“A tailored strategy can help maximize the advantages of China’s administrative patent infringement procedure while minimizing uncertainties.”

Patent Infringement ProcedureThere are two distinct procedures available to parties for resolving patent infringement matters in China: an administrative procedure before the IP office and a civil procedure before the courts. With the ongoing efforts of the China National Intellectual Property Administration (CNIPA), the regulation of patent infringement administrative procedures has become more comprehensive.

In July 2024, CNIPA published the “Method of Administrative Adjudication and Mediation for Patent Disputes” for public comment. Prior to this, CNIPA had already published and updated the “Measures for Administrative Enforcement of Patents” (URL) and the “Guide to Patent Administrative Enforcement (Trial Version)” (URL).

Here are some of the key aspects and important takeaways with respect to China’s administrative process for patent holders.

1.  Choosing Administrative Procedures for Patent Infringement

Various factors may prompt a patent holder to initiate legal action against patent infringement. Regardless of the specific motivation, a common goal is to achieve a swift and pressure-driven outcome against the opposing party. One crucial factor in a quick resolution is the efficiency of the chosen legal procedure.

In this regard, the administrative procedure stands out as a superior option. The efficiency of the review process for patent infringement matters is generally higher before a Chinese IP office compared to court procedures.

During the acceptance and petition-serving stage, the administrative procedure imposes strict time limits. The case must be accepted within five days, and the petition must then be served to the opposing party within 15 days.

In the substantive stage, the IP office is required to conclude the case within three months. If an extension is necessary, the extension period cannot exceed one month.

In contrast, the timeframe for patent infringement cases in Chinese courts often does not meet these strict timelines. Although Chinese courts have made efforts to shorten the various stages, the timelines for court procedure are still less predictable compared to the administrative procedure.

Therefore, if a patent holder intends to seek a swift infringement decision, the administrative procedure should be considered.

2.  The Impact of an Infringement Decision Issued in Administrative Procedures

The IP office can issue an administrative order to cease infringing behavior. The opposing party has the right to appeal this decision to the court for further review, which may hinder the effectiveness of the administrative ruling.

However, with the ongoing refinement of regulations related to administrative procedures, the potential outcome and impact of administrative decisions are improving and becoming clearer.

For example, Article 41 of the “Method of Administrative Adjudication and Mediation for Patent Disputes (Exposure Draft)” stipulates:

“After an administrative adjudication or judgment rendered by the department charged with the administration of patents or a people’s court determining the commission of an infringement and ordering the infringer to immediately cease the infringement takes effect, if the same type of infringement upon the same patent right is committed again and the patentee or an interested party requests the handling of the infringement, the department charged with the administration of patents may directly make an administrative adjudication ordering the immediate cessation of the infringement. If a party intentionally infringes upon a patent right or refuses to perform or evades the performance of an administrative adjudication decision after the decision is made by the department charged with the administration of patents, although it has the capacity to do so, which seriously affects the credibility of the department charged with the administration of patents, the party may be included in the list of seriously dishonest entities subject to joint punishment in accordance with the law.”

This article imposes severe consequences on companies with local entities in China and their representatives.

Another example involves e-commerce businesses that primarily operate on internet platforms. Article 80 of the Exposure Draft includes a provision addressing blocking methods against online sales channels:

“If the department charged with the administration of patents determines that a patent infringement has been committed through the e-commerce platform and makes an administrative adjudication, it shall notify the network service provider and e-commerce platform operator to promptly take necessary measures such as deleting, blocking, disconnecting, and terminating transactions and services on the relevant webpages for the patent-infringing products or infringing products directly obtained through the patented process, in order to stop the infringement committed by the business operator on the platform.”

Although China’s Patent Law provides parties with the opportunity to seek a court’s review of administrative decisions issued by the IP office, Article 81 of the Exposure Draft explains that existing administrative decisions shall not be suspended during a court review:

“Where the respondent files an administrative lawsuit with a people’s court after the department charged with the administration of patents makes an administrative adjudication determining the commission of a patent infringement and ordering the infringer to immediately cease the infringement, the enforcement of the administrative adjudication shall not be suspended during the proceedings.”

