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On 22 December 2022, the Supreme People’s Court (SPC) issued final decisions for three cases of VMI HOLLAND B.V. vs. Safe-Run Intelligent Equipment Co., Ltd. (SPC Cases [2020] No. 661, 902, 1003), in which the issues dealing with claims of patent ownership based on the misappropriation of technical secrets are clarified, as per an article written by two judges of the Intellectual Property Tribunal of the SPC and published on 11 May 2023.
Cases Summary
The three cases respectively involve the invention patent right for “a tread component loading system” under Chinese Patent Registration No. 201410624213.1, the invention patent right for an “auxiliary orientation device for conveyor belt ply” under Registration No. 201610332841.1, and a utility model patent right for an “auxiliary orientation device for conveyor belt ply” under Registration No. 201620457270.X, owned by Safe-Run Intelligent Equipment Co., Ltd. (Safe-Run), a Chinese company located in Kunshan, Jiangsu Province.
VMIHOLLAND B.V. (VMI), a Dutch company, claimed that it had first developed “vertical and horizontal transverse movement of banding drums for laminating material systems” and “auxiliary directional roller mechanisms for conveyor belt bundle layers” and applied these to its tire moulding machines, and that it had protected the involved relevant technology as technical secrets, however, Sun-Run’s filing and registration of the patents mentioned above infringe its technical secrets. Consequently, VMI filed three lawsuits with the Suzhou Intermediate People’s Court (Suzhou Court) (Case No. [2018] 05 1296), requesting orders that the three patent rights be transferred to VMI. Such civil infringement disputes between two business entities are usually dealt with by intermediate courts where the defendant/respondent is located, according to the PRC Civil Procedure Law, rather than in the Beijing IP Court.
On 26 December 2019, the Suzhou Court issued judgements of first instance. It held that VMI had failed to show that Safe-Run had committed the act of unlawfully appropriating the prior confidential technology claimed by it, and accordingly rejected VMI’s requests in all three cases.
Dissatisfied with the judgements of first instance, VMI appealed to the SPC, claiming that the Suzhou Court improperly applied the burden of proof, and that VMI had proved that the patented technical program at issue was substantially the same as its prior technology, and Safe-Run had the possibility of access to the prior technology and had actually accessed it.
Through a hearing on 19 January 2021, and the exchange of additional evidence and questioning of the parties organized on 31 May 2021, the SPC held that the prior technology claimed by VMI had constituted technical secrets, and VMI had proved that Safe-Run had access to the prior technology before the filing dates of the patents at issue. Under such circumstances, although Safe-Run claimed that the patented technical program was independently researched and developed by itself, the so-called evidence of research and development submitted by Safe-Run was only the conclusion of the research and development, but lacked the process of technical information that could reflect the substantive content of the research and development, which was insufficient to reflect the complete research and development of the technical program, and was insufficient to show the independent research and development of Safe-Run, and that Safe-Run had made a creative contribution to the substantive features of the patents at issue - therefore, Safe-Run’s claim that it was entitled to the rights of the patents at issue lacked basis in fact and in law according to the SPC. Accordingly, the SPC concluded that Safe-Run had obtained the prior confidential technology of VMI by improper means and then improperly filed for registration of patents covering that technology of VMI.
Legal Basis
The SPC withdrew the first-instance judgment and changed the ownership of the patents involved, in accordance with Article 9, Paragraph 4 of the Anti-Unfair Competition Law, Articles 3, 4, 5, and 6 of the Provisions of the SPC on Several Issues Concerning the Application of Law in the Trial of Civil Cases of Infringement of Trade Secrets, Article 6 of the Patent Law (amended in 2008), and Article 13 of the Detailed Rules for the Implementation of the Patent Law.
SPC Trial Review
The SPC pointed out in the decisions that, where the right holder of a technical secret uses the infringement of the technical secret as the basis of the claim and asserts that the patent right at issue is owned by it, the court should, in the course of the trial, examine the following two aspects:
1) whether the patent document discloses the technical secret asserted by the right holder or whether the patented technology makes use of the technical secret;2) whether the technical secret constitutes a substantial part of the technical program covered by the patent at issue.
In determining whether the patent document at issue discloses a technical secret, it can be generally presumed that the fact regarding the accused patent owner has obtained and disclosed the technical secret by improper means has been established, if the right holder of the technical secret provides evidence to show the following facts:
1) The technical program disclosed in the patent document is the same as or substantially the same as the technical secret claimed by it;2) The accused patent owner has the channel or opportunity to obtain the technical secret of the right holder of the technical secret before the filing of the patent application.
If the accused patent owner claims that it has completed the accused technical program by independent research and development or that the accused technical program has a proper source, it should bear the burden of proof; if the accused patent owner provides evidence sufficient to prove its claim, it can negate the presumption of illegal acquisition and disclosure, and at the same time can also prove that it enjoys the legitimate right to the patents at issue.
Comments
It was pleasing to see the win for VMI in these three cases, which should be seen as positive for the protection of technology developers who rely on technical/trade secrets for the protection of part or all of their technology. The SPC decision offers welcome guidance for courts at all levels in China when looking at similar cases in the future.