1. China IP Litigation Updates
May 2013
Benjamin Bai

2. Explosive growth of civil IP cases (2003-2012 )

3. IP cases involving foreign parties: tip of the iceberg

4. Filing Trend

5. Breakdown of IP Cases in China: 2010

6. 2010 Breakdown by Region

7. September 2007: The Largest Patent Infringement Damages in China; - Settled for €16m in 2008

8. December 2008: Samsung Mobile Phones Found Infringing and ordered to pay US$7.3 Million damages

9. China Environmental Project Tech vs. FKK, et. al. , winning US$7
China Environmental Project Tech vs. FKK, et. al., winning US$7.6 Million (May 2008), affirmed by Supreme Court on December 21, 2009

10. Neoplan vs. Zhongwei and Zhongda Winning US$3.1 Million (2008/2009)

11. CIELA – IP Litigation Statistical Analysis
Many, not all, IP decisions are published
CIELA – based on analysis of 15,000 civil IP cases
Decisions between Jan 2006 and Mar 2012
From 98 courts in top 35 cities in China
Free data available at
*Courtesy of Tim Smith of Rouse & Co.

12. Headline Statistics Between 2006 and 2011
Overall plaintiff win rate: 84%
Overall foreign plaintiff win rate: 88%
Average time to first instance: 5.3 months
Average compensation awards:
trade mark: CNY100,275
unfair competition: CNY94,546
copyright: CNY30,034
design patent: CNY56,264
invention patent/utility model: CNY193,830 (£20K)
*Courtesy of Tim Smith of Rouse & Co.

13. Invention patent headlines
All Plaintiffs
Foreign
Domestic
1st instance win rate
73%
78%
72%
2nd instance win rate
52%
40%
Overturn rate
19%
30%
17%
Mean compensation
RMB439,614
RMB230,827
RMB525,939
Median compensation
RMB100,000
RMB125,000
Duration
8.2m
11.8m
6.9m
*Courtesy of Tim Smith of Rouse & Co.

14. Invention patent - win rates
Top venues by win ratio – 1st instance invention patent
Court 
Percentage
Number of cases 1
Changsha Intermediate
85% 26 2
Shanghai 2nd Intermediate
83% 12 3
Guangzhou Intermediate
82%
 17 4
Hangzhou Intermediate
75% 5
Shanghai 1st Intermediate
74% 19 6
Beijing 1st Intermediate
73% 22 7
Beijing 2nd Intermediate
64% 44
*Courtesy of Tim Smith of Rouse & Co.

15. Invention patent - injunction
Court
Percentage
Number of cases 1
Beijing 2st Intermediate
100% 27 2
Guangzhou Intermediate 14 3
Shanghai 1st Intermediate 4
Shanghai 2st Intermediate 10 5
Beijing High People's Court 23 6
Shanghai High People's Court 15 7
Jiangsu High People's Court 13 8
Chongqing High People's Court 11 9
Changsha Intermediate
93%
Guangdong High People's Court
89% 37
*Courtesy of Tim Smith of Rouse & Co.

16. Rate of Permanent Injunction (26 Cities) in Patent Cases

17. Plaintiff's Win Rate in Patent Cases

18. Chinese Court System

19. Patent Infringement Action: Procedures
File Lawsuit
7 days
Court accepts, pay court fees
Appeal (foreigner 30 days, other 15 days)
3 month statutory time limit
longer, if foreigner is involved.
6 month statutory time limit.
Longer, if foreigner is involved.
Does not include time required for resolving jurisdiction, technical appraisal or stay.
Service of complaint
30/15 days for response
With or without hearing
Set the evidence exchange period
Apply for technical appraisal; Apply for witness attendance
Appeal decision
Apply for enforcement
Evidence Exchange, usually no more than twice
Trial (maybe more than once)
opening statements, evidence examination; arguments; closing statements
Decision of first instance

20. Patent Invalidation Action: Procedures
Request Invalidation
30/15 days
Appeal to Beijing Higher Court
PRB Accepts
3 month statutory time limit
longer if foreigner is involved
Hearing
Evidence Exchange
Decision
Hearing
Decision
3 months
Appeal to Beijing 1st Intermediate People’s Court
Court Accepts
6 month statutory time limit
longer if a foreigner is involved
Set Evidence Exchange Period
Evidence Exchange
Hearing
Decision

