DISPUTE OVER CANCELLATION OF ADMINISTRATIVE PENALTY DUE TO PATENT INVALIDITY ◆ First Instance Docket: (2016) Yue73XingChu No. 12 ◆ Second Instance Docket: (2017) YueXingZhong No. 843 CASE 16 :
Guangdong Province
[Headnotes] During the judicial review process, when the asserted patent is pronounced invalid by the Patent Reexamination Board, the administrative penalty loses its factual foundation. For stability of the market, administrative efficiency, and for the coherence between administrative proceedings of patent protection and judicial process, the penalty should be cancelled.
[Synopsis] Appellant (Defendant below): Guangdong Intellectual Property Office Appellant (Third party below): Giuliano Group, S.p.A. (Giuliano) Appellee (Plaintiff below): Coseng
Automotive Equipment Ltd. (Coseng) Giuliano is patentee of Patent No. ZL200910175775.1 for “Operating head for removing and fitting wheel tires for vehicles” with a application filing date of October 13, 2009, and publication date of March 4, 2015. Upon receiving a complaint from Giuliano, Guangdong Intellectual Property Office (the Office) conducted a field investigation at the premises of Coseng on March 17, 2016, and seized one sample of infringing product of “Rotating removing and fitting head.” At the investigation scene, Coseng’s general manager Ouyang Xiaochun said there is a tire mounting machine (model No. BD15) in the showroom. The
operating head on it was purchased non-standard part. Other machines with operating heads are still being assembled, and have not been sold in quantity. What is shown in trade fairs was a concept model, not for export or stock in warehouse. Coseng contends that its offer for sale is about the assembled machine, not the accused operating head on the mounting machine. Meanwhile, Coseng denies use of the accused device. Coseng, the Office and Giuliano all agree that the penalty decision does not relates to any infringing sales by Coseng. Coseng contends that the connecting technology of the accused device is not identical with the claim 1 connecting
limitation, and therefore does not fall with the protective range of the patent. The Office believes that the accused device contain all the elements for claim 1, and is covered by the claim 1. Based on this, the Office renders a decision on July 11, 2016, YueZhiZhiChuZi (2016) No. 5, for an injunction against Coseng’s use or offer for sale of any product identical with the patented subject matter under No. ZL200910175775.1, and to remove any influences, and is prohibited from any actual sales, and required to destroy any infringing devices. The Office dismiss all other Giuliano petitions. Coseng subsequently requested with State Intellectual Property Office, the Patent Reexamination Board, for invalidation. The Board on December 14, 2016 issued No. 30902 invalidity decision, invalidating the entire patent. Guangdong Intellectual Property Court at first instance ruled to vacate the penalty decision, and remanded the case for a new decision. The Office and Giuliano, dissatisfied, appealed, which was dismissed by Guangdong High People’s Court, affirming the decision below.
[Judge’s Comment] In this case, after the underlying patent is pronounced invalid, the administrative decision is vacated, for three important consequences: 1. Necessity for Stabilizing Market Order The rapid development of market economy depends on the certainty and stability of various rights, which demands prompt and timely execution of administrative and judicial decisions. For this Article 44(1) of Patent Enforcement Measures mandates that when infringement is found by the patent management authorities with an order for injunction, and a respondent files for judicial review, the administrative decision shall not be stayed. But if the patent is pronounced invalid during the judicial review proceeding, the patent shall be deemed invalid ab initio under Article 47(1) of the Patent Law. At this moment, the administrative decision is actual violating respondent’s right, causing unsettlement to other market players for use, offer for sale of the accused device, and detriment to market stability. Therefore considering the fairness, the decision shall be vacated. II. Fully Reflecting Administrative Efficiency Efficiency is always a priority for administrative enforcement. Hence, a decision would not be stayed during judicial review. Thus, the effect of administrative decision can be achieved even during judicial review. A patent invalidity decision, after announcement, can also be reviewed. But in practice, the Board’s decision is rarely reversed.
