On March 21, 2016, the Supreme People’s Court issued the Second Interpretation of the Supreme People’s Court on Specific Issues Concerning the Application of Law in Patent Infringement Dispute Trials (hereinafter, the “Interpretation) primarily to provide guidance to courts in resolving major difficult issues in patent trials, such as claim construction, indirect infringement, standard implementation defense, defense of legitimate sources, and calculation of damages. Consisting of 31 articles, the Interpretation came into effect on April 1, 2016. The main issues in the Interpretation are discussed below:
(1) The scope of the close-ended claims for enclosed composition is defined.
The so-called close-ended composition claims means that a patent using “consisting of…” or similar wording in its claims to indicate that only the elements of the composition are claimed. Pursuant to relevant provisions in the Patent Examination Guidelines, the scope of close-ended composition claims is limited to the elements as indicated save for the impurities that typically exist. However, there is no express language to this effect in the Patent law and the relevant judicial interpretations, so significant controversy has arisen as to how the scope of close-ended composition claims may be defined in judicial practice. Article 7, Paragraph 1 of the Interpretation addresses this by stipulating: Where any alleged infringing technical solution is supplemented with other technical features on the basis of including all technical features claimed in the closed composition, the people’s court shall deem that the alleged infringing technical solution does not fall within the scope of the patent except when the added technical features fall within the typical unavoidable impurities. “Such interpretation not only maintains the respect and reliance on the disclosure of claims but is also consistent with the provisions on for closed composition claims in historical versions of the Patent Examination Guidelines.
It should be noted that Paragraph 2 of the same article makes an exception on claim construction for Chinese medicine compositions. With respect to composition claims for Chinese medicine, the people’s court shall examine if the additional technical features of an alleged infringing product has substantive impact in solving technical issues to determine if the product falls within the patent protection scope.
(2) Indirect infringer shall assume joint and several liabilities.
Article 21 of the Interpretation specifically provides that people who indirectly infringe by aiding and abetting infringers shall be held jointly and severally liable with the infringers. In general, indirect infringers with no communication of intent with the infringers who ultimately practice the inventions do not constitute contributory negligence. However, given the clear subjective bad faith of indirect infringers, and to further strengthen the protection of patentees, Paragraphs 1 and 2 of the said article separately provide circumstances which constitute aiding and abetting infringement under Article 9 of the Tort Liability Law and joint and several liabilities apply: “where [a party] is fully knowledgeable about the exclusive materials, equipment, parts and components used to practice a patent but, without the consent of the patentee, provides such to others to infringe on the patent right for the purpose of production and operationÓ, and “where [a party] is fully aware that the relevant products and methods are patented but nevertheless induces others to infringe on the patent for the purpose of production and operation”.
(3) The exercise of the “standard implementation defense” is specifically stipulated.
Under Article 24, Paragraph 1 of the Interpretation, with respect to essential patent information involved in recommended national, industry or local standards, if an accused infringer asserts non-infringement on grounds that practicing the standards does not require a patentee’ permission, the people’s court shall disregard such defense. This means that use of essential patent information involved in any recommended national, industry or local standard still requires a license from the patentee.
However, the patentee is also required to perform its obligation under the standards to license under fair, reasonable and non-discriminatory terms. If a patentee violates the above licensing obligation to an extent that a patent licensing agreement cannot be concluded, and if the accused infringing party has committed no obvious fault in the course of negotiation, the patentee may not request the court to enjoin the accused infringer from practicing the standard in accordance with Paragraph 2 of the same article.
(4) The exercise of “the legitimate source defense” is improved.
Article 70 of the Patent Law provides that if the user, offer or seller is able to successfully establish the legitimate source defense, they will not be liable for damages. In practice, there is still some dispute over whether a good faith seller or user who has established legitimate source and has paid a reasonable consideration should be required to stop selling or using the patent, or whether they should still pay royalties for continued use. Article 25 of the Interpretation specifically provides that in case of use, offer for sale or sale for production and operation purposes with no knowledge that the patent infringing products were manufactured and sold without a license from the patentee, such offer for sale or sale shall still be discontinued even where the source of the products is “legitimate”. In the balance of interests, however, a proviso may be made to such rule to exclude good-faith users. To wit, only “users who have unwittingly used infringing products” can exercise the legitimate source defense by substantiating that they have paid reasonable consideration for the products and continue to use the infringing products without paying patent royalties.
(5) The burden of proof for calculating damages is appropriately shifted to infringers.
To address the issue of “difficult substantiation and low damages” in patent litigation, Article 27 of the Interpretation improves to a certain extent the evidentiary rules concerning the amount of damage. Pursuant to this article, if it is difficult to quantify the actual damages incurred by a rights holder, and the amount of damages is thus determined based on the infringer’s profits under Article 65 of the Patent Law, the infringed party is obligated to provide the relevant supporting evidence in that regard. To wit, if the rights holder has provided preliminary evidence in support of the infringerÕs profits, but with the infringer in control of the relevant books, records and materials relating to the infringing acts, the people’s court may order the infringer to turn over such books, records and data. If the infringer refuses to comply or provides falsified materials, the people’s court may determine the profit received by the infringer based on the assertions and supporting evidence submitted by the rights holder to appropriately reduce the burden of proof of the infringed party.
In addition, the Interpretation also contains provisions concerning issues such as desisting from infringing acts, functional features, standards essential patents, estoppel, and the period of temporary protection of an invention patent.