21. Patent Invalidation Statistics
PRB:
2183 invalidation requests in 2007;
2038 invalidation requests in 2008;
2247 invalidation requests in 2009;
2411 invalidation requests in 2010;
About 40% invalidated, 10% partially invalidated and 50% maintained
For invention patents, rate of success is less than 1/3
Appeal to Courts:
About 20% decisions appealed to courts
Rate of Success: about 1/4

22. Supreme People’s Court’s Judicial Guidance on IP Adjudication Opinion on Several Issues Relating to Sufficient Utilization of IP Adjudication to Foster Development and Prosperity of Socialist Culture and to Promote Autonomous and Coordinated Economic Development December 16, 2011 22

23. Guidance on Claim Construction
Balanced approach to claim construction
claim language v. object of invention
Pioneer inventions are entitled to broader protection; conversely, incremental inventions lesser protection.
Object of invention limits scope of patent; inferior inventions should not be covered.
Disclosed but unclaimed technical features are dedicated to the public.
Patentee is estopped from asserting any subject matter surrendered during prosecution or invalidation.

24. Guidance on Infringement Determination
All elements rule.
No infringement if one element and its equivalent is missing.
An equivalent must meet the function/way/result analysis and must also be obvious.
Practicing prior art is defense to infringement, both literally and equivalently.

25. Guidance on Patent Abuse
Concept of “Patent Abuse” (滥用专利权)
Malicious assertion of invalid patents
Warning letter; or
Infringement action
Patentee knows that the patent is in prior art
A form of unfair competition
Liability for Damages

26. Guidance on Pre-Suit Injunctions
Conditions for “Pre-Suit Injunction” (诉前禁令)
Facts clear; and
Infringement readily ascertainable
Cases involving complex technologies
Not amenable to pre-suit injunction
If practicable, courts must hear arguments from both sides in determining infringement.
Pre-Suit Injunction should not issue where there is an invalidation decision on the patent in suit (even if the decision is under appeal).

27. Guidance on Process Patent Enforcement
Courts must balance patentee’s rights and accused infringer’s trade secrets in enforcing process patents.
Burden of proof shifts where patented process makes a new product.
Patentee proves that the product and process is not known to the public before priority date; and
Then defendant must prove they use a different process.

28. Guidance on Process Patent Enforcement
Court may shift burden of proof even if patented process does NOT make a new product, if
Patentee proves that the products are identical;
Patentee has made reasonable efforts but is unable to prove infringement; and
Court concludes that there is a high likelihood that defendant uses the patented process based on common knowledge and facts of the case.
Court should grant evidence preservation in cases of difficulty in collecting infringing evidence.
Must prevent abuse and safeguard defendant’s trade secrets.

29. “Landmark” Judgments on FRAND for SEP29

30. FRAND for SEP SEP (Standard-Essential Patent)
Patent (or more accurately, patent claim) that is essential for a standard’s implementation
FRAND (Fair, Reasonable and Non-Discriminatory)
A commitment usually made by standard-setting participants
Is it an “offer,” or an “invitation for offer,” or?
What is a FRAND royalty? 30 30

31. Huawei v. InterDigital
Two cases filed with Shenzhen Intermediate People’s Court in December 2011
#857 for disputes on patent license agreement
#858 for monopolization
First instance judgments issued in February 2013
InterDigital violated China’s antitrust law
Granted damages of US$3.2M for attorney fees and other expenses
Chinese law applied
Royalties capped as 0.019% of price of each product
* The above information is taken from InterDigital’s Form10-K filing with US SEC 31 31

32. Conclusions
China’s Current IP landscape is generally plaintiff-friendly
Overall plaintiff’s win rate > 80% in many cities
Foreign parties win more than domestic parties in many cities
Rate of permanent injunction >75% in many cities
Invention patent validity rate > 67%
But pharma patent litigation landscape is much worse
Chinese Supreme Court offers glimmer of hope for better IP enforcement system
Antitrust enforcement is chipping away IP rights
China is not alone

33. For More Info, Please Contact
Thank You
For More Info, Please Contact
Benjamin Bai
Partner
Allen Overy LLP, Shanghai Office