Therefore, if the administrative decision is stayed pending judicial review decision with prolonged waiting period and low probability result, it may seem to save judicial and administrative resources, but actual violates the administrative efficiency principle, causing greater harm. III. Coherence of Administrative Enforcement and Judicial Protection of Patent Proceedings Currently, patent protection in China is run on two tracks of “separate judicial and administrative systems.” How to square with each other is a problem. Under Article 2 of Supreme People’s Court Interpretation of Several Issues of Application of Law in the Trial of Patent Infringement Cases (II), when a patent asserted by patentee in infringement litigations is invalidated by the PRB, the court in infringement case may dismiss the patentee’s allegation based on invalid patent. If the patent is upheld, the party may file a separate lawsuit for redress. But there is no similar provision for administrative proceedings, which causes the administrative result and judicial result to be out of whack. In this case, the court, after the patent is invalidated, directly vacated the administrative decision; and in the administrative proceedings, the complaint was dismissed. This resulted in coherence between the two tracks.
“MARKUSH CLAIM” AND DISPUTE OF PATENT INVALIDITY ◆ Docket: (2016) ZuiGaoFaXingZai No. 41 CASE 17 :
City of Beijing
[Headnotes] The nature of a Markush claim is a generalized, rather than a congregation of compounds, subject matter. Amendment of a Markush claim should be limited to a group or a compound producing no new character or effect. Markush claim drafting should followthe “tripartite” in forming inventiveness for compound claims.
[Synopsis] Plaintiff: Beijing Winsunny Harmony Science & Technology Co., Ltd. (Winsunny) Defendant: State Intellectual Property Office, Patent Reexamination Board
(PRB, or the Board) The third party: Daiichi Sankyo Company Ltd. (Daiichi Sankyo) Daiichi Sankyo is the patentee of a patent for “Process for preparing pharmaceutical composition for treatment or prevention hypertension” (the Patent) which was drafted with
[
Markush claims. Winsunny requests invalidation of the patent with SIPO, Patent Reexamination Board (PRB) for lack of inventiveness. On August 30, 2010, Daiichi Sankyo made amendment to the claim, including: deletion from claim 1 “… salt or ester that may be used as medicine” of the words “or ester;” deletion of “alkyl having 1-6 carbon atoms” under claim 1 R4 definition; deletion of all subject matters other than carboxyl and formula COOR5a under claim 1 R5 definition. In the oral examination, the PRB informed Daiichi Sankyo that the amendment of deleting “or ester” is acceptable, but all the others are not for being inconsistent with Article 68 under the Implementing Regulations under the Patent Law. Neither Daiichi Sankyo nor Winsunny objects to it. On January 14, 2011, Daiichi Sankyo submitted the amended claim substituting a page deleting “or ester” from claim 1. The Board allowed the patent as amended with Decision No. 16266 because claim 1 in light of reference 1 is nonobvious under Article 22(3) of the Patent Law. Winsunny is not satisfied, and files for judicial review. The court of first instance finds that the Board’s rejection of the amendment of August 30, 2010 on basis of Article 68 of the Regulations is not inappropriate. Claim 1 is nonobvious over reference 1, and therefore possesses inventiveness.
It then upholds No. 16266 decision. Winsunny is still not satisfied, and appeals. The court of second instance finds that Markush claim is a unique type that carries parallel subject matters; the Daiichi Sankyo amendment of August 30, 2010 narrows the scope of the patent protection, in line with Article 68(1) of the Regulations; the patent claim at issue contains one embodiment whose technical effect is compatible with that of embodiment 329 in reference 1 of the prior art, hence achieving no unexpected result, possessing no inventiveness. The court therefore vacated the decision below and Decision No. 16266, remanding the case to PRB for a new decision. The Board is not satisfied and requests for reconsideration with the Supreme People’s Court, which upon certiorari vacated the second instance decision and reinstalled the first instance decision, finding that the compound claim of Markush type should be taken as a generalized subject matter, rather than as congregation of multiple compounds; the principle for allowing amendment to Markush claim should be that it may not produce new property or effect of a category or a single compound by the amendment, but the consideration must be made on case-by-case basis; the inventiveness of a Markush claim compound should be determined following the “tripartite” method
delineated by the Patent Examining Guidelines. The unexpected result is a secondary consideration for inventiveness. Generally, it would be inappropriate to bypass the “tripartite” test by applying the unexpected result test for inventiveness.
