Taking Advantage of Pre-trial Injunction System to Cease Imminent Infringement

 
On 6 August 2004, the Ningbo City Intermediate People's Court issued, at the request of the -- Shimano Inc, a pre-trial injunction to the Cixi City Bowei Vehicles Parts and Accessories Co., Ltd. (Bowei) and the Ningbo Limeng Machinery Co., Ltd. (Limeng), enjoining Bowei from making, selling and offering to sell its bicycles spare parts of its POWER SFT-EF 33 Model Series; enjoining Limeng from offering to sell its bicycles spare parts of its POWER SFT-EF 33 Model Series. It is said that this is one of the rare cases in which a foreign business has succeeded in applying for a pre-trial injunction since the adoption of the pre-trial injunction system in China. Recently, our correspondence has interviewed Mr Dong Wei, attorney-at-law of the China Patent Agent (H.K.) Ltd., who has been the attorney at litem in the case, inviting him to talk about the pre-trial injunction system and his experience in utilising it to secure protection of corporate intellectual property.
Reporter: Please give us an overview of the pre-trial injunction system.
Dong Wei: In China, ordering to cease infringement before instituting lawsuit is known as pre-trial injunction, and the provisions in this regard are in harmony with those of other countries. The pre-trial injunction is one of the civil relieves introduced after the entry into force of the Patent Law as revised in 2001. The pre-trial injunction is a measure of great force once taken by the court. If issued, the injunction takes effect right away, and no appeal against it is allowed. Injunction is mainly directed to imminent infringement, which will cause irreparable loss to a rightholder if no measure of the kind is taken to cease it.
Reporter: We know that few foreign rightholders have been successful so far in applying to the Chinese court for the pre-trial injunction. As an attorney at litem for the success case in this regard, what are the difficulties you think in applying for it?
Dong Wei: The pre-trial injunction system has just been put in place in China. Cases are rare in which injunction has been finally accepted and enforced in the judicial practice. Those successful in applying for it are mostly Chinese companies. Our case is the first in ZhejiangProvince in which a foreign rightholder has succeeded in its application for the injunction. It is rare in China.
Cases of application for the pre-trial injunction are rare for several reasons. Firstly, the court has to make its preliminarily determination of whether or not an alleged infringer has committed an infringement before lawsuit is instituted, and the determination must be made within 48 hours from receipt of an application. With the determination to be made in such short time and, sometimes, with a foreign interested party involved, the court is usually very cautious. Secondly, the pre-trial injunction is not necessary in most IP infringement lawsuits. If an interested party's loss can be compensated via another form of civil relief, the court does not grant injunction. The pre-trial injunction is more directed to imminent infringement. For example, an infringing product has been made in a factory and is to be put on the market soon. If it is not blocked, the rightholder's market share will irreversibly reduced. Thirdly, it involves the matter of guaranty. The pre-trial injunction is to compulsorily prohibit an act by an alleged infringing party. Once granted, the injunction is effective nationwide, and remains so until the lawsuit following it is closed; hence it is of great effect. An injunction erroneously enforced would cause great loss to an alleged infringer. Because of this, the court requires a guaranty of sufficient amount to be placed in applying for it. Under most circumstances, the court requires, in the present judicial practice, a foreign applicant to place its guaranty in cash. It is somewhat difficult for a foreign applicant having no business of its own investment in China to provide guaranty this way, and it is most difficult for a foreign rightholder to be granted the pre-trial injunction specially when an infringement involves an invention patent and a guaranty of relatively large amount is needed.
Reporter: What accounts for the successful application in the present case?
Dong Wei: The reasons are various. The rightholder in the present case is a Japanese manufacturer of bicycle spare parts and accessories and an owner of several Chinese patents, and the products of the alleged infringer suspected of infringement are many. After we were appointed by the rightholder as a legal agent in the case, we considered the our chance of success in such cases and the legal cost of the lawsuit. We first chose from all the alleged infringing products a part in which the applicant had its most secure patent right and about which infringement determination would be easy to make, namely the gear device on the handbar of the bicycle, as the object of infringement to base our litigant claims on. The choice was made with account taken of the consequence of our possible successful application for the pre-trial injunction: once enforced, it would not make the alleged infringer go bankrupt, which would avoid a series of social problems, such as unemployment, from arising and free the court from much pressure when it came to grant the pre-trial injunction.
As regards the irreparable losses, we gave the reasons that both the patentee and the alleged infringers were manufacturers of the same class of products and in fierce competition with each other in the marketplace. If the infringing products had been installed on the bicycles and sold, it would have been almost impossible to remove or replace it. Besides, the infringing product, if not replaced or removed, would surely reduce the market share of the patentee. The patent right is time-limited. Once the market is lost, even the subsequent damages obtained via lawsuit would not be sufficient to cover all the losses incurred.
