May 2023
Yanting Jiang and Teresa Huang
The Intellectual Property Tribunal of the Supreme People’s Court has issued 20 model cases from the 3,468 cases involving intellectual property rights in technology and monopoly it concluded in 2022. Among them, there were 7 civil patent cases, 3 administrative patent disputes, 3 new plant variety cases, 3 technical secret cases and 4 monopoly cases. This article will briefly introduce the latest judicial criterion embodied in the cases involving patents and technical secrets.
1. The successive implementation of patent infringement may constitute joint infringement
[Case No.] (2020) Zui Gao Fa Zhi Min Zhong No. 1559, (2022) Zui Gao Fa Zhi Min Zhong No. 541
In the two cases of infringement of invention patent rights and infringement of trade secrets involving Sichuan Golden-Elephant Sincerity Chemical Co.,Ltd., Beijing Yejing Technology Co.,Ltd., Shandong Hualu-Hengsheng Chemical Co.,Ltd., Ningbo Houcheng Management Consulting Co., Ltd., Ningbo Antai Environmental Chemical Engineering Design Co., Ltd. and Mr. Yin, the plaintiff argued that the defendants jointly obtained and used the relevant trade secrets, which constituted joint infringement. The first-instance court partially supported the plaintiff’s claims. The Supreme People’s Court held in the second-instance trial that the defendants had intentional contacts regarding the infringement, and subjectively knew about each other’s actions, sequentially engaging in corresponding acts of infringement, thereby forming a complete chain of infringement. Objectively, they divided the work and cooperated, constituting joint intentional infringement, and should bear joint and several liability for all the damages caused by the infringement. Therefore, the judgment was amended to support all the plaintiff’s claims, ordering the infringers to destroy the infringing production systems and related technical secret carriers through dismantling and jointly compensate the right holder for a total economic loss of RMB 218 million (including a compensation of RMB 120 million for the infringement of invention patents and a compensation of RMB 98 million for the infringement of trade secrets).
The second-instance judgment of the case points out that if the infringement subjects subjectively have intentional contacts, and objectively form the division of work and cooperation, and jointly implement the infringement of the technical secrets involved in the case, resulting in inseparable damage consequences, and the damage consequences and the infringement acts of the infringement subjects have a direct cause-effect relationship, they constitute joint infringement. Moreover, on the liability for damages, the court held that the infringement acts implemented by the infringers sued were an indispensable part of the joint infringement, the four infringers’ acts were indispensable and caused the same damage consequences, and the damage consequences and the four infringers’ acts had a direct cause-effect relationship, so the infringers sued shall be jointly and severally liable for the full amount of the losses caused by the joint infringement, rather than proportionally liable therefor. In general, this case provides a more detailed analysis on joint infringement, and is well worthy of attention.
2. The fault of the parties will be taken into account in determining liability for damages for infringement of standard-essential patents (SEPs)
[Case No.] (2020) Zui Gao Fa Zhi Min Zhong No. 1696
In the patent infringement case of Mr. Xu and Ningbo Roaby Technology Industrial Group Co., Ltd., vs. Hebei Yideli Rubber Products System Company and Hebei Jitong Road & Bridge Construction Co., Ltd., the patentee Mr. Xu and the involved patent’s exclusive licensee Roaby Company of which the legal representative is Mr. Xu claimed that Jitong Company used expansion joint devices manufactured and sold by Yideli Company based on the involved patent in the Pingzan Expressway project, resulting in infringement of the involved patent rights. They filed a lawsuit with the Intermediate People’s Court of Shijiazhuang, Hebei Province, requesting the court to order the two defendants to stop the infringement and jointly compensate for losses and reasonable expenses for safeguarding rights of RMB 3 million. In the first-instance court decided that Yideli Company and Jitong Company had infringed the involved patent rights and ordered Yideli Company to compensate for economic losses and reasonable expenses for safeguarding rights of RMB 100,000. Mr. Xu and Roaby Company were dissatisfied with the judgment and filed an appeal. The Supreme People’s Court held in the second-instance trial that, the involved patent was a standard-essential patent, and the recommended standard explicitly disclosed the involved patented technical scheme, patent number, and the contact information of the patentee. Roaby Company had previously notified Yideli Company in 2016 of suspected infringement of the involved patent rights. Yideli Company was well aware of the existence of the involved patent but not only failed to actively seek patent licensing but also implemented the involved patent again without permission, demonstrating clear subjective fault. Therefore, the judgment was amended to fully support the patentee’s compensation claim of RMB 3 million.
This case shows that, if a standard-essential patent does effectively exist, and the patentee has taken the initiative to communicate, if the infringers sued cannot prove that they have done its duty to actively seek permission, it may be found to have intentionally implemented the fault and thus be sentenced to a high amount of punitive damages.