[Judge’s Comment] This case relates to the nature of Markush claim, rules for making amendment in invalidity proceedings and determination of inventiveness. Markush claim is a relatively unique way of drafting for chemical or pharmaceutical inventions. Because of its generalized function, it has become widely used. Its nature, rules for making amendments and its inventiveness standard will directly affect large number of chemical and pharmaceutical applications for patents, attracting wide attention in the practicing and academic circles. The Supreme People’s Court clarifies in this case that amendment to Markush claim should be premised on the basic condition that it may not introduce a category or a single compound with new property or effect; determination of inventiveness must follow the “tripartite” test. This case has clarified several important legal principles and has important guiding influence for drafting patent claims in the field of chemical and pharmaceutical inventions.
ADMINISTRATIVE DISPUTE OF UTILITY MODEL PATENT ISSUANCE INVOLVING THE “CUT-OFF DATE FOR CLAIMING DOMESTIC PRIORITY” ◆ First Instance Docket: (2015) JingZhiXingChuZi No. 2822 CASE 18 :
City of Beijing
[Headnotes] In approval priority, if the Patent Office has issued for the earlier application Notification to Grant Patent and Notification for Recordation Formalities, and the applicant has accordinglycompleted the recordation, it shall issue for a later application Notification to Presume NonRequirement for Priority.
[Synopsis] Plaintiff: Dongguan Richtek
Electronics Co., Ltd. (Richtek) Defendant: State Intellectual Property Office (SIPO) On June 13, 2014, Richtek filed a utility patent application with SIPO for “A portable multifunction pomp” (the first application). On
June 14, 2014, SIPO issued a filing receipt. On September 17, 2014 SIPO issued Notification to Grant Utility Patent and Notification for Recordation Formalities, approving to grant utility patent and notifying Richtek to complete the recordation formalities. On October 17, 2014, Richtek paid the printing fee to SIPO, the first annuity and stamp duty. On October 30, 2014 Richtek filed with SIPO an invention patent application for “A portable multifunction pomp” (second application), requesting in the second application the priority of the first application. On October 31, 2014, SIPO issued a filing receipt for the second application. On November 19, 2014, SIPO published the first application for patent. On December 16, 2014, SIPO issued Notification for Assuming NonRequirement of Priority, denying priority, on the grounds that the first application has been granted for patent, not in condition for basis of priority under Article 32(2) of the Implementing Regulations under the Patent Law. Dissatisfied with the Notification, Richtek, on February 15, 2015, requested administrative reconsideration with SIPO, which, on March 24, 2015 decided to uphold the Notification. Still not satisfied with the administrative reconsideration decision, Richtek filed suit against SIPO, alleging: the first application has not been granted for patent when the second application was filed, and should be allowed for
domestic priority basis, requesting cancellation of the SIPO decision on “Notification for Presumption of Non-Requirement for Priority.” The court found that, to accurately interpret Article 32(2), item 2, of the Regulations for “… has been granted for patent,” it should be systematically understood for patent granting. First, applicant after completing recordation and before publication date files a second application requesting priority, may result in double patenting in violation of Article 9 of the Patent Law. Secondly, no law requires SIPO to declare sua sponte invalid of the first application simply because the applicant has request priority on it for a second application, or presume abandonment of the first patent because of request for priority. Therefore according to Article 32(3) of the Implementing Regulations, when request for domestic priority is made on a first application, the first application has at least to be not yet published for granting for patent. Moreover, when applicant completed the recordation, it shall be viewed as consenting to SIPO’s grant for patent, and shall bear the legal consequences. At this moment, SIPO’s denial of priority based on a first application that has been recorded is in compliance with legal logic and work reality. In sum, the court, in accordance with Article 69 of the Administrative Procedure Law, dismisses plaintiff’s complaint.
[Judge’s Comment] This case relates to interpretation of the cut-off time for claiming domestic priority, i.e., whether Article 32(2), item 2, of the Implementing Regulations for “… has been granted for patent” should be understood as “the grant has been published for patent.” The above item 2 merely indicates that “when request is made for priority in a second application based on a first application that has been granted for patent, the first application shall not be used for priority basis.” In this language, “… has been granted for patent” is likely to be taken as “grant for patent has been published.” But according to Patent Examining Guidelines, priority will be presumed as not requested for a second application if the Patent Office has issued the Notification to Grant for Patent and for Completing Recordation Formalities, especially when applicant actually completes the formalities. There may be conflicting understandings of the law and regulations. Precisely because of such conflicts, this case from the angle of avoiding double patenting, termination of patent rights, invalidation and preserving legitimate rights of the parties, discusses the basis for priority of a first application that has been recorded being denied for priority. This case further clarifies the cutoff time for domestic priority, with certain practical value as guidelines.
