December 16, 2011, the China Supreme Court released Opinion on Several Issues Relating to Sufficient Utilisation of IP Adjudication to Foster Development and Prosperity of Socialist Culture and to Promote Autonomous and Coordinated Economic Development.The Opinion set forth principles for adjudication of patent, trademark and copyright infringement disputes, as well as unfair competition claims.

In patent litigation, the China Supreme Court for the first time introduced the concept of patent abuse and created a private cause of action for malicious assertion of invalid patents. In an effort to facilitate method patent enforcement, the China Supreme Court broadened the applicability of burden shifting in infringement proof. The Opinion further clarified applicable principles for claim interpretation and infringement determination, such as the dedication rule, the all elements rule, the estoppel principle and the doctrine of equivalents.

In the judicial guidelines, the China Supreme Court emphasised a balanced approach to claim interpretation – the claim language must be balanced against the object of the invention. The object of the invention limits the scope of a patent; inferior inventions, such as inventions that do not fulfil the object of the invention, are not within the scope of the patent. Pioneer inventions are entitled to broader protection, including a broader scope of equivalents. Conversely, incremental inventions have less protection.

The China Supreme Court reiterated the principle for claim interpretation: disclosed but unclaimed technical features are dedicated to the public and are not within the scope of a patent. Moreover, the estoppel principle is alive and well. A patentee is estopped from asserting a claim interpretation that covers any subject matter surrendered during prosecution or invalidation. Prior cases suggest that an estoppel can arise with a narrowing amendment, regardless of the reason for such amendment. An argument can also give rise to an estoppel. As such, estoppel, coupled with the dedication principle, operates to limit the scope of a patent in China.

Courts must follow the all elements rule: each technical feature such as an element in a patent claim must be met by an accused process or product, either literally or equivalently. There can be no infringement if one technical feature and its equivalent are absent.

The Opinion confirmed that practising prior art is a defence to claims of both literal infringement and equivalent infringement. According to the Opinion, the prior art defence can be established by showing that an accused product or process is identical to prior art or constitutes an obvious variation of prior art. A single prior art reference can be combined with common knowledge to prove an obvious variation. The combination, however, must be obvious. As to the scope of prior art, the Opinion clarified that a conflict application, like an application filed earlier but published later, also constitutes prior art for prior art defence purposes.

The concept of patent abuse was proposed but not adopted in the third amendment to the Chinese Patent Law in 2009. The China Supreme Court did introduce such a concept in the Opinion though, reining in abusive patent enforcement. While the China Supreme Court did not define patent abuse, it singled out malicious assertion of invalid patents as a form of patent abuse that is actionable as unfair competition. Malicious assertion of invalid patents is defined as sending of warning letters or filing of infringement suits on patents that the patent owner knows to belong to prior art. In such a case, the patent owner is liable for damages suffered by the victims due to such assertion.

The Patent Law authorises courts to issue injunctions before or during infringement actions. Upon receiving a request for a preliminary injunction, a court must make a ruling within 48 hours if it finds that all procedural requirements have been met. Once issued, the injunction is immediately enforceable. The patentee, if it has not done so already, must initiate an infringement action in the courts within 15 days or the injunction automatically will be lifted. In the Opinion, the China Supreme Court once again urged restraint in issuing a pre-suit injunction, a common form of preliminary injunction in China. It emphasised that the conditions for granting pre-suit injunctions are clear and infringement is readily ascertainable. Cases involving complex technologies are not amenable to pre-suit injunction. Pre-suit injunctions should not issue where there is an invalidation decision on the patent in suit (even if the decision is under appeal). If practicable, courts should hear arguments from both sides in determining infringement.

According to the Opinion, where a patented method makes a new product and the patent owner proves that the product and the method are not known to the public before the priority date of the patent and the defendant’s product is identical to the patent owner’s new product, the burden of proving non-infringement shifts to the defendant, who must prove that they use a different method.

Importantly, the China Supreme Court stated that courts may also shift the burden of proof even if a patented method does not make a new product, if:
The patent owner proves that the products are identical;
the patent owner has made reasonable efforts but is unable to prove infringement; and
the court concludes that there is a high likelihood that the accused infringer uses the patented method based on common sense and facts of the case.

The China Supreme Court stressed that, in adjudicating method patent cases, courts must balance the patent owner’s rights against the accused infringer’s legitimate interests in protecting their trade secrets. Courts should grant evidence preservation such as a seizure order when there are difficulties in collecting infringing evidence for method patents. At the same time, courts must prevent abuse of such procedures to safeguard the defendant’s trade secrets.

Opinion (in Chinese) : http://www.fdi-law.com/view.php?id=100307