An analysis of the factors that shape the outcome of patent infringement disputes

In a patent infringement dispute the legal elements are, first, ownership of the patent right; secondly, the facts of infringement; and thirdly, the degree of fault. The first two decide whether infringement is made out and whether the patentee may recover. Taking full account of what the parties argue in court, the factors that most often appear are: invalidity of the patent, infringement by equivalents, complete coverage, overall observation and comprehensive judgment, prior art or prior design, functional technical features, estoppel, and lawful source. According to the author's search on PKULaw, these factors occur with comparatively high frequency in patent infringement cases, distributed as follows:

1. Invalidity of the patent in suit

It goes without saying that almost every patent infringement action involves the invalidity of the patent in suit, which has become almost the first resort of an accused infringer. In invalidation cases the provisions most often relied on are article 26 of the Patent Law (insufficient disclosure in the specification) and article 22 (novelty and inventiveness).

In the administrative reexamination and invalidation case concerning the "dry fryer" that drew much attention in intellectual property circles this year, Beijing 73 Xing Chu No. 5126 (2017), the first petitioner for invalidation, Zhongshan Jinlangbao Electrical Appliances Co., Ltd (Jinlangbao), had been ordered by the Higher People's Court of Guangdong Province in its civil judgment (2014) Yue Gao Fa Min San Zhong Zi No. 384, made on 18 December 2015, to pay the patentee, the SEB company, RMB 500,000; the second petitioner, Zhongshan Huateng Electrical Appliances Co., Ltd, had been sued by SEB in the Guangzhou Intellectual Property Court, and from ruling (2015) Yue Zhi Fa Zhuan Min Chu Zi No. 2646 it may be inferred that the two reached a settlement and the action was withdrawn, Huateng (as it is called) undoubtedly having paid a considerable price.

In the present administrative reexamination and invalidation case, the main grounds advanced by the petitioners Jinlangbao and Huateng were that the specification did not disclose the invention sufficiently and that there was no novelty or inventiveness. In some invalidation cases a patent agency, drafting the claims, tends to use "generic" wording without explaining it clearly in the specification, which leads to an adverse invalidation decision; but in this decision the Reexamination Board held that the necessary connection and mode of cooperation between the features "heat flow", "main heater device", "heat flow" and "directed impact on at least part of the food" were fully reflected in the specification, and so did not uphold the request on this ground.

As to novelty and inventiveness, the Patent Law speaks in fairly general terms, but the Guidelines for Patent Examination published by the State Intellectual Property Office deal with them in part three of chapter two. Novelty means that there is no "prior art" and no "conflicting application"; inventiveness means that there is no simple technical modification of the kind "prior art plus common general knowledge" or "prior art A plus prior art B".

2. Complete coverage and infringement by equivalents

In an invention or utility model patent, the infringing product must contain every technical feature of the claim of the patent in suit, which is the so-called principle of complete coverage. This is the comparison on which patent infringement cases turn. An infringer may, however, vary the working of the patent in suit to some extent, and here the "equivalent feature" comes into play: "a feature which, in comparison with the technical feature recorded in the claim of the patent in suit, is realised by substantially the same means, achieves substantially the same function and reaches substantially the same effect, and which a person of ordinary skill in the art could think of without inventive effort". In some cases that technical judgment is extremely fine and requires a specialist in the field to take part, which is the point of introducing "technical investigators" into patent trials.

Where complete coverage or infringement by equivalents is not made out, however, the court will rarely find infringement even if the infringer knew of the earlier patent and intended to infringe. In the utility model case brought by Zhang Jianhua, applicant for retrial, against Shenyang Zhilian High-Rise Heating Technology Co., Ltd, respondent, and Shenyang Gaolian High-Rise Heating Network Technology Co., Ltd, respondent in the appeal, the defendant Zhang Jianhua was an employee who had moved from the patentee; knowing of the earlier patent and seeking to avoid infringement, he deliberately omitted one important technical feature when making the product, which made the technical effect worse. The Supreme People's Court held on retrial that under the principle of complete coverage, since the inferior feature did not satisfy the two requirements of an equivalent feature, "achieving substantially the same function" and "reaching substantially the same effect", it was hard to find that Zhang Jianhua had infringed.

