Patent Litigation in China – Level Playing Field For MNCs
The number of 20-year patent applications filed with the State Intellectual Property Office (SIPO) already ranks China third in the world after Japan and the US. Furthermore, the growth rate of 20-year patent applications filed in China with the SIPO between 2000 and 2006 averaged over 20 percent. All the published Chinese applications and issued patents are also freely available through the SIPO’s website.
At the same time, cases dealing with intellectual property issues involving international companies have increased in China. The number of cases where at least one of the parties was a non-Chinese company reached 268 in 2005. This was an increase of 77.5 percent over the previous year. Contrary to popular belief, a level playing field seems to have emerged for foreign companies within the intellectual property system of China: according to the records of the No.1 Intermediate Court of Beijing, foreign parties won 60 percent of the cases.
Level Playing Field for Foreign Companies in China
Pfizer was involved in a remarkable case: the pharmaceutical company was granted a patent for the use of Sildenafil (the active ingredient in Viagra) by the SIPO on September 19, 2001. Several Chinese pharmaceutical companies and individuals immediately filed petitions to invalidate this patent. Main arguments were that the patent failed to provide a detailed description under Article 26 and that the patent lacked novelty under Article 22 of the Chinese Patent Law. On July 4, 2004, the SIPO issued a ruling to revoke the patent due to insufficient disclosure. Pfizer appealed against this decision to the Beijing No.1 Intermediate People's Court. On June 2, 2006, the Intermediate Court reversed the earlier revocation and referred the case to the SIPO for further determination. Several Chinese companies then appealed against the Intermediate Court's ruling to the Beijing Higher People's Court. In September 2007, the Beijing Higher People's Court made a final decision that upheld Pfizer’s patent rights with respect to Viagra in China.
In addition to the Pfizer case discussed above, examples are given below of some other landmark cases relating to foreign entities:
- In 2006, 3M won a lawsuit against the Shanghai Dasheng Health Products Manufacture Company for infringement of its patents (relating to dust masks) that were granted by the SIPO in 1997 and 1999. The court ordered the infringing company to pay around CNY 250,000 (around US $35,000) to 3M as damages.
- In 2001 and 2002, Philips filed nearly 20 patent invalidation requests, all pertaining to design of an electric shaver, to the Patent Reexamination Board of the SIPO, and won all but one of them. In that one case, the Board denied Philips’ request to invalidate the design patent on shavers granted to a Chinese patentee, Yang Weijiang. Philips appealed to the Beijing No.1 Intermediate People’s Court in 2002. The court decided that the main difference between the two designs was only in the shaver’s blades, which was not sufficient to establish novelty. Therefore, the court dismissed the Board’s earlier decision, and ordered the Board to re-issue its decision within three months.
- In 1997, Honda accused two Chinese companies, Shanghai Feiling Motorcycle Co. and Zhejiang Huari Co., of infringing its Chinese design patent for a “mini-scooter” that was granted in 1994. The two defendants filed an application for invalidation in 1998 on the grounds that a similar design patent had been granted earlier and another one had been published earlier in magazines. The Patent Re-examination Board declared the design patent invalid in 2001. Honda appealed at the Beijing No.1 Intermediate People’s Court, which upheld the decision of the Board. Honda appealed this judgment to the Beijing High People’s Court. The High Court reversed the Intermediate Court’s decision and ordered the Board to withdraw its invalidation decision (in 2004).
- Schneider Electric lost a patent litigation to Chint Group in the year 2007. Chint had alleged infringement by Schneider on one of Chint’s utility models (10-year patents). The Wenzhou intermediate people’s court ruled in favour of Chint and awarded damages worth nearly USD 43 million. Schneider’s invalidation request was also rejected. Schneider has appealed in the higher court and the judgment for that is awaited.
Conclusion
Growing patent application filings in China clearly suggest that filing in China should become an intrinsic part of any multinational company’s IP strategy.
In terms of litigation, a level playing field has emerged for foreign companies in China. However, foreign companies can also be targets of litigation as was seen in the case of Schneider Electric. It is also now evident that there is no upper limit to damages being awarded in case of patent infringement. Therefore, while tracking Chinese competitor’s activities, it is also necessary for foreign companies to carefully analyze Chinese prior art before entering the Chinese market.
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