Earlier this year, the Shanghai IP Court (“Court”) handed down an interesting judgment in a patent infringement case between a French car parts manufacturer and three Chinese defendants (two Xiamen, Fujian Province based companies and an individual). On 27 March 2019, upon appeal, the IP Court of Appeal at the Supreme People’s Court upheld the judgment. The judgment is interesting not so much for its outcome, but for the procedural discretion employed by the Court. That is, instead of handing down a complete judgment on infringement and damages following the end of court proceedings – which would be typical – the Court instead issued a “partial judgment” on the infringement claim, while granting the plaintiff’s petition to calculate the amount of damages to be awarded at a later date in time. This is a promising result for IP owners who can have the issue of infringement decided more quickly, and could represent the beginning of a more viable strategic alternative to applying for interlocutory injunctions.
The facts of the case were as follows: the French claimant brought a patent infringement suit against the defendants for alleged infringement of its invention patent, which protects a certain type of connector piece used on vehicle windshield wipers. Given the substantial amount of evidence, the technical complexity involved in the calculation of damages, and in light of the ongoing harm to the plaintiff’s business interests caused by the infringement, the claimant petitioned the Court for an advance partial judgment on just the issue of the infringement, with the hope that a permanent injunction would be ordered immediately by the Court.
The Court ruled that such a petition had a sufficient legal basis under Article 153 of the Civil Procedure Law, which provides that when “…some of the facts in a case being tried…are already evident, the court may pass judgment on that part of the case first.” Following a determination that the products fell within the scope of the plaintiff’s claims (with additional assistance of a Court appointed technical expert), the Court applied Article 153 and granted an advance ruling on infringement, ordering the defendants to immediately cease sales and manufacture of the infringing product, while the judgment on damages would be issued at a later time.
Practical benefits of advance partial judgments
For patent cases involving complex and difficult calculations of damages, partial judgments may significantly reduce the amount of time it takes for an IP court to issue a decision on the merits, and, as a consequence, reduce the time before a permanent injunction can be ordered against the infringer. This is significant given the heavy caseload of the IP courts in China, with invention patents cases involving foreign parties often taking several years before a written decision is issued. Another advantage is that a partial judgment on infringement can provide significant leverage to claimants in settlement negotiations, even in cases where the claimant has difficulty gathering evidence needed to recover a significant amount of damages. A further benefit is that in cases where the court decides that there has been no infringement, the parties may be able to avoid incurring some of the costs and expending the effort needed to prove their cases on quantum of damages.
Such partial judgments also provide several advantages compared to preliminary or interlocutory injunction procedures in China. First and foremost, the Chinese courts tend to treat preliminary and interlocutory injunction petitions very cautiously, and rarely grant them unless the facts and evidence of infringement is very clear-cut. The court also needs to be satisfied that irreparable harm will occur if the injunction is not granted, and that the granting of the injunction does not unfairly harm the public interest. Secondly, for interim injunctions, the applicant must provide a bond – which may be significant – and remains liable for any potential “wrongful application” (for example, when the injunction is granted but the underlying IP right is later invalidated). These are the major downsides of preliminary injunctions, and they are not applicable to a partial judgment petition. However, as compared to preliminary or interlocutory injunctions, advance partial judgments can be appealed immediately to the new IP Court of Appeal at the SPC which generally suspends their effect, while preliminary or interlocutory injunctions are not appealable.
While the innovative concept of advance judgments on infringement is definitely interesting, IP owners will need to strategically weigh their advantages and disadvantages when considering IP infringement litigation in China. For now, it is probable that advance judgments are most useful in cases that are likely to be settled after liability is decided, or in cases in which the IP owner has insufficient evidence to make a feasible claim for high damages. In any event, it is a welcome addition to the armory of IP owners when battling IP infringers in China.
Note: because China has adopted a bifurcated patent infringement procedure (cf. Germany), a counterclaim for invalidity is not possible before the Courts (it needs to be filed as an administrative case before the Patent Reexamination Board).