgments rendered in cases of a technical nature (excluding design patent cases).
In addition, the State Intellectual Property Office published drafts of the revised patent law, which – among other things –significantly strengthened the enforcement powers of local IP offices (IPOs). These initiatives received mixed reviews. Some commentators applauded them, while others expressed concerns about the risks that an administrative procedure may entail for the confidentiality of technical secrets.
In the most recent draft law, many of the articles concerning administrative patent enforcement were returned to their original state. Administrative enforcement will therefore continue as before. However, with the ongoing restructuring of the China National IP Administration (CNIPA), local IPOs will progressively rejoin the nationwide enforcement network established by the State Administration for Market Regulation.
Advantages of administrative enforcement
Administrative enforcement has a number of advantages. For example, if properly handled, IPO actions are not necessarily less effective than civil litigation.
The Guangdong province has always been a hot spot for patent infringement disputes (approximately one-third of China's 2018 patent suits were filed there). As such, the Guangdong IPO network comprises the most active and experienced administrative patent enforcement agencies in China.
In 2018 patentees from France and the United States filed patent infringement disputes against four local factories with the Guangdong IPOs. Under the mediation of the IPOs, the cases were settled, with the four factories:
- undertaking not to infringe the subject patents again;
- compensating the patentees financially;
- destroying the detained infringing products and moulds; and
- promising to pay liquidated damages of Rmb500,000 to Rmb1 million in case of repeat infringement.
In each case, the length of time between filing the case and executing the settlements was only six months.
If an alleged infringer is located in the Guangdong province, the following factors should be considered when deciding whether to approach the courts or a local IPO.
Timespan of enforcement
One important factor that makes enforcing patents in China difficult and ineffective is the lengthy litigation procedure, during which the defendant may continue its infringement operation. If the infringer's products specifically target foreign markets, the patentee often has to wait for the civil litigation judgment to take effect. In contrast, the administrative enforcement procedure is quick. Article 19 of the Administrative Enforcement Measures for Patents stipulates that:
The administrative department for patent affairs shall close the file within four months from the date of receiving the complaint. If the case is particularly complex and the time period needs to be extended, it shall be approved by the head of the Department in charge of patent administration. The period of extension approved shall not exceed one month. (Emphasis added.)
With the creation of an increasing number of IP rapid enforcement centres to process simple disputes, the procedure has been further expedited. Such a centre can wind up a simple case within three months.
Difficulty in infringement analysis
If the alleged infringer refuses to comply with a local IPO's decision, it may institute an administrative suit against the decision. In order to avoid administrative litigation, local IPOs often persuade patentees to withdraw their complaints and approach the courts with their evidence in cases where the IPO is not competent to analyse an alleged infringement. If the patentee has already collected qualified evidence of patent infringement and concludes that it is not literal infringement, the judicial route is likely to be a better option. In addition, if the technology is complicated and tests are required to determine infringement, the patentee should go directly to the court, as IPOs have limited resources in this regard.
Characteristics of infringers and difficulty of evidence collection
If an infringer is a small or medium-sized factory, IPO action can be an opportune choice. These kinds of infringers, which often have little or no patent awareness, are unlikely to challenge an IPO decision by engaging a patent attorney to undertake a non-infringement analysis. Rather, they will often stop their infringing activity and negotiate the level of compensation. Further, the fact that such infringers often operate stealthily makes it difficult for patentees to obtain physical evidence of infringement or evidence of the profit yielded from such infringement. There are many restrictions in requesting the court to preserve evidence for the patentee. However, a local IPO may, at the patentee's request:
- inspect the alleged infringer's facilities to draw samples;
- identify the infringing products and moulds used to produce the infringing products;
- take photos or videos for infringement analysis; and
- inspect and copy the business records (if any) and interrogate the responsible persons through an on-site inspection procedure.
Engaging a local IPO to collect evidence will greatly alleviate a patentee's burden of proof in an infringement dispute.
After obtaining strong evidence of infringement through a local IPO's on-site investigation, patentees may:
- settle the dispute by IPO mediation; or
- withdraw the complaint from the IPO and approach the courts with the official evidence.
In addition, under Article 41 of the Administrative Enforcement Measures for Patents, the measures taken by an IPO to stop infringement include "destroying the equipment and moulds used for manufacturing infringing products". If an IPO inspection confirms that the alleged infringer has the special equipment and moulds, it may supervise their destruction in a follow-up procedure. Conversely, in civil suits, infringers often deny the existence of such equipment and moulds. Even if the court orders the destruction of equipment and moulds, it is difficult to execute such a court order.
Against the backdrop of China's changing IP landscape, the administrative enforcement of patents remains a valid option. Although the local IPOs of the Guangdong province are being incorporated into the local administrations of market supervision, their patent enforcement function will remain intact. As such, judicial and administrative protection will likely dovetail in future to achieve complementary advantages. IP practitioners are therefore advised to tailor enforcement strategies to the circumstances of the case and needs of the client.
For further information on this topic please contact Shuhua Zhang at Wanhuida Peksung by telephone (+86 10 6892 1000) or email ([email protected]). The Wanhuida Peksung website can be accessed at www.wanhuida.com and www.peksung.com.
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