Source: https://chinaipr.com/category/judicial-interpretation/
Timestamp: 2019-04-20 02:37:32+00:00

Document:
As has been noted in the media, on April 26, 2018, the Guangdong High People’s Court (GHC) promulgated the Trial Adjudication Guidance for Standard Essential Patent Dispute Cases (the “Guangdong Guidance”). The Guangdong Guidance adhered to the basic framework of Beijing Higher Court’s (BHC) Guidance for Patent Infringement Determination 2017 (the “Beijing Guidance”) which itself appears quite similar with the basic framework set forth by Court of Justice of the European Union (CJEU) in its decision for Huawei v. ZTE, as well as in the recent decisions of Iwncomm v. Sony (see abridged English translation from the Comparative Patent Remedies blog here) in Beijing and Huawei v. Samsung in Shenzhen. Taken together, these approaches depart from prior Supreme People’s Court (SPC) practices, and embody a “fault-based” conduct-evaluation framework. The Guangdong Guidance further suggests that courts which apply the fault-based conduct-evaluation framework may rely on a comparable license approach than other approaches to determine FRAND royalties.
The earliest Chinese court’s attitude about determining injunctive relief and royalties for standard-related patent infringement case can be found in the reply letter issued by the SPC on July 8, 2008 to the Liaoning High People’s Court (LHC). The SPC instructed the LHC that once a patent holder participated in the standard setting process and agreed to have its patents adopted in the standard, the court shall deem the patent holder as having consented to license its patents to anyone who implements the standard. The patent holder can charge the standard implementer for royalties, which, however, shall be less than the usual amount of royalty if a standard were not involved. The court would also implement the promise of a patentee to license on a royalty-free basis.
Subsequently, on October 16, 2013, the GHC upheld the Shenzhen Intermediate Court decision of Huawei v. InterDigital. In this case, the Chinese court held that once an implementer had indicated its willingness to conclude a license, a FRAND encumbered SEP owner shall have the obligation to make a FRAND offer to the implementer. The key to determining whether the offer was FRAND is the evaluation of the royalty rate. Their opinion may also be read to suggest that the courts might reject a FRAND-encumbered SEP owner’s petition for an injunction when an implementer expressed it willingness to conclude an agreement. However, the court did not address how to determine whether an implementer is willing to negotiate.
On March 21, 2016, the Supreme People’s Court of China promulgated the Judicial Interpretation on Several Issues Regarding Legal Application in the Adjudication of Patent Infringement Cases II (the “Patent JI II). Article 24 of the interpretation stipulated that the Court shall not support the SEP owners’ petition for a permanent injunction if the SEP owner intentionally acted against its FRAND commitment made in the standardization process during the negotiation of licensing conditions with the accused infringer, and the infringer was not at “obvious fault” during the licensing negotiation. Paragraph 2 of this Article also provides that in determining licensing conditions, a court shall, in accordance with FRAND principles, comprehensively consider the contribution of the innovation and its role in the standard, the situation in the technical field of the standard, the nature of the standard, the scope of exploitation of the standard, the related licensing conditions and other factors. This Interpretation thus introduced the fault-based idea into Chinese courts’ consideration of whether to issue an injunction in a SEP related case. The types of standards referred by Article 24, according to its language, are limited to non-mandatory national, industrial and local standards. The promulgation of Patent JI II opened the gate for the Chinese courts to view FRAND obligations as imposing certain conduct behavior on both the SEP owner as well as the standard implementer.
One year later, with the promulgation of the Beijing Guidance, the BHC extended the fault-based test for determining an injunction from the SEP owner to the standard implementer. In the Beijing Guidance, BHC attempted to structure a more complete and balanced framework for SEP injunctions. Article 150 of the Guidelines stipulated that both parties shall negotiate in good faith during the SEP licensing negotiation. Article 152 of Beijing Guidance targets the situation in which both parties were not at obvious fault. It provides that if the infringer duly submitted the amount of royalty it offered or a deposit no less than that amount to the court, then the court shall not generally support the SEP owner’s petition for a permanent injunction. Article 152 also detailed the situations where the court can determine the SEP owner disobeyed its FRAND obligation. These principles were also articulated in Article 13 of the Guangdong Guidance with some difference in detail. Article 153 of the Beijing Guidance targets the situation in which the SEP owner disobeyed its FRAND obligation and simultaneously the accused infringer was also found acted at obvious fault during the negotiation. It provides that the decision to grant an injunction shall be based on which party is more blameworthy for the break-down of the negotiation. Article 153 also enumerated the situations by which a court can determine that the accused infringer acted at obvious fault, which is also articulated by Article 14 of the Guangdong Guidance with some difference in details.
