Patents

An exploitation of a subject matter protected under a patent without authorization of the patentee constitutes an infringement.  Patent infringement activities may include manufacturing, offering to sell or selling patented products; using patented processes or products directly acquired by the patent processes for production or business purposes; and importing or exporting patented products or products directly  acquired through patented processes.  A patentee or any interested party alleging infringement of a patent must prove (1) an illegal act, directly or indirectly, infringing a valid patent right; (2) damages to the patentee or any interested party; (3) causation between the illegal act and damages; and (4) fault by the accused infringer.  In China, each party is responsible for presenting evidence to support its claims, and all evidence must be presented in court and is subject to cross-examination.

The Chinese Patent Law also recognizes certain acts as non-infringement acts.  For instance, the “prior use” exception states that a person, other than the patentee, who had worked on, or made serious preparation for working on, the invention before the priority date, may continue to work on the invention within the original scope, independently of the patentee and despite the patent.  In addition, the Chinese Patent Law excludes from infringement for “scientific research or experimental use” and “innocent use” if a person uses or sells the patented invention, not knowing that it was unauthorized.  Moreover, a foreign entity’s temporary and authorized exportation of the patented invention is excluded from infringement.

When infringement disputes arise, the Chinese Patent Law encourages the parties to first resolve the infringement disputes through negotiation, mediation or arbitration.  If a settlement agreement can not be reached, the parties may then seek help through administrative adjudication and/or civil litigation.  Serious cases may be subject for criminal prosecution.

Administrative adjudications are preferred for the majority of patent infringement cases in China because the investigations may occur soon after filing the complaint, the patentee may be able to participate in the investigation, and the time required for rendering a decision can be shorter than any civil litigation.   However, administrative adjudications have the disadvantages because of a lack of compensation and deterrence for further infringement.  Local protectionism, corruption, or a lack of resources may make the possibility that an investigation may not be instigated.  Further, a lack of coordination between administrative offices may make uniform protection of patent rights difficult.  Besides its responsibility for granting patents, SIPO is also a proper venue for initiating administrative enforcement.  In serious cases, SIPO may refer a matter for criminal prosecution.  The administrative remedies may include injunctions and/or fines of up to about $6000.  Any administrative remedies may be appealed to the People’s Intermediate Courts.  In addition, Customs Measures  may also provide relief for companies that are victims of patent infringement.
Civil litigation is the second mechanism to enforce patent and/or other IP rights. 

To initiate a civil litigation for patent infringement, a written complaint must be filed in an Intermediate People’s Court in the relevant municipality, province, or special economic zone, which together with the appellate Higher People’s Courts, have maintained special IP Tribunals since 1993.  A statute of limitation for a patent infringement case is 2 years from the date the patentee become aware or should have become aware of infringing activity.  Preliminary injunction may be available based on reasonable evidence of actual and/or imminent infringement and a likelihood of causing irreparable harm resulting from the infringement. 

Damages are determined based on lost-profit of the patentee, gain-profit of the infringer, or an appropriate multiple of a reasonable royalty for the patent.  Remedies available for civil litigation may also include an issuance of a public apology, confiscation of unlawful gain or infringing products and assets used in furtherance of the infringement.  Although civil litigation is quite costly and time consuming and the damage awards are low, as Chinese legal personnel become more educated in the importance of patent regulations, civil litigation in China begins to play a larger role in preventing infringements and properly enforcing patent and other IP rights.

For certain serious infringement acts, criminal liability may be imposed.  Criminal investigations start with the Public Security Bureau, and the matter may be transferred to the Supreme People’s Procuratorate for prosecution.  Criminal liability for patent infringement may include up to seven years’ imprisonment, fines, and damages.

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