On 22 February 2024, China’s Supreme People’s Court (“SPC”) released its top 10 influential cases and 100 typical cases selected from the 15,710 cases concluded by its IP court in the past five years. This article focuses on the instruction of the top 10 influential cases.
The third case among the top 10 influential cases is the first case heard by the IP Court after its establishment. The third case (2019) SPC Civil IP Judgment of Final Instance No.2 (“Case No.3) is an infringement case involving an automobile wiper invention patent No. 200610160549.2 owned by VALEO SYSTEMES D‘ESSUYAGE (“Valeo”). Case No.3 filed by Valeo targets the manufacture and sale of wiper products by Xiamen Lu X Auto Parts Company (“Lu X”), etc. In the first instance, Valeo submitted an application for behavioral preservation during litigation. The court of first instance made a judgment that it constituted infringement but ignored the application for behavioral preservation. Lu X filed an appeal. Valeo did not appeal but still insisted on its application for behavioral preservation. The IP Court rejected the appeal based on correcting the functional characteristics of the first-instance judgment and pointed out that it supported the application for behavioral preservation to fill the gap in the legal validity of the first-instance judgment that was temporarily unenforceable due to the appeal. On the substantive side, Case No.3 clarified the criteria for identifying functional features to avoid improper restrictions on the scope of patent protection; on the procedural side, it advocated the adjudication method of preliminary judgment + temporary injunction to relieve rights holders’ rights promptly and efficiently.
The first and tenth cases among the top 10 influential cases involve the characteristics of foreign investment. The first case (2020) SPC Civil IP Judgment of Final Instance No. 1559 and (2022) SPC Civil IP Judgment of Final Instance No. 541 (“Case No.1”) involves disputes over infringements of a melamine invention patent No. 201110108644.9 and a technical secret of a melamine production system with an annual output of 50,000 tons using pressurized gas phase quenching method. Sichuan Jin X Chemical Company (“Jin X”) and Beijing Ye X Technology Company (“Ye X”) are joint patentees of the patent, and Jin X is the owner of the technical secret. The Two companies filed two lawsuits against three companies including Shandong Hua X Chemical Company (“Hua X”) and one of the patent inventors for infringement of the patent and the technical secrets, claiming compensation for losses of RMB 218 million, including RMB 120 million for the loss caused by the patent infringement and RMB 98 million for the loss caused by the technical secret infringement. The plaintiffs’ claims were partially supported by the court of the first instance, but fully supported by the court of the second instance. Although Hua X applied for a retrial but was rejected by the IP Court. Since the judgments of Case No.1 were made about the early implementation of the alleged infringement of the first phase of the project, Jin X and Ye X filed a new lawsuit regarding the subsequent actions of the project and the newly added second phase of the project after the judgments. Based on the settlement agreement reached by the parties on the effective judgment of Case No.1 and the new litigation during the enforcement process, the right holders were finally compensated RMB 658 million, and Hua X also obtained a license to use the patent and the technical secret. Jin X and Ye X are Sino-foreign joint ventures and high-tech private enterprises respectively, and the defendant Hua X is a listed company with state-owned assets. The amount of compensation awarded in Case No. 1 was RMB 218 million, but the right holders were ultimately compensated RMB 658 million. This not only sets a new record for domestic intellectual property rights protection but also reflects the court’s equal treatment of all types of enterprises, including foreign-funded enterprises, in terms of intellectual property protection.
The tenth case (2022) SPC Civil IP Judgment of Final Instance No. 189 (“Case No.10”) is a patent infringement case regarding the invention of a cordless vacuum cleaner No. 200780027328.0 owned by Dayson Technology Limited (“Dayson”). Dayson filed a lawsuit against a technical company in Suzhou (“Suzhou Company”) because the technical solutions used in two cordless vacuum cleaner products produced and sold by it fell within the scope of the patent protection, requesting an order to stop the infringement and compensate for economic losses of RMB 1 million. The court of first instance ruled to reject the lawsuit. Then, Dayson appealed to the IP Court. Dayson and the Suzhou Company are both influential companies in the global household appliance industry. During the second instance, the IP Court learned that the two parties had more than 20 intellectual property disputes around the world. Based on comprehensively sorting out these disputes between the two parties, the IP Court ultimately facilitated them to reach settlements of these global disputes, including Case No. 10, by building a dialogue platform for them. Case No. 10 enabled Chinese and foreign parties to reach a package settlement of global disputes, which was an innovation and effectively resolved global IP disputes between multinational enterprises.