If both parties are found acted at fault, the decision of whether to grant an injunction depends on an assessment of the faults of both parties.
On January 4th, 2018, about two months before BHPC came to its conclusion on Iwncomm v. Sony, the Intellectual Property Division of the Shenzhen Intermediate People’s Court granted injunctions against Samsung in two separate decisions in Huawei v. Samsung. After detailed examination of the performance of both parties in the past licensing negotiation process and the court mediation process, the court then found Samsung was at “obvious fault” and that it acted against FRAND principles. Thus, a permanent injunction was granted. The court also ruled that in the light of the different nature of SEP and non-SEP cases, the two parties are allowed to continue negotiating licensing terms after the judgment, and the injunction will not be enforced on the condition that the parties reach an agreement later or Huawei consents not to enforce it.
The court’s injunction absent licensing-decisive negotiations or the probability of Huawei’s decision not to enforce the injunction was the basis for Judge Orrick’s Anti-Suit Injunction in the US counterpart case that enjoins Huawei from enforcing the Shenzhen Court’s injunction.
In Judge Orrick’s view, his court was the first to hear the case even if it were not the first to decide it, upon the petition of the same party (Huawei), and any decision to enjoin activity in Guangdong would undercut the possibility of a global settlement, which is the basis of Huawei’s claim before his court. Unlike the Chinese courts to date, Judge Orrick does undertake a lengthy comity analysis to justify his decision. Judge Orrick’s decision stands in stark contrast to another, earlier Shenzhen decision, Huawei v InterDigital (2013) which determined that InterDigital’s seeking an injunction (exclusion order) at the USITC was an abuse of its rights as a SEP holder, and arguably showed no deference to a previously initiated US litigation. Judge Orrick may have been taking prophylactic measures to ensure that US courts retain jurisdiction over disputes, and to deny a Chinese party “two bites” of the apple by undercutting a case that the Chinese plaintiff initiated at essentially the same time as a Chinese litigation.
The Guangdong Guidance was promulgated with all of the foregoing Chinese cases and judicial practices in mind. Article 10 of the Guidance explicitly reiterated that whether a permanent injunction is granted shall depend on whether the SEP owner or the implementer was at fault. Article 11 provides that when deciding whether the parties were at fault comparing with ordinary business practices, the factors that a court shall consider include: (1) the entire history of the negotiation; (2) the timing, tactic and content of negotiation of the parties; (3) the cause of deadlock, and; (4) other facts. Article 12 generally restates the principles of whether granting a permanent injunction set forth by the BHC in Iwncomm v. Sony. Article 13 and 14 followed the basic idea and structure of Article 152 and 153 of the Beijing Guidance for conduct-evaluation for both parties with some differences in detail.
Article 13 provides that if the SEP owner’s conduct met any one of the following situations, a court may determine the SEP owner disobeyed its FRAND obligation. The situations include: a SEP owner who (1) did not notify the implementer, or notified the implementer but didn’t list the scope of the patent in dispute according to the ordinary business practice; (2) did not provide the implementer with explanatory claim charts, patent lists and other patent information according to the ordinary business practice after the implementer had clearly expressed its willingness to negotiate the license; (3) did not provide the implementer with licensing conditions and the method of calculating the royalty, or provided obviously unreasonable licensing conditions, which result in failure to reach an agreement; (4) did not reply to the counter party within reasonable time; (5) impeded or interrupt the negotiation without justifiable reasons, and; (6) practiced other conduct at obvious fault.
Article 14 enumerates the situations that the court may determine an implementer disobeyed its FRAND obligation accordingly. The situations include an implementer who (1) refused to receive the negotiation notice from the SEP owner, or did not respond to the SEP owner within a reasonable time after it had received the negotiation notice; (2) refused to sign a confidentiality agreement, and thus led to a deadlock in negotiation; (3) did not make a material response to the SEP owner within a reasonable time after the SEP owner had provided explanatory claim charts and patent lists; (4) did not make a material response to the SEP owner within a reasonable time after the SEP owner offered its licensing conditions; (5) provided obviously unreasonable licensing conditions, which resulted in failure to reach an agreement; (6) delayed to or refused to negotiation without justifiable reasons, and; (7) practiced other conduct at obvious fault.
