Article 13 of China’s Patent Law states that “after the application for an invention patent is published, the applicant may require the unit or individual that exploits the said patent to pay an appropriate amount of royalties”. This provision, in principle, establishes the interim protection system under the Patent Law of China. However, in legal practice, the rightful owners often face issues that the law does not expressly specify when they apply for the interim protection of patents for inventions.
In this article, the author discusses some legal issues involved in the interim protection of patents for inventions, based on a patent infringement litigation case he represented.
Company A found that tens of fabric machines Company C used were suspected of infringing the former’s patents for invention. The investigation found that Company B produced and sold those machines to Company C, and the firm was still committed to selling the said products on its official website. Company A sued Company B and Company C for patent infringements and asked them to stop such infringement immediately and compensate it for economic losses. Company B provided several sales contracts and claimed that, as the sales and delivery times of the said machines were earlier than the issuance date of the patent, it could not be held liable for patent infringement.
May the plaintiff also claim royalties during the interim patent protection period in the same patent infringement litigation case? The defendant claimed that “the production and sales conducted by the defendant took place before the issuance date of the patent, thus the defendant shall not assume the liability for infringement. The plaintiff shall not claim for the royalties incurred during the interim patent protection period, instead, the plaintiff shall bring another suit in respect of such claim.”
The plaintiff’s lawyer challenged the defendant’s claim as follows: First, although the dispute over the royalties incurred during the interim patent protection period, it is not a patent infringement dispute in general terms; it is, in essence, still a kind of infringement dispute in respect of patent and involving the patent owner’s rights to receive royalties for the patented technology it invented during the interim protection period. Secondly, the plaintiff provided sufficient evidence to prove that, in this case, the defendant’s infringement took place before and after the issuance date of the patent, which was continuous and consistent. For the plaintiff’s convenience of litigation, the rightful owner shall be allowed to claim royalties during the interim protection period and the patent infringement in the same case. Thirdly, the plaintiff provided several effective rulings to prove that, in legal practice, courts of many places had heard the damages for patent infringement together with the reasonable fees during the interim protection period.
The court supported the plaintiff in its ruling and believed that “essentially, all of the above claims are liability that shall be assumed by the entity which requires to use the patent. The plaintiff, as patent owner, shall not be required to get aware of the time when other persons use the patent before the litigation, and then make claims by bringing accurately separated cases to the court. If the plaintiff is required to separate the case, it is obvious that the burden and the costs of the plaintiff will be increased. Therefore, we hold that the defendant’s legal liability for using the patent may also be heard in this case.”
How to determine royalties incurred during the interim protection period? The Patent Law only requires the patent users “to pay appropriate fees”, based on which it is hard to determine the legal nature of the patent users’ payments. Firstly, though such “appropriate fees” are not patent royalties, the legal position of such fees is similar to that of the royalties. Secondly, such fees are different from the damages for patent infringement because the damages for patent infringement may only be made for the infringement of licensed patent. Some scholars also interpret the “appropriate fees” in terms of improper benefits, conditional contract and otherwise.
Currently, the only legal basis is Article 18 of the Interpretations (II) of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Cases Involving Patent Infringement Disputes that “where a right holder files a lawsuit to request an entity or individual to pay appropriate fees for exploiting the relevant invention during the period from the date of announcement of the invention patent application to the date of announcement of the grant of the invention patent in accordance with Article 13 of the Patent Law, the competent people’s court may make determination on reasonable basis by referring to relevant patent royalties.”
However, these interpretations do not specify how to determine the reasonable royalties without any reference to relevant royalties. In legal practice, the court will comprehensively take into account the patent user’s source of technology, existence of subject intent, production capacity and scale, value of the patented technology in the product, product price, benefits and other factors to make determination.
Although the laws differentiate the appropriate fees incurred during the interim protection period from the damages for infringement, most courts, in practice, tend to believe that usually the appropriate fees incurred during the interim protection period shall not exceed or shall be less than the patent royalties or the damages for the patent infringement for the corresponding period.
The interim protection system of patents for invention, to some extent, supplements the “earlier publication, deferred examination” system implemented in China, and provides better protection to the rights and interests of patent and the right owners. However, the provisions in respect of the patents for invention in the current Patent Law of China are not clear and detailed enough. There is still room for further study and discussion at the theoretical and practical levels.
Chen Jian is a patent attorney at Sanyou Intellectual Property Agency and director of Beijing Wan Rui Law Firm. Geng Yunfeng is a patent attorney at Sanyou and associate at Wan Rui