Additionally, our interested party had made substantial investment and was in a position to promote the bicycle industry financially and technologically in China. it was well established in the country. In particular, after China's WTO entry, the foreign businesses of the nature should be at lease entitled to the national treatment. It was our hope that the court would take into account of all these factors.
We worked out a detailed calculation of the amount of guaranty. Before filing our application, we investigated the alleged infringer's production, profit and duration of infringement. The amount of the guaranty should not be less than the losses the alleged infringer was likely to suffer. We provided the guaranty covering a year the infringement lawsuit would possibly take. If the lawsuit lasts longer, the court may require additional guaranty. If the rightholder failed to do so, the court may release the injunction. The guaranty of RMB 500,000 yuan, though not a large amount, was sufficient in the present case. The damages we claimed for was RMB 100,000 yuan, an amount roughly equivalent to the annual profit made by the defendants from its production of these specific products.
With its investment in China, our client had no difficulty placing the guaranty in cash.
Reporter: How is the case going on now?
Dong Wei: After the pre-trial injunction was granted, the respondent did not request for reconsideration within the 10 days under the law. The applicant instituted legal proceedings within the statutory 15 days, and the court has accepted the case. So far, all the legal procedures relating to the pre-trial injunction have been finalised, and the civil lawsuit will follow. The pre-trial injunction will remain enforced until the close of the case. The entire process of the successful application for the pre-trial injunction is flaw-free: the Ningbo City Intermediate People's Court has treated the Chinese and foreign rightholders alike and protected the rights and interests of the IP rightholder in accordance with the provisions of the Paris Convention and the TRIPS Agreement and in strict compliance with the provisions of the Patent Law and the Civil Procedure Law. The patentee, the 日本岛野 Co., Ltd. is very much satisfied.
Reporter: In what way is the successful application for pre-trial injunction significant to the IP protection in China?
Dong Wei: This successful case is a sound interpretation of the patent system and system for judicial protection of patent in China, and a practical example of China's efforts to enhance the IP protection, to comply with the TRIPS Agreement and the Paris Convention, and to accord the foreign rightholders the national treatment. Acts of bad-faith patent infringement will not only affect China's introduction of foreign investment and foreign trade, but also seriously tarnish the international reputation of the Chinese enterprises. Cessation of acts of patent infringement in a timely manner is in the interests of the entire national industry of China, helps enhance China's international reputation, and has positive effect on the normal, orderly and long-term development of the national industry of China. Since the Patent Law as of 2001 entered into force, the courts in all parts of China have enforced some pre-trial injunctions directed to patent infringement. However, they are mostly confined to patent infringement cases involving domestic interested parties because most cases of dispute over patents involving foreign parties relate to the relatively sensitive issues: the defendants are usually large-scaled domestic enterprises or local substantial tax payers, who have their impact on the mass opinion as the representatives of the national industry, and can put great social pressure on the courts. As a result, the courts become extremely cautious when taking the legal measures, such as pre-trial injunction that is relatively effective and can remain enforceable for long time.
Now, in spite of the social pressure, the Ningbo City Intermediate People's Court has imparitially and effectively protected the legitimate rights and interests of the foreign patentee by issuing the injunction against the domestic enterprise at the request of the foreign patentee, which will undoubtedly promote the patent protection in China and enhance the confidence of foreign businesses in the patent system in China.
Reporter: What advice would you like to give to the rightholders?
Dong Wei: This successful application for the pre-trial injunction has had much to offer to the foreign rightholders. This shows to them what cases are likely to be successful in applying for the pre-trial injunction.
The pre-trial injunction system has had a good start, and it has a significant role in promoting the IP protection. But, what we would like to the rightholders, attention to is that, as is the case in all the other countries with the system of pre-trial injunction, the pre-trial injunction, having great force and effect, is nothing but supplementation of the normal civil procedure in China, and the cases in which the pre-trial injunction is granted are possibly not many. Under the policy of the Supreme People's Court, the courts at the various levels will follow a very strict standard to enforce it.
Dong Wei, attorney-at-law and patent attorney and trademark attorney of the China Patent Agent (H.K.) Ltd., has been practicing as a patent attorney and intellectual property attorney-at-law for 13 years, acting as attorney at litem in quite a number of influential civil and administrative lawsuits.
