5. Jurisdiction of the court
First, we need to be aware that not all courts have jurisdiction over IP cases. Copyright and trademark infringement cases often go under the jurisdiction in the lowest trial courts designated by higher courts for the first trial. In Shanghai only six district courts have jurisdiction over trademark/copyright cases but totally Shanghai has 17 district courts. Lawsuits regarding patent and anti-competition shall be under the jurisdiction in the intermediate courts designated by higher courts for the first trial. Secondly, level jurisdiction shall apply to the courts due to the amounts appealed by the plaintiff in different cases. Taking Shanghai for example, as for the trademark and copyright cases involved by foreign people or companies, if the amount appealed is below 5 million, the lowest district courts shall have jurisdiction over such cases for the first trial; between 5 and 100 million, the intermediate courts applies; over 100 million, Shanghai High Court the higher court shall apply. As a result, locating the most applicable court of first trial and court of appeals is the priority for initiating litigation in China. For the two-tier trial system adopted in China, if the first trial court is Shanghai Highest Court, the appellate court shall be the Supreme Court of China.
Apart from the level jurisdiction mentioned above, we need to pay attention to territorial jurisdiction. Due to the unbalanced development in different parts in China and the existence of local protectionism, many foreign companies do not intend to bring the lawsuits to the courts located in the defendants’ domicile. They would rather divert them to the courts located in some bigger cities like Beijing, Shanghai or Shenzhen where the judges are well trained and the results might be fairer for foreign plaintiffs. Actually these ideas can be realized through the choice of forum. In accordance with Chinese laws, either the courts of the place where the infringement takes place or where the defendant has domicile have jurisdiction over IP infringement lawsuits. Therefore, some foreign companies choose to purchase infringed products in a different city and then commence the lawsuit in the place where the distributor or seller is located. As such the forum choice can be realized. As of the exhibition, if the notarization of the evidence regarding the exhibition and sale of infringed products is executed, the plaintiff can bring the lawsuit in the place where the exhibition is held.
As for the INDAL case, design patent infringement cases are usually under the jurisdiction in intermediate courts due to the small appealed amount. But it needs to be decided whether to bring the case under the intermediate court in Ningbo City (the manufacturer is located) or Guangzhou City (the exhibition is located). Relatively speaking, the plaintiff felt more confident to bring the lawsuit in Guangzhou. Please be noted that the courts have jurisdiction over the design patent infringement cases shall not include courts where the offer for sale occurs. If there is only exhibition but no sales of infringed products on the exhibition, INDAL can not sue against Company A in Guangzhou. That is a big difference between design patent and utility model or invention patents.
6. The overlap of patent litigation and patent invalidation
After the plaintiff initiates a patent litigation, the defendant will usually apply for the invalidation of the patent, which is a common tactic for defense. The validity of a patent must first be heard by the Patent Reexamination Board. If not satisfied with the first verdict from the Patent Reexamination Board, a lawsuit can be brought to the Beijing First Intermediate Court as the first instance court and then Beijing Highest Court as the appellate court. The local courts hearing the infringement issues will suspend the litigation after the defendant files the invalidation application and await the final verdict for the validity of the patent. It takes about 1-2 years to finish the procedure of patent invalidation. That is the reason why the whole litigation procedure is always dragged. In order to avoid such delay, when representing the plaintiffs, we always advise our clients to adopt the Property Preservation. If its bank account is frozen, the defendant will hesitate to delay the procedure. In the INDAL case, Company A applied for the patent invalidation after being sued. Fortunately, the Patent Reexamination Board issued a verdict to maintain the validity of the patent in six months and Company A failed to appeal.
7. The compensation for losses
The final compensation to be issued by courts in IP litigation shall be calculated according to the losses suffered by the plaintiff or the benefits gained by the defendant pursuant to Chinese laws. If the actual amount can not be ascertained, the judge has the authority to rule damages up to 1 million RMB from case to case on the basis of the specific circumstance, which is called the statutory damages. Nowadays, the damages of most cases are not high enough because it is difficult to produce evidence for the losses and the statutory damages are always applied. For example, in a design patent infringement case, if the plaintiff can not produce evidences of the sales volume, the sale price and the gained profits from the sales of the counterfeit products, Guangzhou Intermediate Court usually rules the damages to 80,000 to 100,000. Though the damage is not very high, the court can render a judgment that the defendant must stop the infringement. Of course, there have always been some exceptions. For example, in Shanghai Panati Wine Company vs. Castel Freres SAS, the damages for trademark infringement are as high as 33.73 million. That’s because the plaintiff had obtained evidence regarding sales of products from the Customs and calculated the losses according to the average profit margin of the same industry. Hence, it is very important to obtain the Customs statistics on import and export if such record is available.
To summarize, there is no discovery process in Chinese civil litigation which is totally different with the common law system. Therefore, the plaintiff and its attorneys shall produce all evidences at the beginning, such as the origin of rights, the acts of infringement and the losses suffered. Compared to the defendant, the work of the plaintiff’s attorneys will be much harder and they need to do more work. In a word, IP litigation is really complicated in China and professional attorneys are always required to be involved into the whole strategic planning and tactics arrangement for the litigation. Without such involvement, there will never be an ideal outcome.
[This article is just for academic exchange, and shall not be considered as any legal opinion. Should you have any questions, please contact the author at simonfang@grandall.com.cn
