4.3.4 Defenses in patent infringement lawsuits
4.3.4.1 Prior art defense
According to Article 67 of the Patent Law, where an alleged infringer has evidence to prove that the technology or design they exploited forms part of the prior art or is a prior design, such exploitation does not constitute an infringement of the patent right. This provision was added to the 2008 Patent Law out of consideration that the protection scope of patent rights should not cover prior art and technologies that are obvious and equivalent to prior art (see Section 4.8.9 regarding the prior design defense).
With respect to the definition of prior art, Article 22 paragraph 5 of the Patent Law stipulates the following: “Prior art refers to any technology known to the public domestically and/or abroad before the filing date of patent application.” This wording was inserted into the 2008 Patent Law. Previously, the provision had defined different geological scopes of public disclosure through publications, public use or other means. To determine the prior art for a patent, the version of this provision in the Patent Law that applied at the patent filing date is considered. Article 22 of the Interpretation (II) of Patent Infringement Dispute Cases stipulates the following: “Regarding the prior art defense or prior design defense asserted by an alleged infringer, the people’s courts shall define the prior art or prior design in accordance with the Patent Law that was in effect upon the patent filing date.”
In determining whether the prior art defense is sustained, the main factor to be considered is the relation between the alleged infringing technology solution and the prior art. Even though the alleged infringing technical solution constitutes literal infringement, so long as the alleged infringer can provide evidence to prove that the alleged infringing technology forms part of the prior art, the prior art defense may be sustained.
In a retrial of a dispute over invention patent infringement, Strix Ltd v. Ningbo Shenglida Electric Manufacturing Co.,94 the Supreme People’s Court held that whether a prior art defense applies depends only on whether all technical features in the alleged infringing product alleged to fall within the protection scope of the patent right are identical or equivalent to corresponding technical features of technical solutions publicly disclosed in the prior art. A prior art defense cannot be excluded merely because the alleged infringing product is identical to the patent.
With respect to the judgment method for the prior art defense, Article 14 paragraph 1 of the Interpretation of Patent Infringement Dispute Cases stipulates the following:
Where all the technical features alleged to fall within the protection scope of a patent right are identical or have no substantial difference with the corresponding technical features of a prior art technical solution, the people’s courts shall determine that the technical solution implemented by the alleged infringer forms part of the prior art as stipulated in Article 62 of the [2008] Patent Law.
This provision clarifies that the technical features alleged to fall within the protection scope of a patent right, rather than all technical features of the technology implemented by the alleged infringer, are compared with corresponding technical features of the prior art. If the two are identical or have no substantial difference, then the technology implemented by the alleged infringer forms part of the prior art.
In a retrial of a dispute over utility model patent infringement, Yancheng Zetian Machinery Co. v. Yancheng Geruite Machinery Co.,95 the Supreme People’s Court held that, in examining the prior art defense, the alleged infringing technical solution shall be compared with the prior art, rather than comparing the prior art with the patented technical solution. The examination method is to determine the technical features alleged to fall within the protection scope of the patent right with reference to the claims of the patent, and to judge whether identical or equivalent technical features are disclosed in prior art. Prior art defense does not require the alleged infringing technical solution to be completely identical to prior art. The technical features in the alleged infringing technical solution that are irrelevant to the protection scope of the patent right shall not be considered in determining the prior art defense.
In a retrial of a dispute over invention patent infringement, Beijing Baidu Netcom Science and Technology Co. v. Beijing Sogou Technology Development Co.,96 the Supreme People’s Court held that, in determining whether technical features alleged as falling within the protection scope of a patent right are identical to or have no substantial difference with the corresponding technical features in prior art, the focus should be on the technical problems to be solved by the patent and the functions and technical effects of the disputed technical features recited in the claims. The difference between the two in terms of means, functions, effects and the degree of impact thereof shall be considered.
To determine whether “substantial difference” exists in the prior art defense, the doctrine of equivalents may be used as a reference. In an appeal of a dispute over utility model patent infringement, Foshan Shunde Fashion Electrical Appliances Mfg. Co. v. Zhejiang iSMAL Hi-Tech Electrics Co.,97 the Supreme People’s Court held that, if a technical feature in the alleged infringing technical solution and the corresponding technical feature in a prior technical solution are directly interchangeable customary means in the technical field, then it can be determined that no substantial difference exists.
In an appeal of a dispute over invention patent infringement, Wang Yeci v. Xuzhou Huasheng Industry Co.,98 the Supreme People’s Court held that, where a patented technical solution has specifically indicated its invention points and emphasized that all technical features other than the invention points are general components, if the technical features corresponding to the invention points have been disclosed in prior art whereas other technical features have not, and if the combination of the prior technology and general components inevitably leads to an overall prior technical solution corresponding to the patented technical solution, then a prior art defense is sustained.
4.3.4.2 Conflicting application defense
Article 22 paragraph 2 of the Patent Law stipulates the following:
Novelty means that, the invention or utility model does not form part of the prior art; no entity or individual has filed a patent application for the identical invention or utility model with the patent administration department under the State Council before the filing date and the content of the application is disclosed in patent application documents published or other patent documents announced after the filing date.