While the Chinese fault-based conduct-evaluation frameworks borrowed ideas from the CJEU’s decision for Huawei v. ZTE, the starting point of the Chinese framework is in different from the CJEU framework. The direct objective of CJEU framework was to answer the question whether a SEP owner’s action for seeking injunction breaks EU competition laws, specifically the Article 102 of TFEU. Logically speaking, courts that follow the CJEU’s framework do not need to answer whether an injunction should be granted. On the other hand, the Chinese framework directly addresses whether an injunction should be granted without reference to antitrust principles.
A Break With Tradition and A Rush to Change?
After these various developments, it can be said that Chinese courts now view the FRAND commitments as a universal principle binding both the SEP owner and the implementer. This approach leaves open where the implementors’ obligations of negotiating in good faith come from and when and how such obligations are triggered. Historically, Chinese courts also do not consider the infringer’s state of mind when deciding whether to issue a permanent injunction, nor are such standards part of the Patent Law (Art. 118, 134) or the General Principles of the Civil Law of the People’s Republic of China (Art. 179 ) or the more recent General Rules of the Civil Law of the People’s Republic of China. The framework introduces new judicial doctrines to determine a permanent injunction into Chinese patent law practice, which is also atypical for Chinese legal practice. However, as China is currently considering introducing punitive damages in next revision of the patent law, fault-based factors may become more important and, indeed, fault factors involving punitive damages and an implementer’s state of mind in SEP negotiations could conceivably overlap.
It also worth noting that the judicial evaluation of royalties still plays an important role in this fault-based conduct-evaluation framework. In determining whether an offer or a counter offer are FRAND, the court may rely much more on the comparable license approach. Article 18 of the Guangdong Guidance provides that in determining SEP royalties, the methods a court may refer to include: (1) comparing the comparable licenses; (2) measuring the market value of the SEP in dispute; (3) comparing the licensing information of comparable patent pools, and; (4) other methods. Last but not least, Article 16 of the Guangdong Guidance also confers the courts with the jurisdiction of setting royalties beyond its jurisdictional territory under one party’s petition as long as the counter -party does not file an objection or the objection is found to be unjustified.
Chinese courts’ approach appears to reflect the increasing global experience in adjudicating FRAND-encumbered patent infringement matters. The fault-based approach also helps address the problem of Chinese implementers delaying in taking licenses and using the FRAND obligation as a sword to deny a patentee access to judicial relief, at possible risk of a licensor being on the receiving end of an antimonopoly action. The approach also appears to reflect Chinese, and especially Guangdong-based companies, rapidly growing role as both a patent implementer and a contributor to important emerging standards, such as 5G. Nonetheless it is concerning that the pioneering cases noted here ruling in favor of a licensor acting in good faith and being entitled to obtain injunctive relief have all occurred where the licensor was Chinese (Iwncomm v Sony, Huawei v Samsung). This is a scenario not that different from what some observers thought was the problem behind the President taking the unusual step of denying relief to Samsung in the Apple vs Samsung 337 litigation in the US – the binary observation is that it seems to be easier to make precedent eroding/strengthening IP rights when the party adversely affected/benefitted is foreign/domestic. For previous information about the Obama administration’s refusal on USITC’s order, please see here, here, here, here and here.
Written by Yabing Cui, LLM of Berkeley Law 2018 and Ph.D. Candidate of Peking University Law with the the assistance of Mark Cohen. Yabing can be contacted at cuiyabing@berkeley.edu.
On June 1, the SPC released a new draft judicial interpretation on patent validity litigation for public comment (最高人民法院关于审理专利授权确权行政案件若干问题的规定（一）[公开征求意见稿]). Comments are due within a month. The Chinese draft is found here. Here is a translation provided by the Anjie law firm.
The draft should be of interest to foreign companies, who frequently challenge final decisions of the Patent Review Board at the Beijing IP Court. According to data published by the Beijing IP court, in 2013, nearly 35% of the administrative patent cases involved foreigners. According to the SPC’s report on IP litigation for last year (to be further discussed in a future blog) there were 872 such adminsitrative patent cases in 2017，a decline fo 22.35% from the prior year.
Should the NPC also consider Criminal Copyright Reform when it considers Copyright Reform?
1. Article 217 of the criminal code, mandates having a “profit motivation” in order for criminality to attach.Should the “profit motivation” requirement be removed from the criminal code?
