Right of action for integrated circuit design licencees

By Blake Yang and Chancy Chen, MHP Law Firm
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Although China’s integrated circuit industry has advanced in recent years, its independent innovation link is still weak and is more dependent on imports. Therefore, the use and manufacture of integrated circuits by Chinese enterprises by means of licensing of overseas rights holders is still a common business model. In cases of infringement, the costs for the overseas right holders to protect their rights in China are high, and it is more convenient for the licensees (such as Chinese enterprises) to defend their rights. Therefore, it is a real problem whether or not a licensee can obtain the rights of action from a rights holder by simply signing a licensing contract. Based on this, the right of action of the licensee with respect to the integrated circuit’s layout designs is briefly analyzed in this paper.

杨奕  BLAKE YANG  君悦律师事务所资深律师  Senior Associate  MHP Law Firm
杨奕
BLAKE YANG
君悦律师事务所资深律师
Senior Associate
MHP Law Firm

An integrated circuit has attributes of both the copyright and patent right, but also has its own particularities. First of all, an integrated circuit is a kind of layout design. The form of its expression is close to the nature of the works of the copyright, but this kind of layout design also has industrial practicality and this is contrary to the copyright spirit of protecting the expression not the practical function. Secondly, the core of an integrated circuit is its industrial practicality, which is close to the patent rights. But, the upgrading of the integrated circuits is mainly resolved by constantly decreasing the width of lithography lines to continually improve the integration scale, so the requirement for its innovation and iteration is that it only needs to reach the “non-conventional design” requirements, not the “creative” requirements in terms of the patent. To this end, all countries and TRIPSs have adopted specialized laws to protect the layout designs of the integrated circuits.

Chinese legislation only protects the layout designs of the integrated circuits at the administrative regulations and departmental rules levels. This is mainly enforced by the Regulations for the Protection of Layout Designs of Integrated Circuits promulgated by the State Council and the Implementing Rules for the Regulations for the Protection of Layout Designs of Integrated Circuits promulgated by the State Intellectual Property Office, and no protection at the legislative level like patent, trademark, or copyright is rendered. For the right of action of the intellectual property rights licensees, it is stipulated in the copyright law, patent rights law and the Regulations for the Protection of Layout Designs of Integrated Circuits that the relevant intellectual property rights holder or interested party has the right to bring an action in the people’s court when an infringement of intellectual property right happens (no similar provisions are in the copyright law). But as for how to define the “interested party” and whether the licensee always constitutes an “interested party”, there are different provisions in the corresponding judicial interpretations.

陈扬  CHANCY CHEN  君悦律师事务所律师  Associate  MHP Law Firm
陈扬
CHANCY CHEN
君悦律师事务所律师
Associate
MHP Law Firm

Although an integrated circuit has the attributes of both copyright and patent rights, the right of action of the licensee mainly refers to the patent rights. In accordance with the provisions of the Supreme People’s Court, the application for the cessation of infringement before litigation shall be handled in accordance with the Provisions of the Supreme People’s Court on Several Questions Concerning the Application of Law to Pre-litigation Cessation of Patent Infringement (Provisions on Pre-litigation Injunctions of Patent Rights).

Article 1 of the Provisions on Pre-litigation Injunctions of Patent Rights stipulates that a licensee may apply to the people’s court for a pre-litigation injunction against the respondent to cease infringement in the case of a patent right violations. Licensees who are under exclusive licensing contracts may independently apply to the people’s courts whereas licensees who are under sole licensing contract may only apply if the patentee does not apply. Although Article 1 of the Provisions on Pre-litigation Injunctions of Patent Right is about the application for pre-litigation injunction instead of the right of action itself, by referring to Article 12, “if the patentee or interested party fails to institute an action within fifteen days after the people’s court has taken measures to halt the relevant act, the people’s court shall lift the measures it ruled be taken,” it can be seen that Article 1 in fact grants the licensees under exclusive licensing contracts and sole licensing contracts the right of action. It is not clearly stipulated in the Provisions on Pre-litigation Injunctions of Patent Rights whether the licensees under ordinary licensing contracts can apply for pre-litigation injunctions or whether they are entitled to the right of action.

The application for pre-litigation injunctions by trademark licensees is similar to the aforementioned provisions on patent right. But the Interpretations of the Supreme People’s Court Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks (Judicial Interpretations on Trademark) promulgated after the Provisions on Pre-litigation Injunctions of Patent Rights further clarifies the rules of the rights of action of the licensees under ordinary licensing contracts, that is, “licensees under ordinary licensing contracts may initiate an action with express authorization of the trademark registrant.” This stipulation is based on explicit authorization. In other words, the licensees under ordinary licensing contracts cannot initiate an action if their right of action is not expressly agreed upon in such contracts and they fail to obtain authorizations afterwards.

Is it possible to solve the right of action of licensees under ordinary licensing contracts by simply providing an analog to the rule of right of action of the trademark licensees to the patent rights and integrated circuit layout design? We believe that, despite the debate in the academic circles, it can be applied by analogy due to the similarity in terms of the function, purpose and rule in granting the right of action to the licensees under ordinary licensing contracts. In addition, relevant cases show that, based on the particularity of intellectual property rights and prevailing international practices, the court is inclined to respect the autonomous disposal of the right of action by the intellectual property rights holders based on their intentions. Therefore, the licensees may as well include the exercising rule of the right of action in the licensing contracts to fill the void of statutory rights of action and to reduce the uncertainty of future rights protection work.

Blake Yang is a senior associate and Chancy Chen is an associate at MHP Law Firm 

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