For some time, there has been an increasing number of patent invalidation administrative procedures being suspended due to property preservation measures taken against patent rights, adversely affecting the adjudication and rulings in related patent infringement civil cases. In certain cases, the suspension of patent invalidation procedures was essentially caused by the patentee’s own actions, preventing the accused infringer from defending through invalidation proceedings and resulting in a significant imbalance of interests between the parties.
In a utility model patent infringement dispute, the Supreme People’s Court clarified that when the patent invalidation proceeding is suspended for property preservation measures, preventing an invalidation decision from being issued before the second-instance judgment in the infringement lawsuit, the court may, based on the specific circumstances, impose necessary conditions on the enforcement of the effective judgment. This includes adding conditions for the enforcement of court rulings such as "cessation of infringement" and "compensation for damages" as subject to necessary conditions, and setting the CNIPA upholding the patent claims' validity after examination as a prerequisite for executing the second-instance judgment. This judgment represents a constructive exploration in judgment enforcement and has positive significance in preventing patentees from unjustly benefit from suspended invalidation procedures, curbing litigation misconduct by patentees, expediting dispute resolution, and better balancing the interests of all parties.
Shenzhen A Company (the "patentee") owned a utility model patent titled "An Anti-Gravity Droplet Humidifier"(the “Patent”) with 9 claims. It sued Shenzhen B Company for manufacturing, selling, and offering to sell allegedly infringing products that fell within the protection scope of Claims 2, 3, and 5–8 of the Patent. Shenzhen A Company also sued Natural Person X, who is the legal representative of Company B, for him receiving turnover of the infringing products via his personal Alipay account without settlement with Shenzhen B Company. The first-instance court ordered Shenzhen B Company and X to immediately cease the infringement, destroy inventory, and jointly compensate for economic losses and reasonable legal costs. Shenzhen B Company appealed the rendered judgment, arguing that the accused products implemented prior art and that the case should be suspended pending the outcome of the patent invalidation proceedings.
The Supreme People's Court, in its second-instance review, found that Shenzhen B CompanyB, along with multiple third parties, respectively filed invalidation requests with the CNIPA, asserting that Claims 1–9 of the Patent lacked inventiveness and submitted specific grounds and supporting evidence. On the other hand, Company C, a third-party, sued the patentee before Shenzhen’s Longhua District Court for a private loan dispute, alleging unpaid debts. Upon Company C’s petition, Longhua District Court issued a property preservation order against the Patent. To enforce this order, the CNIPA imposed preservation measures on the Patent from January 10, 2023, to January 10, 2026. Company C and the patentee later settled the loan dispute, with Longhua Court issuing a mediation agreement stipulating that the patentee should pay Company C CNY 300,000 in three installments by August 1, 2026, and Company C should apply to lift the property preservation measures within 5 working days upon the receipt of all payments. Due to the property preservation, all invalidation proceedings against the patent were suspended by the CNIPA.
The Supreme Court found that the accused infringing products fall within the protection scope of Claims 2, 3, and 5–8 of the Patent. While the prior art defense against Claims 2, 3, and 5–7 succeeded, such defense against Claim 8 cannot be sustained. Thus, Shenzhen B Company was liable to cease infringement and compensate for the economic losses as well as reasonable expenses incurred.
Regarding enforcement, the second-instance judgment noted that the Patent involved is a utility model patent, which underwent no substantive examination. In this regard, filing an invalidation request against the utility model patent is a critical defense strategy for the accused infringer. The invalidation proceedings were suspended because of property preservation orders against the Patent, which prevented an invalidation decision from being issued prior to the second-instance judgment of the patent infringement lawsuit. Although the property preservation of the Patent was triggered by a dispute between the patentee and a third party, under the legal relationship between the patentee and the accused infringer, the clear obligation to timely lift the property preservation measures lied with the patentee. The accused infringer shall not bear any potential adverse consequences resulted therefrom. Meanwhile, the people's courts must also prevent bad-faith conduct whereby patentees deliberately cause the suspension of invalidation proceedings through their own actions, so as to safeguard litigation integrity.
Taking into account the court's findings on the prior art defense in this case and the specific invalidity grounds and evidence submitted by multiple petitioners against Claim 8 of the patent in the invalidation administrative proceedings, the second-instance court determined there is a substantial likelihood that Claim 8 would be declared invalid. The eventual invalidation decisions may significantly impact both the adjudication of the related infringement case and the enforcement of this judgment. Notably, the patentee - solely due to its own actions - unreasonably prolonged the property preservation measures against the Patent until 2026 through settlement terms, thereby obstructing the invalidation proceedings. This conduct would inevitably create a significant imbalance between the parties' interests. Accordingly, the second-instance judgment set the CNIPA's final determination maintaining the validity of the asserted claims as the prerequisite of its enforcement. Furthermore, the judgment specifies the interest accrual mechanism for delayed payment: After the enforcement condition is met, from the judgment service date until payment is made within the prescribed period, interest shall accrue at the Loan Prime Rate (LPR) published by the National Interbank Funding Center; post-deadline payments shall incur doubled interest for the delinquency period.
(2024) Zui Gao Fa Zhi Min Zhong No. 370
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