2. Whether to criminalize the Internet related right of “communication over information networks”?
3. How to address secondary and principal liability of internet platforms?
a) How to criminalize destruction of technological protection measures?
b) How to criminalize commercial scale use of piratical software?
c) What are the thresholds to deal with online criminal enforcement?
In my view, these are all important issues, which should be considered in the context of copyright reform. Many of these issues were raised in DS/362, the WTO enforcement case which the United States brought against China. Of particular note was that the United States raised the history of amending US laws to address willful copyright infringement that caused large scale harm without necessarily causing commercial gain (the LaMacchia case, in the cartoon above). In addition, the United States also recognized that thresholds based on the numbers of copies would not capture the harm caused by technological changes which permitted large digital quantities to be distributed on line or in compressed formats. One of the current thresholds involves 500 “flat articles” ( 500 张 ) (typically used for CD’s or flat pieces of paper), which the WTO panel called “copies, for the sake of simplicity” and is an awkward determinant for infringement in rapidly moving technologies.
Also of note is that criminal IP enforcement has become more important in China. This was brought to my attention by a Chinese judge who mentioned that while China opposed the WTO case, it was now widely recognized that criminal IP is an important part of an IP enforcement system. In a sense, the US may have lost the 2007 battle over criminal IP at the WTO, but clearly won the war. The data bears this out. When the WTO was filed against China, there were only about 904 criminal IP infringement cases in China (2007). In 2013, by comparison there were 7,804 infringement cases – an increase of about 8 times, not including increases in other provisions of the criminal code that also can address IP infringement, such as crimes involving illegal business operations or fake and shoddy goods.
While China recognizes that criminal IP is enforcement it an important part of its enforcement system, an equally important question concerns the role of the relatively small criminal IP enforcement system in light of China’s civil, administrative and customs enforcement (see chart below). In addition to the increasing number of criminal IP prosecutions, the increasing numbers of referrals from China’s administrative copyright enforcement to criminal copyright enforcement is an encouraging trend in this regard. An even more encouraging sign would be consideration by the NPC of criminal copyright law reform at the same time as it considers substantive copyright law reform. As criminal law reform goes through different procedures at the NPC, working on both issues simultaneously may entail some coordination, but would help ensure that any changes to China’s copyright regime is comprehensive and would set a good precedent for other IP legislative reforms coming up, such as in reform of the trade secret regime in the Antiunfair Competition Law.
The SAIC has announced that it has amended its TM review and examination standards (“Trademark Review and Examination Standards”). The revised standards, with a date of December 2016, are available here. The revisions incorporate revisions to Articles 19, 50, 15.2, 1and 10 of the Trademark Law.
In addition, the Supreme People’s Court published a judicial interpretation on Certain Issues Related to Trials of Administrative Cases Involving the Grant and Confirmation of Trademark Rights 最高人民法院关于审理商标授权确权行政案件若干问题的规定. A public comment draft of the JI was circulated as early as 2014; the final version was released at a press conference on January 11, 2017. The JI clarifies the application of “adverse influence” in Article 10(1)8 and “other improper means” in Article 44(1) of trademark law and provides details on prior rights of Article 32 including copyright, naming right, trade name, amongst other provisions. The Financial Times has suggested that the JI is linked to the Qiaodan case , although as the Chinese media as noted, Qiaodan may also be seen as one of a series of cases providing more expansive relief against abusive registrations and recognizing more extensive related rights, such as naming rights and even merchandising rights. In an unrelated development, the SPC on January 7, 2017 listed the Qiaodan case as one of the top 10 civil and administrative cases for 2016.
The 2016 JCCT obligated China to “take further efforts to address bad faith trademark filings”, according to the recently released Joint Fact Sheet. The amended examination guidleines, JI, and related case developments, including the development of case law in IP, should help implement this commitment.
The Supreme People’s Court published its revised judicial interpretation on patent infringement litigation. I previously blogged about the early draft here. Here is a Chinese language article on the press conference announcing the draft Judicial Interpretation, which was held on March 22, 2016. The JI goes into effect April 1.
The drafting and timing of the JI seems to be drafted in part in response to perceived problems in enforcing patents in China, which have put pressure on the legislative bodies, courts and administrative agencies to seek appropriate reforms. In particular, the JI may be perceived to be another policy initiative undertaken to address the continuing competition between the courts and administrative agencies over which agency should be the principle patent enforcing agency. Justice Tao Kaiyuan addressed this issue for the courts in an article earlier this year, while SIPO’s efforts to enhance its role were articulated in a draft SIPO revision of the patent law released for public comment by the State Council Legislative Affairs Office at about the same time as the draft law was released.