(Mu Yi)
Pre-trial Injunction System in Brief
The pre-trial injunction, one of the pre-trial relieves, is usually adopted to cease, in a timely manner, an imminent or on-going infringing act to prevent the infringing act from causing irreparable injury to a rightholder. Provisions similar to those on the pre-trial injunction in foreign countries have been incorporated into the relevant laws by way of amendments of the Patent Law, Copyright Law and Trademark Law between 2000 and 2001. For example, Article 61 of the Chinese Patent Law as revised in 2000 provides that a patentee or any interested party may apply to the people's court for pre-trial injunction to order the respondent to cease an act of patent infringement. The interested parties who may file the application include licensees of licensing contract for exploitation of patents, lawful heirs in title of the patent right, etc.. Of the licensees of licensing contracts for exploitation of patents, the exclusive licensees of licensing contract for exploitation of patents may independently file application with the people's court, and non-exclusive licensees of licensing contract for exploitation of patents may do so when the patentees do not. In June 2001 and January 2002, the Supreme People's Court issued the Several Provisions on Issues Relating to Application of Law to Pre-trial Cessation of Infringing Acts and the Interpretation of Issues Relating to Application of Law to Pre-trial Cessation of Acts of Infringement of Registered Trademarks and to Evidence Preservation, setting forth further detailed provisions on pre-trial cessation of infringing acts. All the above legal documents together have constituted the legal bases for enforcing what is known as the pre-trial injunction system in China (the pre-trial cessation of infringing acts is not exactly the same as the pre-trial injunction in some foreign countries and the latter term is borrowed here for the purpose of this article).
Upon accepting an application for the pre-trial injunction, the court reviews mainly the following evidence: the pertinent valid right the applicant legitimately enjoys, the imminent or on-going infringing act by the respondent, the irreparable injury to the legitimate rights and interests of the applicant if the pre-trial injunction is not granted. That is, obvious imminent infringement and potential irreparable injury to the legitimate rights and interests of the applicant will strongly justify the court's decision to grant the pre-trial injunction.
The statutory requirements and pertinent procedure for application for the pre-trial injunction against patent infringement are as follows:
I. The Applicant
Under Article 61 of the Patent Law, a patentee or any interested party may apply to the people's court for pre-trial order to have a respondent cease and desist from its act of patent infringement. Those who are entitled to file the application are licensees of licensing contracts for exploitation of patents, the lawful heir in title of the patent right. Of the licensees of licensing contracts for exploitation of patents, the exclusive licensees may file application with the people's court on their own, and non-exclusive licensees may do so when the patentee does not.
II. Requirement for Acceptance of Application
An application for pre-trial injunction to cease an act of patent infringement should be filed with the people's court having the jurisdiction over cases of patent infringement. A patentee or any interested party should file the application with the people's court in writing, with evidence attached showing the authenticity and validity of the patent right and evidence of the imminent infringement.
III. Guaranty
When filing an application, the applicant should provide guaranty. If it/he fails to do so, the people's court may refuse the application. The people's court should allow an applicant to place due and valid guaranty in the form of pledge and hypothecation. In determining the scope of guaranty, the people's court should take into account of the factors, such as sales revenue and expenses for duly storing and keeping the involved products in efforts to cease production; the possible losses if the respondent ceases the relevant act and the reasonable costs, like salaries. Besides, in the process of enforcement, when the respondent is likely to suffer more losses for taking the measure, the people's court may order the applicant to place additional guaranty. If the applicant fails to do so, the people's court may release the measure taken. But the measure taken with decision on pre-trial cessation of acts of patent infringement is not to be released on account of any counter-guaranty placed by the respondent.
IV. Enforcement of Pre-trial Injunction
After accepting an application filed by a patentee or any interested party for pre-trial injunction, the people's court should, upon finding that the requirement for acceptance of pre-trial injunction are met, make its decision in writing within 48 hours, ordering the respondent to cease its act of patent infringement, and the decision should be enforced immediately. If the people's court has to check the relevant facts within the time limit, it may summon one or two parties for enquiry and then make its decision in due course. If the people's court decide to issue the pre-trial injunction to order the respondent to cease the relevant act of patent infringement, it should notify the applicant in time, or within 15 days at the latest. If the patentee or any interested party fails to sue within 15 days after the people's court takes the measure to cease a relevant act, the people's court should release the measure taken decide on. In the absence of this circumstance, the pre-trial injunction remains enforceable until the final legal instrument takes effect.
V. Reconsideration of Pre-trial Injunction
An interested party dissatisfied with a pre-trial injunction decision may apply for reconsideration once within 10 days after receipt of the decision. During the reconsideration, the enforcement of the decision is not suspended. However, given that the pertinent laws do not more clearly provide for the time limit or procedure of the reconsideration and the mode of relief in case of dissatisfaction of the decision, possibly, it is very difficult in the practical operation of the reconsideration system.