Decision on misapplication of evidence preservation in IP suits

By Geng Yunfeng, Sanyou Intellectual Property Agency
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As one of the three major preservation measures in civil litigation in China, the significance of evidence preservation is self-evident (the other two are conduct preservation and asset preservation). As the state strategy to build a strong intellectual property rights (IPR) country rolls out, more and more rights holders are found harnessing the power of evidence preservation – a procedural weapon indeed.

However, one question begs to be answered, i.e., how to define the legal responsibility of the applicant in the case of misapplication for evidence preservation. This article focuses on this problem through the perspective of whether the claim of the applicant is supported by the court.

preservation
Geng Yunfeng
Patent Attorney
Sanyou Intellectual Property Agency

Article 105 of the Civil Procedure Law states that, “in the case of misapplication, the applicant shall compensate the respondent for any losses incurred by the respondent because of preservation”. The Regulation on the Cause of Action in Civil Cases, promulgated by the Supreme People’s Court (SPC) on 18 February 2011, defines “the dispute over damages liability in connection to the application for pre-litigation evidence preservation” (item 367) and “the dispute over damages liability in connection to the application for evidence preservation during the litigation” (item 369) as “disputes over tort liability”.

It can be easily concluded that such disputes are governed by tort liability legislation. In tort liability law, fault liability is a general liability principle, and the presumptions of fault liability and liability without fault need to be based on the special provision in law. Under the fault liability principle, the subjective fault of the infringer is one of the constitutive elements of an infringement act. In judicial practice, approaches used by the court to determine the subjective fault of the evidence preservation applicant are varied.

In the dispute over damages liability between Yongxing Door Co, Ltd and Ou Jieren in Nanhai district, Foshan municipality, in connection to the application for pre-litigation evidence preservation, the court of first instance held that, “two of the litigations are withdrawn proactively by the defendant and one is dismissed; in another one, the claims are overruled in whole by the court on the ground that the tort charge is not established, and this judgment is sustained in the appeal. Therefore, this court takes the view that the defendant has misapplied for the pre-litigation evidence preservation, and shall compensate the respondent, i.e., the plaintiff in this case for the losses incurred because of the preservation.”

Apparently, this judgment is open to deliberation because the phrase “the claims are not supported” does not directly translate into “the applicant subjectively has fault”; equally, the subjective fault of the applicant (intentional or negligent) cannot be decided merely based on whether the claims are supported by the court. Fortunately, this judgment was corrected in the appeal, where the appellate court held that, “the damages liability in connection to the application for pre-litigation evidence preservation is not within the scope of liability without fault, as defined under the tort liability law, and the “in the case of misapplication” stipulated in article 105 of Civil Procedure Law is not equal to “in the case that the applicant loses the case”; therefore this court does not sustain the original judgment where the subjective fault of the applicant was not considered, and the conclusion of misapplication is based on whether the claims are supported, such judgment is against the law.”

In the author’s view, undeniably the applicant should consider the possibility that the case might be lost, and the applicant should have due diligence and be prudent when applying for the evidence preservation. But the applicant’s anticipation of whether the claims might be supported by the court, based on the applicant’s own understanding of the tort judgment rules, may not be necessarily in line with the conclusive judgment of the court; by deciding on the subjective fault of the applicant merely based on this fact, the court is “shackling” the rights holders.

However, article 16.3 of the Regulations on Several Issues Concerning the Application of Law of the Conduct Preservation in IPR Disputes, issued by the SPC on 12 December 2018, stipulates that the following situation shall be treated as the “misapplication” defined in article 105 of the Civil Procedure Law, i.e., the applicant applies to the court to order the respondent to stop infringing the IPR or stop unfair competition acts, but the effective judgment finds that the conduct of the respondent does not constitute infringement or unfair competition.

This regulation explicitly provides that misapplication for conduct preservation can be established because, “the effective judgment finds that the conduct of the respondent does not constitute infringement”. This stipulation seems inconsistent with the current “fault liability principle”.

It is worth noting that this provision is aimed at conduct preservation, which is ordering the party to do something or not to do something, and some conduct preservation is similar to “advance execution” in nature (for example, some pre-litigation injunctions require the respondent not to sell the products suspected of infringing IPR). This requires the applicant to have stricter due diligence and be more prudent when applying for such preservation. In this regard, to set “the effective judgment that the conduct of the respondent does not constitute infringement” as one of the criteria for deciding whether there is misapplication is reasonable in the author’s view.

To summarize, evidence preservation is like a double-edged sword; whoever is waving this sword should be prudent. Judicial policy should strike a balance between encouraging the party to boldly apply for preservation “in some cases when it is hard to obtain the evidence”, and preventing the abuse of the procedure by applicants with bad intentions. Whether the claims are supported by the court shall not be the only ground for deciding on the misapplication; the court should have considered deliberation combining the necessity and timing of the application, and the stability of the IPR.

Geng Yunfeng is a patent attorney at Sanyou Intellectual Property Agency and a lawyer at Wan Rui Law Firm

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