Pre-trial injunction applications and problems in dispute cases

By Craig Zhou, Martin Hu & Partners
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The term “pre-trial injunction”, also known as a “pre-trial order to cease the act in question”, means that a party requests, before the institution of a legal action in a dispute case, that the court issue an order demanding that the other party not carry out a certain act, so as to promptly put a stop to an act, infringing or potentially infringing the petitioner’s relevant rights, that is currently being, or is about to be, carried out. In December 2001, China established the pre-trial injunction system in newly revised intellectual property (IP) laws and regulations in accordance with the requirements of the international Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. The amended Civil Procedure Law implemented in 2013 also adds provisions on pre-trial injunctions to provide the legal basis for applying pre-trial injunctions in other dispute cases, e.g. trade secret dispute cases, privacy dispute cases, etc.

Based on these legal provisions, a party in a dispute case can avoid the irreparable losses arising due to the relevant act of the other party by applying for a pre-trial injunction, and the court needs to review the party’s application to determine whether to approve it, so as to avoid causing losses to the relevant party due to the erroneous application of a pre-trial injunction.

Procedural provisions

The legislation addressing pre-trial injunctions in China tends to be principle-oriented. The emphasis in existing laws and relevant judicial interpretations of the Supreme Court is the resolution of the procedural issues involved when parties to dispute cases apply for pre-trial injunctions, including the competent court, the evidence that needs to be submitted, matters relating to the provision of security, reconsideration, institution of the legal action, etc. As relevant laws, judicial interpretations and regulations contain relatively specific provisions on these, the author will not address them further.

Craig Zhou Lawyer Martin Hu & Partners
Craig Zhou
Lawyer
Martin Hu & Partners

As mentioned above, the legislation on pre-trial injunctions in China mainly resolves relevant procedural issues, but it’s largely ignoring of substantive issues such as the specific criteria for determining whether relevant measures ought to be taken, which remains a common difficulty faced by Chinese courts at present.

In judicial practice, in three trademark/patent dispute cases – namely the dispute case between Changling (Group) and Shaanxi Changling Electrical Appliance Development involving an application to cease infringement, the dispute case between Juli Integrated Circuit Design and SigmaTel Inc et al involving an application to cease infringement of a patent, and the trademark infringement dispute case between Beijing Hongshi Coatings and Beijing Hongshi Jingqi Trading involving a pre-trial injunction – each court approved the relevant party’s application for a pre-trial injunction.

In the unfair competition cases of Yang Jiang v Sungari International and Li Guoqiang, involving a pre-trial injunction, and Eli Lilly and Company and Lilly China Research and Development v Huang Mengwei, involving an application for preservation of an act, the courts also approved the relevant parties’ applications for pre-trial injunctions.

In contrast, although the parties in the dispute cases Novartis v Chongqing Xinyuanxing Pharmaceutical, involving an application for a pre-trial injunction, and Beijing Tianwei Ruiheng Electric v Beijing Dianke Siwei Power Technology, involving an application to cease infringement of a patent, could substantiate the fact of their rights being infringed, the courts rejected their applications on the grounds that the evidence provided by the applicants was insufficient to show that failure to promptly put a stop to the infringement would cause the rights holders to suffer irreparable losses, or that it was not appropriate to conduct a review to determine the disputed facts involved in the case in a pre-trial procedure.

Although such regulatory documents as relevant laws and judicial interpretations of the Supreme Court of China provide for the procedural issues for a pre-trial injunction in relevant dispute cases, they are silent on the criteria for granting pre-trial injunctions, resulting in parties probably obtaining different rulings or judgments after submitting identical application materials to different courts.

Additionally, except in IP dispute cases where pertinent judicial interpretations expressly provide for pre-trial injunctions, in other dispute cases – e.g. trade secret dispute cases, privacy dispute cases and company shareholder rights dispute cases –aside from the provisions of principle in the Civil Procedure Law, there are no dedicated judicial interpretations that expressly provide for pre-trial injunctions, resulting in the courts having greater discretion.

Furthermore, the amendment of the Civil Procedure Law in 2012 only revised the chapter entitled “Property Preservation and Preliminary Execution to read Preservation and Preliminary Execution”, and only added “preservation of acts”, without making corresponding revisions to other provisions, resulting in the subsequent provisions remaining more suitable for application to property preservation. Unfortunately, the Interpretation of the Supreme People’s Court on the Application of the Civil Procedural Law, implemented on 14 February 2015, still failed to provide any further interpretation on pre-trial injunctions.

Worth noting

In the review for a pre-trial injunction, there are questions worth noting, including whether: it is necessary for a court to conduct a review of the substantive rights of the parties to the dispute and the facts of the dispute, e.g. the actual possibility of the applicant winning the case; if an injunction is not granted, the applicant will suffer irreparable losses; in a case where the damage that the applicant could incur is greater than any potential loss that the respondent could suffer, and the failure to review could lead to a flood of applications for pre-trial injunctions, and if the review is executed, there is the possibility that this would not be in keeping with the definition of “pre-trial” in pre-trial injunction, resulting in the court’s trial procedure being brought forward.

As in the case of an erroneous application for property preservation, the Civil Procedure Law only sets provisions of principle for damages for erroneous applications for act preservation, such as for pre-trial injunctions, and relevant judicial interpretations are silent as to how a court, after an erroneous application, is to dispose of the security provided by the applicant. Although, in practice, erroneous applications for pre-trial injunctions are rare, the law’s imperfections could still cause certain difficulties for potential claims for compensation for erroneous applications.

The author is of the opinion that although China is not a case law country, with the increase of pre-trial injunction cases, the Supreme Court will, at the appropriate time, publish various types of typical cases to serve as reference for parties and the courts. At such time, parties will be better able to apply pre-trial injunctions in relevant dispute cases as an effective means of avoiding incurring irreparable losses.

Craig Zhou is a lawyer at Martin Hu & Partners

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