CHINA Trends and Developments Contributed by: Feng Zheng, Xiaoyang Yang, Baihe Liu and Hongfeng Li, Wanhuida Intellectual Property
went through two instances, and courts of both instances found the third and fourth litigations filed by the patentee constituted bad faith litiga- tion. In finding bad faith litigation and assess- ing liability for financial compensation to the accused, the SPC affirmed the following reason- ing of the first instance court: “... civil litigation is an important route for paten - tees to enforce their lawful rights, yet the paten - tees are still obligated to abide by the principle of honesty and trustworthiness. Considering the patentee and the accused are competitors in the same trade and given the patentee’s with - drawal of its complaints and non-payment of litigation fees, it would be unconvincing to the court that the patentee brought the third and fourth infringement actions to assert its lawful rights and to exercise its right to sue. In both of these actions, the patentee claimed damages of as high as RMB4.5 million, which is way above the damages of RMB125,000 awarded by the court in the first infringement action. Further, the patentee applied for interim preservation of property, and RMB4.5 million of the accused was frozen upon the patentee’s request. As such, it can be determined that the patentee knew that its infringement actions were unwarranted, and it was highly likely that the patentee sought to obtain illegitimate financial gains. It can be inferred that the patentee has the direct intent to infringe the lawful rights of the accused.” (2022) Zui Gao Fa Zhi Min Zhong No. 2586 Another SPC decision, (2022) Zui Gao Fa Zhi Min Zhong No. 2586, discussed a patentee’s liability for damages caused by bad faith litigation. In this case, the patentee of a utility model (“pat- ent at issue”) approached the accused with the drawings, which embodied the patent at issue, and requested the latter to produce samples
according to such drawings. The patentee notarised the receipt of the ordered samples and sued the accused for patent infringement using those samples as evidence. Meanwhile, the pat- entee sent warning letters to customers of the accused, stating the accused was suspected of infringing the patent at issue and advising those customers to refrain from purchasing the infring- ing products. The infringement action filed by the patentee went through two instances. Both courts ruled against the patentee, finding the alleged infringement was the result of the pat- entee’s inducement. The accused subsequently sued the patentee for bad faith litigation and business defamation, requesting compensation from the patentee for, inter alia, the reasonable expenses incurred for responding to the infringement accusation. In both instances, the courts affirmed the paten- tee’s infringement action constituted bad faith litigation and the sending of the warning letters constituted business defamation. Specifically, the SPC found that the patentee collected evidence of infringement in a way that it actively induced the accused to commit infringement. As such, and given the lack of other evidence of infringement by the accused, the patentee’s act contravened the principle of honesty and trustworthiness, as opposed to being a mere defect in its evidence collection. The evidence so collected should not be admit- ted, and the infringement action based on such evidence obviously had no factual basis. The SPC also commented on indicators of bad faith on the part of the patentee, underlining that: • the patentee induced the accused to produce the infringing product, even though there was
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