4.6.2 Act preservation
126.96.36.199 Establishment of an act preservation system in intellectual property disputes
Article 61 of the Patent Law, as amended in 2000, stipulated the following:
Where a patentee or an interested party has evidence to prove that another person is infringing or is about to infringe its or his patent right, which, unless being stopped in time, may cause irreparable damage to his lawful rights and interests, the patentee or interested party may, before filing a lawsuit, apply to the people’s court for adopting measures for ordering to prohibit certain acts in accordance with the law.
The Supreme People’s Court issued the Provisions on the Pre-litigation Cessation of Patent Infringement in June 2001.126 Later, in December 2001, the Supreme People’s Court issued the Interpretation of the Pre-litigation Cessation of Trademark Infringement and Preservation of Evidence.127 Both judicial interpretations have played an important role in the people’s courts’ review of applications for the pre-litigation cessation of patent infringement.
Article 66 of the 2008 Patent Law further improved the act preservation system. The Civil Procedure Law, as amended in 2012, added relevant content on act preservation: Articles 100 and 101 provided for act preservation during and before litigation, respectively, thereby establishing an act preservation system for all civil cases, including those involving intellectual property rights. Articles 152–173 of the Interpretation of the Civil Procedure Law made further provisions regarding “preservation.”
In December 2018, the Supreme People’s Court issued the Provisions on Act Preservation in Intellectual Property Disputes, which included 21 articles covering the subject of applications, the courts of jurisdiction, examination procedures, factors in determining the necessity of preservation, the term of preservation measures, the identification of wrongful applications and the lifting of preservation measures, among other matters.
188.8.131.52 Main contents of the Provisions on Act Preservation in Intellectual Property Disputes
According to Article 3 of the Provisions on Act Preservation in Intellectual Property Disputes,
[a]n application for pre-litigation act preservation shall be filed before the people’s court with jurisdiction over intellectual property disputes at the place where the respondent is domiciled or before the people’s court with jurisdiction over the case.
Where an arbitration clause has been agreed upon between the parties, then the application shall be filed before the people’s court stipulated in the preceding paragraph.
184.108.40.206.2 Identification of “emergencies”
According to Articles 100–101 of the Civil Procedure Law, having an emergency is the prerequisite for applying for pre-litigation act preservation; the application for act preservation during litigation may also involve emergency circumstances; and, for any application for act preservation in an emergency, a people’s court must decide the same within 48 hours after receipt of the application. According to Article 6 of the Provisions on Act Preservation in Intellectual Property Disputes, an emergency is a circumstance that “would damage the interests of the applicant if a preservation measure is not implemented immediately.” In patent-related civil cases, emergencies primarily include the following circumstances:
- the disputed patent will soon be illegally disposed of;
- the patent of the applicant is being or will soon be infringed during a time-sensitive occasion like a trade fair; and
- other circumstances that require the immediate implementation of act preservation measures.
220.127.116.11.3 Factors to be considered for determining the necessity of act preservation
Article 7 of the Provisions on Act Preservation in Intellectual Property Disputes stipulates the following:
People’s courts shall comprehensively consider the following factors in examining an application for act preservation:
- (1) whether the application has a factual and a legal basis, including whether the validity of the asserted intellectual property right is stable;
- (2) whether the applicant’s legitimate rights and interests will be irreparably damaged or make it difficult to enforce the ruling of the case if act preservation measures are not implemented;
- (3) whether the damage caused to the applicant if act preservation measures are not implemented exceeds the damage caused to the respondent by implementing the act preservation measures;
- (4) whether implementing act preservation measures harms the public interest; [and]
- (5) other factors that should be considered.
According to Article 10 of these provisions, “irreparable damage,” in patent-related civil cases, primarily includes the following:
- circumstances where the act of the respondent will make it difficult to control the infringement and significantly increase the losses suffered by the applicant; and
- circumstances where the act of infringement by the respondent will result in a significant reduction in the applicant’s share in the relevant market.
Patent-related civil cases often involve judgment on whether the validity of a patent right is stable. Article 8 of the provisions stipulates the following:
People’s courts shall comprehensively consider the following factors in examining and judging whether the validity of an intellectual property right asserted by the applicant is stable:
- (1) the type or nature of the involved intellectual property right;
- (2) whether the involved intellectual property right has been substantively examined;
- (3) whether the involved intellectual property right is in an invalidation or revocation procedure and has the possibility of being declared invalid or revoked;
- (4) whether there is a dispute over the ownership of the involved intellectual property right; [and]
- (5) other factors that may lead to instability of the validity of the involved intellectual property right.