THE IMPACT OF PATENT INVALIDITY ANNOUNCEMENT ON ADMINISTRATIVE INFRINGEMENT DECISION ◆ First Instance Docket: (2016) Su02XingChu No. 113 ◆ Second Instance Docket: (2017) SuXingZhong No. 610 CASE 19 :
Jiangsu Province
[Headnotes] Patent administrative authorities issues a decision based on effective patent. In subsequent judicial review proceedings, patent is declared invalid for which patentee seeks judicial review. The reviewing court may take into consideration patentee’s right and balance respondent’s interest, by analogizing civil infringement suit for “decision first, lawsuit later” to cancel administrative decision. If the patent is ultimately upheld, the patentee may still assert his right, seeking administrative or judicial remedies.
[Synopsis] Appellant (Defendant below): Wuxi City Intellectual Property Office (Wuxi IP Office) Appellee (Plaintiff below): Jiangyin ChengHua Investment & Development Corp. (ChengHua) Third Party: Wuxi HongGuang Signs Co., Ltd. (HongGuang) On September 4, 2014, HongGuang filed a utility model patent application with State Intellectual Property Office for “Balance block die of drum washing machine.” The patent was issued on January 7, 2015 under No. ZL201420510142.8. In April 2016, HongGuang requested handling of patent infringement with Wuxi IP Office, alleging that ChengHua, without permission, made a mode for accused infringing product and
manufactured the product in quantity. It requests against ChengHua (1) to be enjoined from infringing and from using the infringing products; (2) to destroy all infringing products; and (3) to pay damages in the amount of 5,000,000 yuan. After receiving the request, Wuxi IP Office carried out field investigation and conducted oral trial. Then, HongGuang withdrew (2) and (3) requirements. On July 29, 2016, Wuxi IP Office found in its decision that the accused mode falls within the protective range of the patent, and ordered
injunction against ChengHua from infringement and use of infringing products. ChengHua, dissatisfied, filed suit in Wuxi Intermediate Court seeking cancellation of the administrative decision. During litigation, ChengHua requested with Patent Reexamination Board for invalidation of the patent. On December 27, 2016, the Board in its decision No. 30975 declared the patent invalid. Wuxi Court found: although Wuxi IP Office made its decision on some basis of law and facts, the patent has been invalidated which is retrospective on the administrative decision, thereby sustaining ChengHua’s request. It decided: Wuxi IP Office Decision XiZhi(2016) JiuZi No. 12 for Patent Infringement was vacated. Wuxi IP Office was dissatisfied and appealed to Jiangsu High People’s Court. The High Court found partial improper application of law in the first instance, but otherwise affirmed the decision, dismissing the appeal.
[Judge’s Comment] In the second instance, the Jiangsu High Court found: I. The patent right is a private right and is closely connected with the party’s interest. When in dispute, a patentee may choose between administrative or judicial remedies. These remedies, although deferring in authorities, procedures, and methods, they represent the same value orientation, i.e., to balance the protection of patent and public interest. In this case, Wuxi IP Office made its decision based on an effective patent which is proper application of law, following legitimate procedure, and nothing inappropriate. II. What makes this case unique is that in the first instance trial, the entire patent was declared invalid by the PRB. When the patent is unstable, if the administrative decision is upheld for injunction
against ChengHua, it may produce dire consequences for ChengHua, for once the patent is ultimately invalidated, it may suffer irreparable harm; if the litigation is stayed, due to the long process of judicial review of invalidity, it would made the effect of the administrative decision worse for ChengHua. III. The first instance decision to vacate is based on equitable balancing of both patentee’s right and respondent’s interest. However, in light of the ongoing judicial review of the PRB invalidity decision, it is not final. The first instance decision reliance on Article 47 of the Patent Law is error, because it relates invalidation that becomes effective, and should be corrected. In comprehensive balancing of both patentee’s right and respondent’s interest, Jiangsu High Court followed the spirit of “Cancellation first, litigation later,” when it considers vacating the administrative decision. The spirit, in patent infringement cases, is to dismiss the infringement after the PRB announces invalidation without waiting for the ultimate judicial review result, and allows the patentee the opportunity of judicial remedies for a separate lawsuit later. This system is an equitable balance of both parties’ interests, increasing litigation efficiency, and best alleviating the negative impact of prolong period of patent litigation upon the parties. The administrative authorities, when handling enforcement, should follow the principle of appropriate penalty for the wrong, to avoid improper injury to respondents’ legitimate rights. This case is the High Court’s trial of new type of intellectual property cases in the “three-inone” framework. It further clarified the principles and standards for enforcement, and promoted the ability of enforcement, having significant effect.
