Issuing Body: Supreme People's Court
Issuing Date: December 28, 2009
Effective Date: January 1, 2010

With Chinese courts having had more than a year's experience interpreting the changes wrought by the Amendments to the Patent Law of the People's Republic of China, which took effect on October 1, 2009, the Supreme People's Court has issued an interpretation clarifying a number of trial-related matters, such as the scope of allowable claims, the calculation of damages and the use of cease-and-desist orders. Released on December 28, 2009, the Interpretation on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Disputes (Patent Infringement Interpretation) became effective on January 1, 2010.

The Patent Infringement Interpretation contains 20 articles. The key elements are summarized below.

Determining the Scope of Protection

Under the Revised Patent Law, the scope of protection of an invention or utility model patent is determined by the contents of the patent claim, with the attached description and drawings being used to explain the claims. The scope of protection of a design patent is determined by the content of pictures or photographs, and the brief description used to explain such design.

The Patent Infringement Interpretation provides some guidance for courts seeking to apply those basic principles. Courts shall determine the contents of a claim based on what is recorded in the claim, while taking into account the understanding of the claim derived by any person skilled in the art, without inventive skills, after reading the description and attached drawings. In order to determine whether there has been an infringement of the design, the court should refer to and rely on the knowledge level and cognitive abilities of the average consumer of the product incorporating the design patent.

Determination of Damages

Article 16 of the Patent Infringement Interpretation provides guidance to courts on how to determine the damages to be awarded when infringement occurs and the patent that is infringed upon describes a component of another, more complex (and potentially more valuable) product. The Supreme People's Court directs trial courts to assess the value of the component at issue; "the benefits arising from other rights shall be reasonably deducted."

Here the Supreme People's Court appears to be responding to a controversial decision awarding $46 million in damages against a French company based on overall profit, rather than a calculation of the value of the infringed patent itself as a partial contributor to those profits (that is, rather than an assessment of the component's value, as opposed to the value of the product).

Declaration of Non-Infringement; Cease-and-Desist Letters

Before issuance of the Patent Infringement Interpretation, an alleged infringer of a patent could, after receiving a warning (cease-and-desist) letter from the patent owner, proceed directly to a local court and file an action seeking a Declaration of Non-Infringement. If the local court accepted that action, it would also obtain jurisdiction over future civil litigation relating to infringement of the patent in dispute. As a practical matter, that presented a challenge to patent holders seeking to enforce their patent rights, because sending a warning letter could lead to the accused infringer having "home court advantage."

Article 18 of the Patent Infringement Interpretation changes that dynamic so as to reduce if not entirely eliminate that concern. Now, before seeking a Declaration of Non-Infringement, an alleged infringer who receives a warning letter must first send a reply demanding that the patent owner assert its patent rights through legal proceedings against the alleged infringer. If the patent owner neither withdraws its warning nor files a lawsuit within one month after receiving a reply from the alleged infringer (or within two months from the date of the original warning letter), the individual or company that was accused of infringement may then file an action with a court for a Declaration of Non-Infringement.

As a result of this change, patent owners who had previously been reluctant to send warning letters due to the risk of having to fight the infringer in its local court may now make greater use of cease-and-desist letters as part of their patent enforcement strategy.

Conclusion

Given the complexity of the changes effected by the Revised Patent Law, important questions were bound to emerge—and to need clarification. Previously, for example, the State Intellectual Property Office (SIPO) and SIPO's Patent Office released, respectively, the Transitional Measures for Implementation of the Amendments to the Patent Law of the People's Republic of China and the Circular on Issues Concerning Implementation of the New Patent Law of the People's Republic of China.

While the Supreme People's Court's Patent Infringement Interpretation by no means addresses all of the lingering questions, it answers several that are of importance. For courts and patent owners alike, that guidance is surely welcome.