3. "Overall observation and comprehensive judgment" for design patents

Compared with invention and utility model patents, the assessment of technical features in a design infringement case is somewhat less clear, and generally follows the principle of "overall observation and comprehensive judgment", which sometimes produces inconsistent understanding in adjudication. In the administrative case brought by Zhuhai Gree Electric Appliances Co., Ltd, applicant for retrial, against Guangdong Midea Electric Appliances Co., Ltd, respondent, and the Reexamination Board of the State Intellectual Property Office, respondent in the appeal, concerning the validity of a design patent (an administrative case, though the comparison is the same as in an infringement case), the proprietor of the earlier design, Gree, applied to invalidate Midea's patent for a "wind wheel" and produced its own earlier design for a "fan blade" as the comparison document. The Patent Reexamination Board held in its invalidation decision that, because the wind wheel of the patent in suit is installed inside an air conditioner, the relevant ordinary consumer should be the technical purchasing staff and maintenance staff of air conditioner manufacturers, and the judges in the first and second instance therefore compared the two designs more strictly and found them not similar. On Gree's application for retrial, however, the Supreme People's Court pointed out: "The ordinary consumer is an abstract judging subject established to make the conclusion more objective and accurate, and has a particular level of knowledge and capacity for cognition. As to knowledge, the ordinary consumer has a common-sense understanding of products of the same or a similar category as the patented design product, knows the state of the designs of the relevant products before the filing date, and is familiar with the customary designs on those products. As to capacity for cognition, the ordinary consumer has only ordinary attention and powers of discrimination towards changes in such design elements as shape, colour and pattern, attends to the overall visual effect of the design, and will not attend to minor local differences between the patented design and the comparison design."

The implication of that passage is that for a design patent the group constituting the ordinary consumer should not be limited by the type or function of the product, and that the knowledge and capacity for cognition of the ordinary consumer are described in a correspondingly fixed way. This means that a design patent cannot be compared feature by feature under the principle of complete coverage as an invention or utility model patent is, but must be judged by the standard of "overall observation and comprehensive judgment by the ordinary consumer"; the finding of infringement or non-infringement is therefore less clear, and tends towards the judge's inner conviction.

Where a design patent has been the subject of a patent right evaluation report, however, that report generally states the main features of the design in the section giving its opinion on sameness or similarity, and may serve as the basis for comparison at trial, which makes the comparison more objective. In addition, where the patent in suit has been through invalidation proceedings, the findings on particular features made by the Reexamination Board in its decision may likewise serve as a comparatively objective point of reference.

4. Prior art and prior design

Apart from invalidation, this is probably the commonest term in patent litigation. Article 62 of the Patent Law provides expressly that in a patent infringement dispute, where the accused infringer proves that the technology or design it has worked is prior art or prior design, there is no infringement of the patent right.

In patent litigation, therefore, an accused infringer will generally search for prior art or prior design at home and abroad. Under the Patent Law prior art or prior design means technology "known to the public at home and abroad" before the filing date, which chiefly covers disclosure by publication and disclosure by use. Before the amended Patent Law came into force on 1 October 2009, however, the Patent Law described prior art as technology "published in publications at home or abroad, used publicly in China, or made known to the public in other ways", that is, under the Patent Law before amendment, public use abroad did not constitute prior art. In practice many patents were applied for before 1 October 2009 while the infringing acts occurred after that date, and prior art or prior design must still be defined by the Patent Law in force on the filing date; this was made clear in article 22 of the second judicial interpretation of the Patent Law.

In the case brought by ThyssenKrupp Airport Systems GmbH, applicant for retrial, against China International Marine Containers (Group) Co., Ltd and Shenzhen CIMC Tianda Airport Equipment Co., Ltd, respondents, and Guangzhou Baiyun International Airport Co., Ltd, defendant at first instance, for infringement of an invention patent, the finding of prior art was highly sensitive. Both sides broadly agreed that the patent in suit had been made public by use abroad before the filing date, but the application had been filed before 1 October 2009, so that public use abroad could not constitute prior art at that time; the dispute therefore came to focus on whether Appendix Y, a document supplied by the accused infringer with its sales of boarding bridges abroad, constituted prior art of the kind that is a published document. The case went through first instance, appeal and retrial, and the Supreme People's Court ultimately held that although Appendix Y was an operation and maintenance manual for a product delivered to users with the product, neither its users nor those who came into contact with it were under any duty of confidentiality, so that Appendix Y was public and could be obtained by members of the public at large by photocopying. The applicant for retrial proved by notarisation and authentication that a witness, on 11 November 2011, as a citizen of the State of California, had under that state's Public Records Act requested from San Francisco International Airport, by letter delivered by overnight mail, Appendix Y, "hydraulic stabiliser", of the manual that ThyssenKrupp Airport Systems had supplied to the airport as subcontractor under contract No. 5520.L, together with the cover or title page of that operation and maintenance manual and the list of appendices; and that on 22 November 2011 the witness received those documents without undertaking any duty of confidentiality and without receiving any notice that the material was confidential or ought to be kept secret. It followed that Appendix Y was an independent vehicle of dissemination, and since it also recorded the technical features of the patented technology and the time of its delivery to San Francisco International Airport, that is the time of publication, could be established, it was a publication in the sense of the Patent Law and the prior art defence succeeded.

The term "publicly known technology" also appears in many cases, but judging by practice it means prior design, and no distinction need be drawn between the two.

In some patent infringement cases an "invalid patent" is put forward, but at trial an accused infringer cannot rely on the fact that the technology it uses corresponds to an "invalid patent" as a defence, unless the filing date of that "invalid patent" meets the definition of prior art or prior design or it constitutes a conflicting application.

