Patent invalidation system reform to make 10-year cases a thing of the past

As the number of patent dispute cases increases, issues such as revolving-door lawsuits and abuse of invalidation procedure by suspected infringers have drawn attention across all sectors of society. Gradually, a cry for reform of the patent invalidation system has arisen. The Ericsson patent infringement case in which the authors had a hand is a typical case in this regard.

In 2000, a certain company and two individuals (the plaintiffs) took Ericsson China and Beijing Ericsson (collectively, Ericsson) to court on the grounds that a certain Ericsson mobile phone model infringed their patent. At the time, they instituted legal actions against Motorola and Alcatel based on the same patent. These cases were widely reported in the media and drew broad attention as cases where Chinese patent holders accused multinational corporations of infringement and sought massive damages.

In 2012, after nearly 12 years, the Beijing Municipal Higher People’s Court rendered its judgment in the first instance dismissing all of the plaintiffs’ claims. The Plaintiffs subsequently appealed to the Supreme People’s Court, then followed with an application to withdraw the suit. Ultimately, in 2013, the Supreme People’s Court rendered a ruling permitting the plaintiffs to withdraw their suit. After 12 years, Ericsson had finally been proven the winner and the case concluded.

The main reason for the case dragging out so long without resolution was the dispute between the parties over the validity of the patent in question. In 2000, Ericsson submitted a petition to the State Intellectual Property Office Patent Re-examination Board (PRB) for invalidation of the patent in question. The administrative case for invalidation of the patent finally concluded after two administrative decisions and two administrative judgments, this over a period spanning the years 2000 to 2009. During this period, the court at first instance trying the civil patent infringement case issued a ruling adjourning the trial of the civil case on the grounds that the validity of the patent in question had a direct bearing on the outcome of the civil case. Accordingly, the civil infringement case was not truly concluded until 2013.

Twelve years before the case was concluded in 2013, Ericsson, Motorola and Nokia were being called the three giants of the mobile industry. Now, the mobile market is dominated by Apple and Samsung, and each of the three giants has in turn withdrawn from the mobile industry.

A similar situation occurred in a copyright case in which the authors also served as counsel. The case involved From Emperor to Citizen, the autobiography of Pu Yi, the last emperor of the Qing Dynasty. The trial of that case similarly stretched out over 10 years. The authors feel that it would have been of much greater significance to the parties involved if justice had been served earlier.

It can be said that the Pu Yi case was unique, while the Ericsson case, by contrast, was more universal in nature. However, the adverse impact of the inefficient patent invalidation system on Chinese and foreign rights holders is not at all dissimilar.

IP courts a needed infrastructure

Before the establishment of the intellectual property (IP) courts, China had, as at June 2014, 87 intermediate courts and seven local-level courts competent to hear civil patent cases. However, with the exception of the courts in Beijing, Shanghai and Guangdong, judges in the courts of other regions with the capacity to try patent cases were few and far between.

Compared to the PRB, where the hearing of patent invalidation cases is concentrated, the courts are in no way at an advantage in terms of trial strength. Handing the authority to render judgments and rulings on patent validity to all the courts competent to hear civil patent cases at that juncture would have been adverse to consistency of case trial standards.

Although the judiciary and other authorities have worked incessantly to patch the holes in the system through measures such as instituting the prior art argument and treating the lack of clarity in the scope of patent protection as grounds to dismiss plaintiff claims, these efforts have been but temporary redress.

Nevertheless, practice has shown that if reform fails to start at the structural level of the judicial organization, any reform intended to enhance the efficiency of the invalidation system will be without a foundation to stand, like a tree lacking roots.

Foundation for reform

Recently, IP courts have finally provided the necessary foundation for patent invalidation reform, by placing patent cases on unprecedented high ground. The IP courts engage solely in the trial in the first instance of technical cases and well-known trademark cases – excluding the administrative trademark cases taken on by the Beijing IP Court. Other cases, such as copyright and trademark cases, are tried in the first instance by local-level courts.

Moreover, the possibility of IP court judges moving to other divisions out of consideration of promotion or otherwise has been greatly reduced. The aforementioned function of the IP courts will undoubtedly provide the necessary talent pool for examining the validity of patents.

The pilot period for the IP courts is three years. Although the relevant authorities have not yet disclosed the reform plan after the pilot period, it can be anticipated that cross-regional jurisdiction may very well be the future development direction of the IP courts. For example, the Beijing IP Court could have jurisdiction over all technical cases in the first instance in the eight northern provinces.

In other words, the simple addition of one or two more IP courts and the establishment of an IP court at a higher level could satisfy the need to try IP cases. At such time, the final appeals court for civil patent infringement cases and administrative patent right confirmation cases will be the same, and their trial standards will become more consistent. In civil cases, limited ruling on the validity of patents – a practice that greatly enhances trial efficiency – will offer protection to the system.

Accordingly, the authors optimistically predict that there is hope for thorough reform of the patent trial system in China, a reform that will forever make patent infringement cases requiring a decade to conclude a thing of the past.

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