In an appeal case concerning a utility model patent infringement dispute, the Supreme People’s Court clarified that for patents with questionable stability, courts may adopt interest-balancing measures, such as appropriately extending the enforcement period of an effective infringement judgment or requiring a compensation commitment for future benefits, so as to reconcile procedural justice with substantive fairness and promote genuinely valuable invention creations.
Company A is the patentee of a utility model patent entitled “A Sound-Absorbing and Sound-Insulating Barrier Board” (hereinafter referred to as the patent). It claimed that an insulation and protection facility for a certain highway section (hereinafter referred to as the accused infringing products) manufactured and sold by Company B fell within the protection scope of the patent. Company A filed a lawsuit demanding that Company B ceases the infringement and compensates for economic losses of CNY 1 million and reasonable enforcement expenses of more than CNY 50,000.
Upon trial, the court found that the CNIPA had issued a “Utility Model Patent Evaluation Report” on the patent in question, with a preliminary conclusion that none of the claims of the patent possessed inventiveness and thus did not meet the conditions for patent grant. After comparison, the court of first instance determined that the technical solution of the accused infringing products fell within the protection scope of the patent in question, and that Company B had manufactured and sold the accused infringing products. Accordingly, the first-instance judgment ordered Company B to immediately cease its infringing acts and to compensate Company A for economic losses and reasonable enforcement expenses totaling more than CNY 250,000.
Company B, dissatisfied with the decision, filed an appeal.
During the second-instance proceedings, Company A confirmed that the patent evaluation report had been requested by itself before the CNIPA and that the report was issued before the filing of this lawsuit. Regarding the issue that the evaluation report indicated that the patent was of questionable stability, Company A explicitly declined to make a commitment to compensate Company B for potential benefits if the patent is legally invalidated in future proceedings. Company B also confirmed that it did not intend to file a request for invalidation against the patent with the CNIPA, and did not assert a prior art defense in this case either.
The Supreme People's Court, in its second-instance judgment, held that the principle of prohibition of abuse of rights is a specific embodiment of the principle of good faith, and is also a fundamental rule in exercising civil rights. When exercising patents, patentees must also abide by the principle of good faith and must not abuse their rights to the detriment of the public interest or the legitimate rights and interests of others. The legal basis for a patent infringement lawsuit is a lawful and valid patent. However, once a patent is granted, any entity or individual may file an invalidation request against the patent. A stable right basis is a reasonable prerequisite for determining liability in a patent infringement lawsuit. If a patentee, despite being aware that the validity of the patent for which protection is sought is questionable, persists in filing or refusing to withdraw a patent infringement lawsuit, and such a patent is subsequently declared invalid and ultimately causes harm to another party’s legitimate rights and interests, such conduct may constitute abuse of rights. Although under China's current legal system, the validity of a patent is determined by the patent administrative authority under the State Council, if the people's court, in a patent infringement lawsuit, merely relies on the fact that the patent in question has not yet been declared invalid and simply rules based on the presumption that the patent is still valid, while turning a blind eye to doubts about the patent's stability and the potential harm this could cause to others' rights, it would in essence violate the principle of fairness and would not help encourage truly valuable inventions. Therefore, when the people's court determines, after trial, that the validity of the patent is in doubt in a patent infringement lawsuit, it may adopt certain interest-balancing measures. For example, the court may actively inform the alleged infringer that they may legally file an invalidation request and suspend the infringement proceedings accordingly after such a request is filed. The court may also guide both the patentee and the alleged infringer to make future benefit compensation commitments to each other, depending on whether the patent is eventually invalidated or upheld. In addition, depending on the specific conditions of the case, the court may appropriately extend or adjust the deadline for performing obligations under an effective judgment that affirms infringement and liability, so as to prompt the alleged infringer to timely initiate the invalidation procedure against the patent in question and proactively seek legal remedies to protect their rights.
Before filing the present lawsuit, Company A had already become clearly aware, through a patent evaluation report, that the validity of the patent was questionable. After the court’s explanation, Company A explicitly stated its refusal to make a future benefit compensation commitment to Company B if the patent is declared invalid in accordance with the law, which violates the principle of good faith. Company B, after being informed by the court, also explicitly stated that it would not consider filing a patent invalidation request, which is a passively neglect to lawfully pursue remedies for the protection of its own rights. If this case were to simply uphold the first-instance ruling based solely on the current infringement findings, Company A could obtain damage payments immediately after the 10-day performance period (specified in the ruling) expires. However, even if the patent is later declared invalid, Company B might not be able to obtain a substantive remedy. To reflect substantive fairness and procedural justice, the second-instance judgment has decided to extend the period for performing the monetary payment obligation determined in the first-instance ruling to one year. This both gives Company B an opportunity to seek remedies through the patent invalidation procedure and prevents it from passively neglecting to lawfully pursue remedies for the protection of its own rights in a way that would harm Company A’s interests. At the same time, if Company B still fails to act within the one-year performance period or if the patent is upheld as valid after undergoing the invalidation review process, then Company B shall be required to compound interest on the outstanding amount from the expiration date of the specified performance period.
The second-instance judgment in this case adheres to the judicial concept of protecting good faith and actively innovates interest-balancing measures in infringement cases where the stability of the patent is questionable It effectively prevents abuse of patents by the patentee while also urging and guiding the alleged infringer to lawfully seek remedies, thereby truly reflecting the institutional value of the Patent Law in enhancing innovation capacity and promoting technological advancement and socio-economic development.
(2022) Zui Gao Fa Zhi Min Zhong No. 2833
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