Evidence of intensified intellectual property protection in trial practice

By Wang Yadong and Lu Lei, Run Ming Law Office
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The Decision of the Central Committee of the Chinese Communist Party on Several Major Issues Concerning Comprehensively Intensifying Reform, adopted at the committee’s recent plenum, again emphasised “strengthening the application and protection of intellectual property (IP)”. The Trademark Law, as amended for the third time and published in 2013, and the Copyright Law and Patent Law, currently being revised, have all added relevant provisions. In terms of the judiciary, courts at every level tend to “intensify the protection of IP” in trial practice, and the eight model cases of judicial protection of IP recently published by the Supreme People’s Court make this trend clearer. Through the study of a few model cases, it is not hard to see that intensification of the protection of IP is an inevitable trend.

Prompt protection

With respect to the relatively low rate of support by courts in the past of applications by IP rights holders for temporary injunctions, preventing rights holders from promptly prohibiting infringing acts by infringers, courts will apply preservation measures more frequently, emphasising the prompt protection of the lawful interests of IP rights holders.

王亚东 Wang Yadong 润明律师事务所 执行合伙人 Executive Partner Run Ming Law Office
王亚东
Wang Yadong
润明律师事务所
执行合伙人
Executive Partner
Run Ming Law Office

The Eli Lilly preservation application case is the first case in China in which the injunction system was applied in a trade secrets infringement action in which the amended Civil Procedure Law was applied. This case reveals the court’s prominent use of preservation measures to resolve the problem of the effectiveness of rights protection. Relevant rights holders should grasp this trend to fully utilise such means of relief.

With respect to the issue of the high degree of surreptitiousness in IP infringement and the difficulty of gathering evidence of infringement, the courts in the model cases applied the rule of inference from fact, manifesting the trend towards further lightening the burden of proof on rights holders.

In IP infringement cases, and particularly in method patent cases, the evidence of infringement is usually possessed by defendants, who generally refuse to provide evidence that is damaging to their case. In past IP legal actions, the allocation of the burden of proof to the plaintiff and defendant was generally done in strict accordance with the principle “that the burden of proof rests on the party who makes the claim”. Generally speaking, the burden of proof lies more heavily with the rights holder. The courts have noted this problem and are working to appropriately reduce the burden of proof on rights holders.

Data withheld

For example, in the Gree v Midea patent infringement case, after the court explained the relevant legal consequences, Midea refused to provide data on other models of air conditioners that it produced and sold. The court, applying the rule of inference from fact in accordance with the law, inferred that the products for which Midea refused to provide evidence were infringing.

With respect to the issue of IP actions involving a high degree of specialisation and the measure of damages being difficult to calculate, in recent years, courts have been actively guiding and encouraging parties to employ numerous methods, such as economic analysis, professional evaluations, accounting and other such methods to objectively calculate the measure of damages, and using their best efforts to fully make up the losses of the injured parties.

For example, in the Johnson & Johnson vertical monopoly agreement case, each party engaged a well known domestic economist to give his professional opinion on the issue of damages. The trial court fully took into account the economic analysis of the two experts, strengthening the objectivity and reasonableness of the logic of the judgment, and rendering the calculation of the measure of damages more accurate.

Court’s discretion

As it is quite difficult for the rights holder to adduce evidence for the profits made by the infringer and the losses incurred by the rights holder, even if damages are awarded at the statutory maximum, they cannot make up for all of the rights holder’s losses. In such a circumstance, the court may consider in a comprehensive manner such factors as the costs incurred by the rights holder in protecting its rights, etc., and determine at its discretion a measure of damages greater than the statutory maximum measure of damages.

陆蕾 Lu Lei 润明律师事务所 合伙人 Partner Run Ming Law Office
陆蕾
Lu Lei
润明律师事务所
合伙人
Partner
Run Ming Law Office

Taking the current Trademark Law as an example, the maximum statutory measure of damages is RMB500,000 (US$82,000). However, in respect of certain infringements in bad faith, the profits made by the infringer or the losses incurred by the rights holder as a result of the infringement usually far exceed RMB500,000, but adducing sufficient evidence to show the profits made by the infringer or the losses incurred by the rights holder is very difficult. Accordingly, certain courts have been determining the measure of damages at their discretion, thereby protecting the interests of rights holders to the greatest extent possible. In the BMW v Century Baochi trademark infringement and unfair competition case, BMW was unable to provide complete and sufficient evidence in respect of the losses it incurred.

The court, taking into account such factors as the subjective bad faith of the infringer, the duration of the infringement, broadness of the scope, the huge profits made, etc., and using its discretion to determine a fair and reasonable measure of damages, supported in full BMW’s claim for damages in the amount of RMB2 million.

Fines increased

With continuous pressure from developed countries on the intensity with which China cracks down on criminal IP cases, in recent years the courts have strengthened their work of using criminal law to crack down on IP crimes. In 2012, the number of criminal IP cases and the number of convicted infringers both reached five-year highs, and the courts have placed emphasis on increasing fine amounts. For example, in the Jiangxi Yibo et alcriminal infringement of trade secrets case, the total amount of fines imposed by the court set a new national record of RMB37 million.

Although in the past few years there has been unceasing debate on the insufficient intensity applied to IP protection, the authors have been cheered to see relevant Chinese legislative and judicial authorities accelerating their issuance of various measures in recent years to resolve these problems, and the intensity of improvement has also been continuously increasing. We are anticipating that China will, in future, have established a better legal regime for the protection of IP.

Wang Yadong is the executive partner and Lu Lei is a partner at Run Ming Law Office

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