3. In a technical secrets infringement case involving illegal disclosure acts, the amount of compensation for damages should be determined based on the commercial value of technical secrets disclosed, comprehensively taking into account the specific circumstances of the case
[Case No.] (2021) Zui Gao Fa Zhi Min Zhong No. 2298
In the trade secrets infringement case of Shenzhen Flowers Blossom Co.,Ltd. vs. Zhejiang Panxing Shuzhi Technology Co., Ltd. and Zhejiang Panshi Information Technology Co., Ltd., the plaintiff alleged that the defendants disclosed all of it source code on a public website, thereby infringing its trade secrets. The plaintiff filed a lawsuit and requested the court to order the two defendants to jointly compensate for economic losses of over RMB 50 million and eliminate the impact. In the first-instance court only ordered the defendants to jointly compensate for the losses of RMB 5 million. Both the plaintiff and defendants were dissatisfied with the judgment and filed an appeal. The Supreme People’s Court held in the second-instance trial that the involved software source code constituted a trade secret, and the defendants’ disclosure of the software source code constituted an infringement of trade secrets. The appraisal opinion on the commercial value of the involved trade secret issued by the appraisal institution unilaterally commissioned by the plaintiff shall not be admitted as there were doubts about multiple data therein. Considering such factors as the research and development costs of the trade secret, the proceeds of implementing the technical secret, the benefits to be gained and the period during which a competitive advantage may be maintained, the amount of compensation for damages determined by the first-instance court was not significantly inappropriate. Therefore, the appeal was rejected, and the original judgment was upheld.
This case shows that, in determining the amount of compensation for damages caused by infringement of a technical secret, the appraisal results proposed unilaterally by the plaintiff are more difficult to be admitted, the court will make the final conclusion through comprehensively considering such factors as the research and development costs, the proceeds from implementing the technical secret, the benefits to be gained and the period during which a competitive advantage may be maintained.
4. If the infringer is clearly at fault and the infringement directly determines the business opportunity, in principle, the entire profit may be taken as the infringement profit
[Case No.] (2021) Zui Gao Fa Zhi Min Zhong No. 1363
In the trade secrets infringement case of AE&E Geomicrobial Technologies, Inc. vs. InSoil Energy Technologies Co., Ltd., Mr. Luo, Ms. Li, Mr. Hu, Ms. Zhang, et al., the plaintiff claimed that the defendants not only used its trade secrets but also utilized such trade secrets to deprive the plaintiff of business opportunities that rightfully belonged to it. The Supreme People’s Court held in the second-instance trial that this case involved the infringement of trade secrets caused by a new company established by former employees. InSoil Company knowingly used AE&E’s trade secrets in its actual operations, demonstrating clear subjective malice. Considering that there are relatively few operators in the field of oil and gas microbial exploration and the market competition is not sufficient, it can be inferred that InSoil Company improperly seized the business opportunities that rightfully belonged to AE&E, and thus, InSoil Company’s entire profit therefrom should be treated as the infringement gains. Therefore, the judgment was amended to fully support AE&E’s appeal.
This case shows that, in determining the amount of compensation for damages caused by infringement of a technical secret, in addition to the above-mentioned court’s determination of the compensation standard after taking into account various factors, if the infringer has obvious fault and the infringement directly determine the business opportunities, in principle, the entire profit therefrom may be treat as the infringement profit, that is, if the plaintiff can provide a clear reference standard to prove the value of the involved technical secrets, it is also possible to obtain the court‘s support. At the same time, the case also released a strong signal to effectively strengthen the protection of technical secrets and vigorously safeguard fair competition.
In addition, the model cases issued also include the following cases, which show the State’s protection of innovation, and the determination to maintain a fair competition order in the market. Due to the limitation of space, this article will not analyze all the cases, and interested readers may learn more from:
Model Case 1. The First Case of Drug Patent Linkage Litigation in China [For the judgment of whether the technical solution of a generic drug falls into the scope of protection of patent claims, in principle, it should be judged on the basis of the filing materials of the generic drug applicant] [Case No.] (2022) Zui Gao Fa Zhi Min Zhong No. 905
Model Case 5. “Knotted Anchor Bolt” Utility Model Patent Infringement Case [The content of the public publicity of the infringer sued may eventually be used as the basis for determining the scale of infringement] [Case No.] (2021) Zui Gao Fa Zhi Min Zhong No. 1066
Model Case 8: Two Cases of Invalid Invention Patents for “Levo-ornidazole” [In determining the inventiveness of a patent for a pharmaceutical use of a compound, comprehensive and integrated consideration should be given to whether the prior art provides specific and clear guidelines] [Case No.] (2020) Zui Gao Fa Zhi Xing Zhong No. 475 and 476
Model Case 9: Invalidation of Invention Patent for “Card Metaphor for Activities in a Computing Device” [If several technical features in a technical solution are interdependent and have synergistic effects, and can rely on the whole to achieve a certain function and produce a corresponding effect, the above synergistic effects should be considered in the inventive evaluation] [Case No.] (2021) Zui Gao Fa Zhi Xing Zhong No. 1
Model Case 19: Subsequent Lawsuit Arising from General Motors’ Limited Minimum Resale Price Vertical Monopoly Agreement [The act of agreeing and implementing a limited minimum resale price to a third party with a dealer may constitute monopoly, and if the penalty decision of the anti-monopoly enforcement agency on an act that constitutes monopoly has not been filed an administrative litigation or has been confirmed by the People’s Court within the legal period, and the plaintiff claims that the monopoly has been established, the plaintiff is not required to prove it, unless there is sufficient evidence to the contrary] [Case No.] (2020) Zui Gao Fa Zhi Min Zhong No. 1137
Model Case 20: Administrative Punishment for Maoming Concrete Enterprises’ Collaborative Act Horizontal Monopoly Agreement [As the enterprises involved in the case made intentional contacts and exchanged information, and their price increases were consistent, and no reasonable explanation could be given for the consistency of the acts, such acts constituted “other collaborative acts” under the horizontal monopoly agreement stipulated in the Anti-monopoly Law.] [Case No.] (2022) Zui Gao Fa Zhi Xing Zhong No. 29
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