5. Functional technical features

Before the second judicial interpretation, many patentees who favoured functional technical features were in a comparatively passive position. When drafting a patent document a patentee supposes that using "rotating component" will cover every part that rotates and so widen the scope of protection, not realising that under article 4 of the first judicial interpretation of the Patent Law issued by the Supreme People's Court in 2010, for a technical feature expressed in a claim by function or effect the People's Court shall determine the content of that feature by reference to the specific embodiments of that function or effect described in the specification and drawings and their equivalent embodiments. This means that where a technician reading the claim alone cannot tell what part the "rotating component" is, he must turn to the specification and drawings to fill out his understanding and fix the scope of protection, with the result that the scope of the patent right is narrowed.

Article 8 of the second judicial interpretation of the Patent Law, newly issued by the Supreme People's Court in 2016, however, gives a further reading of functional features, adding the concepts of what "a person skilled in the art can determine directly" and of "infringement by equivalents", and so easing the patentee's passive position.

In any event, for an invention or utility model patent, coined terms that are not in the technical dictionaries, such as "braking member" or "stopping member", must be used with caution, since they tend rather to narrow the scope of the right and to impose an extra burden of proof.

By coincidence, paragraph (f) of section 112 of the United States Patent Act, 35 U.S.C. 112, provides that an element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material or acts in support thereof, and that such a claim shall be construed to cover the corresponding structure, material or acts described in the specification and equivalents thereof.

6. Estoppel

Because the grant of an invention or utility model patent may involve answering examination opinions, where in the course of examination, or in invalidation proceedings after grant, the patentee gives a narrowing interpretation of certain technical terms in the claims, the scope of protection of the patent will be limited to that narrowing interpretation, and consistency must be maintained in litigation: the patentee may not "go back on" it, nor extend it through "infringement by equivalents".

In the case of Beijing Shiyi Tuozhan Technology Co., Ltd against Shaanxi San'an Technology Development Co., Ltd for a declaration of non-infringement, for instance, the patentee Beijing Shiyi submitted a statement of opinion and amended claims in the invalidation and reexamination proceedings, deleting original claims 1 and 2; in the litigation, however, it relied as the compared technical features on the "electric motor" and "electromagnetic tractor" described in the deleted claims, and the court did not support it.

Estoppel is not, however, a matter of course: where a party has not voluntarily "given up" a claim but has had an independent claim "invalidated" by the Patent Reexamination Board in invalidation proceedings, an equivalent infringement may still be made out on the dependent claims that remain valid. In the utility model case of Zhongyu Electronics (Shanghai) Co., Ltd against Shanghai Jiuying Electronic Technology Co., Ltd, the Supreme People's Court explained the difference between "voluntary abandonment" and "passive invalidation" in the scope of protection of claims: "The principle of estoppel applies to amendments or statements that narrow the scope of protection of the patent right, that is, the technical solution thereby given up should no longer be brought within the scope of protection. Such abandonment is usually a self-abandonment by the patentee through amendment or statement of opinion. Where, however, an independent claim has been declared invalid and the patent is maintained as valid on the basis of its dependent claims, and the patentee has made no such self-abandonment, full attention should be paid to the fact that the patentee has not abandoned anything itself, and the conditions for finding abandonment should be strictly applied. Where the additional technical features in the dependent claim were not encompassed by the independent claim, then, since those additional features have no original point of reference, it cannot be presumed that the technical solutions outside those additional features have been abandoned in their entirety."

7. Lawful source

This is, one might almost say, the "last firewall" of every seller. Many sellers hold a great quantity of goods and may well sell products infringing a patent without knowing it. Under article 70 of the Patent Law, a person who, for the purposes of production and business, uses, offers to sell or sells a patented product that infringes, not knowing that it was made and sold without the patentee's licence, and who can prove that the product comes from a lawful source, bears no liability for compensation.

That is to say, if an accused infringing seller produces evidence of how it obtained the goods, such as the relevant sale contracts, invoices, authorisations, receipts and purchase orders, it may at least be relieved of liability for compensation, though it may not go on selling the infringing product.

The TRIPS Agreement mentions the matter only in article 45: for an infringer who has knowingly, or with reasonable grounds to know, engaged in infringing activity, the judicial authorities shall have the authority to order the infringer to pay the right holder damages adequate to compensate for the injury suffered because of an infringement of that person's intellectual property right. That is, it does not require the principle of liability for damages to be one of no fault. China's Patent Law goes further and makes it clear that "he who does not know is not guilty" (limited to sales from a lawful source). This also suits China's present circumstances: most of the world's advanced patented technology is after all held by developed countries, and to require the production and business activities of a developing country to stand at all times under the threat of infringement would hold back its economic development.

Conclusion

On the whole, the trend of intellectual property protection in China has advanced a good deal over recent years, and the legal and policy support the patentee receives is strengthening; at the same time those working in the legal system, lawyers among them, understand better the analysis of the factors that shape patent infringement, and can put those factors to full use at trial to win the greatest lawful advantage for their own client, which is undoubtedly progress in the rule of law in China too.