A “patent application for the identical invention or utility model [that is filed] before the filing date and the [content of which] is disclosed in patent application documents published or other patent documents announced after the filing date” is briefly referred to as a conflicting application. A conflicting application can be used for separate comparisons with a patent to assess the novelty of the patent but cannot be used in combination with other prior art, conflicting applications or well-known general knowledge to assess the inventiveness of the patent. If a technical solution has been disclosed in a conflicting application, then it has no novelty in comparison to the conflicting application and thus cannot be granted a patent. Therefore, an alleged infringing technical solution that has been disclosed in a conflicting application does not fall within the protection scope of the patent right, according to the same rationale as for a prior art defense.
In a retrial of a dispute over utility model patent infringement, Cixi Bosheng Plastic Products Co. v. Chen Jian,99 the Supreme People’s Court held that, where an alleged infringer asserts that they did not infringe the patent on the ground that the alleged infringing technical solution was disclosed in a conflicting application, the people’s courts may examine whether the conflicting application defense is sustained with reference to provisions concerning the prior art defense. As conflicting application and prior art defenses differ in their definition and nature, the judgment criteria for examining a conflicting application defense are compatible with the nature of the conflicting application. Only when each technical feature in the alleged infringing technical solution has been separately and fully disclosed in a conflicting application and has no novelty compared with the conflicting application can it be determined that the conflicting application defense is sustained.
4.3.4.3 Legitimate source defense
Article 77 of the Patent Law stipulates the following: “Any person who, for production and business purposes, uses, offers to sell, or sells a patent-infringing product without knowing that it was manufactured and sold without the authorization of the patentee, may not be liable for compensation provided that he can prove the legitimate source of the product.” According to this provision, the legitimate source defense has two prerequisites. First, the person acted in good faith with no subjective fault in using, offering for sale or selling the infringing product, and the person did not know or should not have known that the relevant product was an infringing product. Second, a legitimate source of the infringing product used, offered for sale or sold by the defendant can be proved. If the legitimate source defense is sustained, the defendant is not liable for compensation.
With respect to the legitimate source defense, Article 25 paragraphs 2–3 of the Interpretation (II) of Patent Infringement Dispute Cases stipulates the following:
“Without knowing” […] means neither actually know nor should have known.
“Legitimate source” […] means the product is obtained through a normal commercial manner such as a legitimate sales channel or an ordinary sales contract. For a legitimate source, the person who uses, offers to sell, or sells the product shall provide relevant evidence in compliance with the course of dealing.
The course of dealing in the disputed case is determined based on whether the trading subjects are natural persons, “individual-run industrial and commercial households” or companies, the price of the subject matter, the customary ways of trading in the industry or region, and so on to determine the requirements for the evidence for proving a legitimate source.
With respect to whether cessation of the infringement is ordered when the legitimate source defense is sustained, Article 25 paragraph 1 of the Interpretation (II) of Patent Infringement Dispute Cases stipulates the following:
Where a person, for production and business purposes, uses, offers to sell, or sells a patent-infringing product without knowing that such product is made and sold without authorization of the patentee, and the legitimate source of the product can be proved by evidence, the people’s courts shall support the right holder’s assertion of ordering that person to stop aforesaid acts of using, offering for sale, or selling, unless the user of the alleged infringing product provides evidence to prove that reasonable consideration for such a product has been paid.
The “reasonable consideration” in this provision refers to a trading price or trading condition that is basically equivalent to or slightly lower than that of the patented product. If the consideration is significantly lower than the trading price or condition of the patented product, it is usually presumed that the purchaser should have known the purchased product was not authorized by the patentee.
In a retrial of a dispute over design patent infringement, Guangdong Archie Hardware Co. v. Yang Jianzhong,100 the Supreme People’s Court held that the legitimate source defense is a right granted by law to bona fide users and sellers of infringing products. According to the principle that “the burden of proof is on the party that raises claims,” to claim the legitimate source defense, the user or seller of an infringing product must provide evidence (e.g., purchase invoices, receipts and payment vouchers) to prove that the infringing product was obtained legitimately. The legitimate source defense has two prerequisites: the user or seller has no subjective fault, and the alleged infringing product is obtained from a legitimate source. Regarding the subjective condition, the user or seller of the alleged infringing product needs to prove that they did not know they were using, offering for sale or selling an infringing product. As a negative fact, the burden of proof is usually on the right holder to prove the subjective status that the alleged infringer knew or should have known. As to whether there is a legitimate source for the alleged infringing product, the user or the seller bears the burden of proving that there is a legitimate purchasing channel, a reasonable price and a direct supplier for the alleged infringing product.
With respect to the determination of a legitimate source defense asserted by a seller, in an appeal of a dispute over utility model patent infringement Baokou (Xiamen) Sanitary Ware Co. v. Guantao Peilong Water Heating Installation and Maintenance Store,101 the Supreme People’s Court held that, if a seller can prove that they have complied with legitimate and normal market trading rules, the product being sold was obtained from a clear source and a legitimate channel and at a reasonable price, and their act of selling it was in good faith and complied with the course of dealing, then it can be presumed that the seller has no subjective fault. Under this circumstance, the right holder should present evidence to the contrary.