If the patent holder, as the petitioner, can establish infringement before the IP office quickly, the above regulations can further strengthen the actual deterrent effect of the administrative procedure.

3.  Only Infringement Can be Determined in Administrative Procedures—not Compensation

According to China’s Patent Law, the IP office can only make determinations regarding infringement issues based on valid patents. For damages, the IP office may mediate between the parties, but if no agreement or settlement is reached, an infringement decision can be issued without a determination of damages. This can be seen as a limitation of the administrative procedure compared to the court procedure.

However, if we consider it from multiple perspectives, there may still be advantages:

  • An infringement decision can exert greater pressure on the infringing party’s business operations and market presence, while damages are typically limited in scope. Therefore, the absence of damage determination will not impact the deterrent effect of the administrative procedure.
  • During the mediation phase of the administrative procedure, damages can be flexibly claimed, leveraging the infringement decision to negotiate a better settlement. Additionally, parties can initiate new proceedings for damage determination once infringement can be established.
  • By not involving a damage determination initially, the patent holder can avoid some preparatory work, thereby reducing uncertainties. In contrast, preparing for damage claims often requires more extensive effort from the patent holder to gather reasonable evidence. If a low damage amount is ultimately determined, it may negatively impact the patent holder’s position.

Therefore, patent holders should consider both aspects of the administrative procedure’s review scope and effectively leverage this procedure as a litigation tool to enhance their bargaining power in infringement matters.

4.  Possible Interventions to the Administrative Procedure for Patent Infringement

There are significant advantages to prevailing in an infringement procedure and obtaining a deterrent infringement ruling for patent holders. However, patent holders should pay close attention to the following scenarios to avoid unexpected disruptions to their strategy:

a. If both the administrative procedure and the court procedure coexist between the same parties for the same issue, the administrative procedure cannot proceed and will be terminated by the IP office.

This may be triggered in the following scenarios.

In one scenario, a patent holder initiates legal action before both the IP office and the Chinese court. Even if the court procedure is launched after the administrative procedure, the IP office shall terminate the administrative procedure due to the duplication of claims between the same parties before the court and the IP office.

In another scenario, a patent holder firstly initiates an administrative procedure, and the opposing party subsequently files a “non-infringement confirmation lawsuit” in court after a certain period of notification. If the court accepts the opposing party’s claim and legal proceedings are initiated, the scope of the court case will overlap with the petition before the IP office, leading to the termination of the administrative procedure.

b. Administrative procedures may be stayed due to a patent invalidation process; however, patents that have previously withstood invalidation challenges can reduce the likelihood of administrative procedures being suspended.

Patent invalidation introduces the highest level of uncertainty in infringement cases and serves as the primary countermeasure employed by the opposing party.

Since invalidation can significantly impact the patent in question, the IP office often suspends the review of infringement cases until the outcome of the invalidation proceedings initiated by the parties is determined.

The two above mentioned factors that may interfere with administrative procedures should be carefully considered by patent holders before initiating and during the process. “Fight no battle unprepared” is a crucial principle for patent holders to remember.

5.  Conclusion and Takeaways

The following takeaways are worth noting when considering administrative procedures for patent infringement in China:

  • If a patent holder seeks a swift infringement decision for ceasing infringement without the need of pursuing damage determination, the administrative procedure can be considered. With the ongoing improvement of regulations governing administrative procedures, the practical impact of administrative decisions is also increasing. This procedure may be especially effective in cases relating to consumer industry.
  • A tailored strategy can help maximize the advantages of the administrative procedure while minimizing uncertainties. This includes focusing on establishing infringement between the patent and the products. Selectively choosing the parties to be sued can help avoid counterclaims from the primary target, reducing the risk of disruption to the administrative procedure.
  • If a patent holder has multiple options for the patents to be enforced, prioritizing patents that have already undergone Chinese invalidation proceedings can help reduce the likelihood of administrative proceedings being suspended.

Every case is unique. But if patent holders are knowledgeable about the various dispute resolution procedures available for patent infringement, they can devise flexible strategies by combining these different approaches and thus fully leverage the key advantages of each procedure.

 

 



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