The fourth and fifth cases among the top 10 influential cases involve the pharmaceutical industry. The fourth case (2021) SPC Civil IP Judgment of Final Instance No. 93 (“Case No.4”) is a case concerning the confirmation of the invention patent of a traditional Chinese medicine dispensing machine No. 03135523.4 owned by Sichuan Xin X Pharmaceutical Company (“Xin X”). Based on an invalidation action submitted by a third party, the China National Intellectual Property Administration declared the patent invalid due to a lack of creativity. After the first instance was dismissed, Xin X appealed to the IP Court. Taking into account several factors, including the patent being one of the key technologies for realizing the automation of traditional Chinese medicine dispensing, which can greatly improve the dispensing efficiency of traditional Chinese medicine pharmacies, and the traditional Chinese medicine dispensing machines using this patent have been widely used in the fight against the new coronavirus epidemic since 2020, the IP Court believed that the existing technology does not provide relevant technical enlightenment, and the patent involved in the Case No.4 is creative, and the patent right should be maintained valid. Case No.4 shows the IP Court’s positive attitude towards the effective protection of technological innovation in the field of traditional Chinese medicine.
The fifth case (2022) SPC Civil IP Judgment of Final Instance No. 905 (“Case No.5”) is China’s first drug patent linkage litigation case. Chugai Pharmaceutical Co., Ltd (“Chugai”) is the patentee of the ED-71 preparation invention patent No. 200580009877.6. Following Article 76 (1) of China’s Patent Law amended on 17 October 2020, Chugai filed a drug patent linkage lawsuit against a Wenzhou pharmaceutical company, requesting to confirm that its technical solution for generic idecalcitol soft capsules falls within the scope of protection of Chugai’s patent claims. After the first instance of rejection, it appealed. The IP Court held that the judgment as to whether a generic drug technical solution falls within the scope of protection of patent claims should be based on a comparison and judgment based on in principle the application materials of the generic drug applicant. After comparison, the IP Court held that the technical solution for the generic drug involved did not fall within the protection scope of the patent claims involved. China’s pharmaceutical patent linkage system established based on Article 76 of the Patent Law is in the initial stage of construction. Case No.5 is an exploratory legal application that conforms to the legislative purpose to problems that arise in the early stages of the system.
The sixth to eighth cases among the top 10 influential cases all involve the issue of compensation for the infringement of technical secrets. Both the sixth case (2020) SPC Civil IP Judgment of Final Instance No. 1667 and the seventh case (2022) SPC Civil IP Judgment of Final Instance No. 816 were awarded high compensation of RMB 159 million and RMB 200 million respectively due to findings of bad faith including the continued infringement after the first instance judgment and refusal to implement the behavioral preservation order of the first instance court. In addition, the IP Court in the eighth case (2019) SPC Civil IP Judgment of Final Instance No. 562 increased the punitive damages multiple to the statutory maximum multiple for the first time based on the consideration that the defendant is engaged in infringement, and continued to produce and sell the infringing products to more than 20 countries after its former legal representative was sentenced for criminal offenses involving infringement of technical secrets involved in the case.
Finally, the second and ninth cases among the top 10 influential cases are respectively a new plant variety infringement case and a horizontal monopoly agreement case, and the findings of the first-instance court in both cases were overturned by the IP Court. The second case (2021) SPC Civil IP Judgment of Final Instance No. 816 (“Case No.2”) is a typical case against seed infringement. The defendant posted a message about Agricultural Industry Chain Information Matching in WeChat to look for potential traders. After collecting membership fees from potential traders, it provided transaction information on the seeds involved, agreed on the transaction price, quantity, and delivery time, and arranged delivery and collection. Regarding the defendant’s behavior, the IP Court held that the defendant was the organizer and decision-maker of the seed trade and should be determined to have directly committed infringing sales behavior, rather than assisting the infringement as determined by the court of first instance. In addition, it did not support the defendant’s non-infringement defense of farmers propagating for their use because the defendant was not a farmer, and the scale of its infringing sales far exceeded the reasonable scale for farmers to propagate for their use.
The ninth case (2020) SPC Civil IP Judgment of Final Instance No. 1382 is a monopoly dispute between Zhang X and a brick and tile association (“Association”). The Association has extensively signed Production Suspension and Rectification Contracts with the nature of a horizontal monopoly agreement with brick and tile companies, including Zhang X, to increase the price of bricks and tiles by suspending production of some companies, which will be provided with discontinuance compensation. Zhang X filed a lawsuit because the Association no longer provided compensation under the agreement and caused economic losses to him, demanding compensation for the losses. The court of first instance ruled in favor of Zhang X’s compensation request. However, the IP Court revoked the first instance judgment because it considered that what Zhang was essentially asking for was to carve up illegal monopoly interests that should not be protected by China’s antitrust laws.
In conclusion, the characteristics of the 10 most influential cases released this time include high compensation and a strong international nature. The reasons why the IP Court awarded high compensation include protecting the core technology of relevant enterprises or industries and combating malicious infringement. The strong international nature is reflected in the fact that the parties involved in the four cases are foreign-funded enterprises.