With respect to the assumption of liability after a legitimate source defense is sustained, in an appeal of a dispute over utility model patent infringement, Guangzhou Surui Mechanical Equipment Co. v. Shenzhen Helitai Technology Co.,102 the Supreme People’s Court held that a legitimate source defense is a defense for release from the liability of compensation but not a defense to infringement. A seller’s legitimate source defense neither changes the tortious nature of the act of selling the infringing product nor releases the seller from the liability of stopping the sales of the infringing product. The seller still bears all reasonable costs of the right holder for obtaining the remedy of infringement cessation.
4.3.4.4 Prior-use rights defense
Article 9 paragraph 2 of the Patent Law states the following: “If two or more applicants file patent applications for the identical invention-creation, the patent right shall be granted to the applicant whose application was filed first.” The prior-use rights defense aims to compensate for the deficiency of this first-to-file rule. According to Article 75(2) of the Patent Law, “before the filing date of the patent application, any person who has already manufactured the identical product, used the identical process, or made necessary preparations for its manufacturing or using and continues to manufacture or use it within the original scope,” shall not be deemed as having infringed the patent right.
With respect to the prior-use rights defense, Article 15 of the Interpretation of Patent Infringement Dispute Cases stipulates the following:
Where an alleged infringer asserts prior-use rights for an illegally acquired technology or design, the assertion shall not be supported by the people’s courts.
Under either of the following circumstances, the people’s courts shall determine the circumstance as “made necessary preparations for its manufacturing or using” as prescribed in Article 69(2) of the Patent Law:
- (1) the main technical drawings or process documents for implementing an invention-creation have been completed; or
- (2) the main equipment or raw materials for implementing an invention-creation have been made or purchased.
The “original scope” stipulated in Article 69(2) of the Patent Law includes the existing scale of production and the scale of production achievable by making use of existing production equipment or based on existing production preparations as of the filing date of a patent application.
Where the holder of the prior use right, after the filing date of the patent application, transfers, or licenses others to implement the technology or design that it has implemented or has made necessary preparations for implementing, the assertion by the alleged infringer that such act of implementation constitutes continuing implementation within the original scope shall not be supported by the people’s courts, unless the technology or design is transferred or succeeded along with the original company.
In an appeal of a dispute over invention patent infringement, Wang Yeci v. Xuzhou Huasheng Industry Co.,103 the Supreme People’s Court held that design drawings are the fundamental basis for product processing and inspection in the machinery manufacturing field. Thus, where an alleged infringer has designed the drawings for key parts of the alleged infringing product, and all the other parts thereof are general parts, it can be determined that the alleged infringer has finished the main technical drawings essential to the implementation of the invention-creation and has made necessary preparations for manufacturing the alleged infringing product, and a prior-use rights defense can be sustained.
In a retrial of a dispute over invention patent infringement, Jiangxi Yintao Pharmaceutical Co. v. Shaanxi Hanwang Pharmaceutical Co.,104 the Supreme People’s Court held that whether a prior-use rights defense is sustained mainly depends on whether the alleged infringer had, before the filing date of the patent application, exploited the patent or made necessary preparations technically or in material form for exploiting the patent. If the registration application files of the alleged infringing product – in this case, a pharmaceutical product – show that the alleged infringer had finished the process documents and equipment for manufacturing the alleged infringing pharmaceutical product before the filing date of the patent application, then it shall be determined that they had made the necessary preparations for manufacturing or using the patent. As the manufacturing certification of a pharmaceutical product is reviewed and granted by a medical product regulatory department, the necessary preparations for manufacturing or using shall not be determined based on the approval of such a certification.
In a retrial of a dispute over invention patent infringement, Beijing Yingtelai Technology Co. v. Beijing SinoShield Chuangzhan Doors Co.,105 the Supreme People’s Court held that, where the manufacturer is not the defendant, but the seller can prove that the alleged infringing product was obtained from a legitimate source and that the manufacturer enjoyed prior-use rights, the seller can also raise a prior-use rights defense.
4.3.4.5 Other circumstances not deemed as patent infringement
In addition to the defenses described above, according to Article 75 of the Patent Law, none of the following shall be deemed patent infringement:
- intellectual property right exhaustion (i.e., after the sale of a patented product or a product acquired directly in accordance with a patented process by the patentee or any entity or individual authorized by the patentee, any other person uses, offers to sell, sells or imports that product);
- any foreign means of transport – temporarily passing through the territory, territorial waters or territorial airspace of China – uses the relevant patent in its devices and installations for its own needs and in accordance with any agreement concluded between China and the country to which the foreign means of transport belongs, in accordance with any international treaties to which both countries are parties, or based on the principle of reciprocity;
- any person uses the relevant patent specially for the purposes of scientific research and experimentation; and
- Bolar exceptions (i.e., any person manufactures, uses, or imports a patented pharmaceutical product or patented medical apparatus for the purpose of providing the information needed for administrative examination and approval, and any other person manufactures or imports a patented pharmaceutical product or a patented medical apparatus for that person).