With respect to applications for act preservation based on utility model patents or design patents, Article 9 of the provisions specifically stipulates the following:
Where an applicant applies for act preservation based on a utility model patent or design patent, the applicant shall submit a search report or an evaluation report issued by the patent administration department under the State Council or a decision maintaining the validity of the patent right made by the patent administration department under the State Council. Where the applicant refuses to submit such documents without justifiable reasons, the people’s court shall rule to dismiss the application.
The main consideration here is that utility model patents and design patents are not substantively examined before granting according to the Patent Law and are therefore more likely to be declared invalid. The special requirements for applications for act preservation based on these two types of patent rights prevent the abuse of rights in applying for act preservation.
18.104.22.168.4 Identification of “wrongful application” and applicant’s liability for compensation
Article 16 of the Provisions on Act Preservation in Intellectual Property Disputes interprets the phrase “wrongful application” from Article 105 of the Civil Procedure Law to mean:
- (1) where the applicant does not file a lawsuit or applies for arbitration within 30 days after implementing the act preservation measures;
- (2) where the act preservation measures are improper from the beginning because the intellectual property right asserted is declared invalid, or for other reasons;
- (3) where an application for ceasing the infringement of intellectual property right or unfair competition was filed, whereas an effective judgment was made holding that infringement or unfair competition is not constituted; [or]
- (4) other circumstances where the application is wrongfully made.
This provision is provided based on the objective principle of imputation, without considering the subjective fault of the applicant.
According to Article 105 of the Civil Procedure Law, where an application for act preservation is “wrongfully made,” the applicant shall compensate the respondent for losses suffered due to the act preservation. The Provisions on Act Preservation in Intellectual Property Disputes stipulate that, if the applicant does not file a lawsuit after applying for pre-litigation act preservation or if the parties agree to arbitration, then a lawsuit for losses filed by the respondent in accordance with Article 105 of the Civil Procedure Law will come under the jurisdiction of the people’s court that implemented the act preservation measures. However, if the applicant files a lawsuit, then it comes under the jurisdiction of the people’s court that accepts the lawsuit.
In the retrial case of Anji Xueqiang Bamboo and Wood Products Co. v. Xu Zanyou,128 an infringement dispute, the Supreme People’s Court held that the property preservation ruling did not fall under the “rulings” stipulated in Article 47 paragraph 2 of the Patent Law (at that time, the 2008 Patent Law) and that the decision declaring the involved patent invalid had a retrospective effect on the property preservation ruling. If an alleged patent infringement has not yet been confirmed, and the patentee has failed to fulfill its duty of care when applying for measures like property preservation or act preservation, causing direct losses to the alleged infringer, then the patentee’s application is a “wrongful application” and constitutes a tort.
22.214.171.124.4.1 Application for act preservation and preliminary judgment for cessation of infringement at the same time
In an appeal of a dispute over invention patent infringement, Valeo Cleaning System Co. v. Xiamen Lukasi Automotive Parts Co.,129 the Supreme People’s Court held that, in a patent infringement litigation procedure, the act preservation that orders the cessation of an alleged act of infringement has an independent value. Where a party applies simultaneously for act preservation and a preliminary judgment to cease the alleged infringement, and the people’s court holds that a preliminary judgment shall be made, then the application for act preservation shall be examined, and a ruling shall be made if the conditions for act preservation are met.
126.96.36.199.5 Reverse act preservation related to e-commerce platforms
In the case of Yongkang Lianyue Industry and Trade Co. v. Cixi Bosheng Plastic Products Co.,130 a utility model patent infringement dispute, the Supreme People’s Court held that an operator of an e-commerce platform, upon the receipt of a notice from an intellectual property right holder showing preliminary evidence of infringement on their platform, has a statutory obligation to take necessary measures to stop the infringement, such as by deleting, blocking and disconnecting the link, and terminating the transactions and services. If, due to an emergency, the merchant’s legitimate rights and interests will suffer irreparable damage if the link is not restored, the merchant on the platform may apply for act preservation ordering the operator of the e-commerce platform to implement act preservation measures like restoring the link. In such a case, the people’s court shall accept such an application and examine it in accordance with Article 100 of the Civil Procedure Law and related judicial interpretations. When determining whether to implement the act preservation measures based on the application of the alleged infringer, the major factors to be considered include:
- whether the applicant’s request has a factual basis and a legal basis;
- whether the applicant will suffer irreparable damage if the link is not restored;
- whether the damage caused to the patentee by restoring the link exceeds the damage caused to the alleged infringer if the link is not restored;
- whether the public interest will be harmed if the link is restored; and
- other factors.