“YULIN IP OFFICE” ADMINISTRATIVE PROCEDURE FOR UTILITY MODEL PATENT INFRINGEMENT ◆ Docket: (2017) ZuiGaoFaXingZai No 84
CASE 20 :
City of Beijing
[Headnotes] On improper procedure in patent enforcement handling, the Supreme People’s Court clearly indicates that a member of the panel, having been replaced but signs on the administrative decision, is serious violation of the legal procedure, akin to “trier not deciding and decider without trial.”
[Synopsis] Plaintiff: Xixia LongCheng Special Materials Co., Ltd. (Xixia) Defendants: Shenmu Tianyuan Chemicals Co., Ltd. of Shanxi Coal and Chemicals Group (Tianyuan); Yulin IP Office Xixia requested with Yulin IP Office for patent infringement of its utility model patent for “External heating internal coal decomposing equipment” (the patent) by Tianyuan. On September 1, 2015, Yulin IP Office made its Decision on Patent Infringement Dispute under reference YuZhiFaChuZi (2015) No. 9 (the Administrative Decision) finding no infringement of the patent by Tianyuan. The panel making the Decision under review included a member GOU Hongdong who is a staff member of Baoji IP Office, who is on no official document to participate in the administrative handling of the dispute, nor did Yulin IP Office record of oral examination indicate GOU Hongdong’s official position or the reason of his participation being informed of Xixia or Tianyuan. Besides, Yulin IP Office conducted two oral trials, in the second of which, the parties were informed that it was a different panel from the one signing
on the Decision. The court of first instance found that administrative enforcement staff members being transferred within administrative system is not in violation of the internal rules. Because of shortage of workhand at Yulin IP Office, asking a member from Baoji IP Office, with approval of Shanxi Provincial IP Office, is all but inappropriate, and violating no legal procedures. The noninfringement is not inappropriate on the merit, either. The court therefore dismissed Xixia’s complaint. Dissatisfied, Xixia appealed which was affirmed. Xixia petitioned the Supreme People’s Court for reconsideration. Upon certiorari, the Supreme People’s Court found that the Decision was in violation of proper procedure and should be vacated. First, as an arbitor of patent infringement, it should have followed the procedural principles of being careful, proper, open and fair. However, when a panel member has been changed, he still signs the Decision, it is a significant and serious violation of the legal procedure. Besides, the panel making the administrative decision should be composed of qualified staff members. Otherwise the administrative enforcement procedure would be a joke, guaranteeing no standardized law enforcement, and enhancing no responsibilities. The so-called approval from Shanxi Provincial IP Office is merely an internal opinion certified to the leaders, without reference, without seal. The SIPO reply to Shanxi Provincial IP Office on the issue of Transferring Staff Member in Certain Cases was made after the Decision and
had nothing to do with it, and could be the legal and effective authority for GOU Donghong’s participation in the panel. Still further, Yulin IP Office’s evidence is insufficient to support its assertion that it has informed the parties of GOU Donghong identity and his reason for participation, as the parties’ recognition of a panel member is not the premise or condition for proper procedure. Therefore it gives no legal validity when Yulin IP Office and Tianyuan asserted that “Xixia did not object to the composition of the panel.”
[Judge’s Comment] This case relates to violation of proper procedure in administrative process. The Supreme People’s Court clearly indicates in this case that a replaced panel member who signs on the Decision is in essence “trier not deciding, decider without trial,” a serious violation of the legal procedure. In principle the panel making the administrative decision must be composed of qualified members. If an outside member is needed to sit in the case, he must go through official and proper procedures. This case effectively enforced procedures for law enforcement authorities, prominently emphasizes the judicial role in protecting intellectual properties, and a typical example of carrying out the Opinions on Several New Issues of Reform and Innovation in Strengthening Intellectual Property Trials, having significance in promoting improvement in IP laws and betterment of legal environment for science and innovation.
（Translated by ZHENG Xiaojun)