For those inclined to seek political motivations to legislative and policy actions particularly by competing agencies, the release of this JI is also proximate to the release by SIPO of its revised provisional guidelines for administrative enforcement earlier this month (March 2, 2016) (专利行政执法操作指南（试行）.
The court’s press conference noted that the revision of the JI seeks to address concerns over patent litigation involving a high burden of proof, low damages and delay.
Who is winning in this competition – the courts, SIPO, the State or the patentee? I hope to provide more detailed comments on the JI later.
Update April 3, 2016: : Song Haining has done a good summary of these recent developments in his blog, including an unofficial translation of the JI, available here.
I have repeated below the outcome language in full, without the annotation that appears in the US Department of Commerce release on the subject, followed by my own “references” on the outcome to compare the text with recent developments in these areas.
The Chinese government version of the outcomes follows the US outcomes.
China’s anti-monopoly enforcement agencies are to conduct enforcement according to the Anti-monopoly Law and are to be free from intervention by other agencies.
China clarifies that commercial secrets obtained in the process of Anti-monopoly Law enforcement are protected as required under the Anti-monopoly Law and shall not be disclosed to other agencies or third parties, except with a waiver of confidentiality by the submitting party or under circumstances as defined by law.
Taking into account the pro-competitive effects of intellectual property, China attaches great importance to maintaining coherence in the rules related to IPR in the context of the Anti-monopoly Law. China clarifies that any State Council Anti-monopoly Law Commission guidelines will apply to the three anti-monopoly law enforcement agencies.
The Chinese side clarifies that in the process of formulating guidance related to intellectual property rights in the context of anti-monopoly law, it will solicit comments from relevant parties, including the public, in accordance with law and policy.
The United States and China affirm the beneficial role of standards in promoting innovation, efficiency, and public health and safety, and the need to strike an appropriate balance of interests of multiple stakeholders.
The United States and China commit that licensing commitments for patents in voluntary standards are made voluntarily and without government involvement in negotiations over such commitments, except as otherwise provided by legally binding measures.
The United States confirms that Chinese firms participate in the setting of voluntary consensus standards in the United States on a non-discriminatory basis, consistent with the rules and procedures of the relevant standards organizations. China welcomes U.S.-invested firms in China to participate in the development of national recommendatory and social organization standards in China on a non-discriminatory basis.
With a view to enhance mutual understanding and trust, the United States and China agree to hold dialogues over issues under this topic.
Here are some other blogs on this important topic.
The United States and China are committed to providing a strong trade secrets protection regime that promotes innovation and encourages fair competition. China clarifies it is in the process of amending the Anti-Unfair Competition Law; intends to issue model or guiding court cases; and intends to clarify rules on preliminary injunctions, evidence preservation orders and damages. The United States confirms that draft legislation proposed to establish a federal civil cause of action for trade secrets misappropriation has been introduced in relevant committees. Both sides confirm that IP-related investigations, including on trade secrets, are conducted in a prudent and cautious manner. The United States and China agree to jointly share experiences and practices in the areas of protecting trade secrets from disclosure during investigations and in court proceedings, and identify practices that companies may undertake to protect trade secrets from misappropriation in accordance with respective laws.
References: Note that the reference in the trade secret provision to a degree mirrors that of the Competition outcome, regarding protecting confidential information in administrative proceedings. Proposed revisions to the AUCL were previously discussed here.
The United States and China will continue our dialogue on GIs. Both sides reaffirmed the importance of the 2014 JCCT commitment on GIs and confirmed that this commitment applies to all GIs, including those protected pursuant to international agreements. China will publish in draft form for public comment, and expects to do so by the end of 2016, procedures that provide the opportunity for a third party to cancel already-granted GIs.
Reference: This commitment builds on the 2014 GI commitment in the JCCT. An important case involving enforcement of a trademark based GI for scotch whisky is discussed here.
The United States and China agree to protect original recordings of the images, or sound and images, of live events, including sports broadcasts, against acts of unauthorized exploitation, including the unauthorized retransmission of such broadcasts over computer networks, in accordance with their respective laws and regulations. The United States and China agree to discuss copyright protection for sports broadcasts and further cooperate on this issue in the JCCT IPR Working Group and other appropriate bilateral fora.
References: Copyright protection for sports broadcasting has been discussed elsewhere in this blog, and is of increasing important to China as it prepares to host the Winter Olympics and wants to develop its sports leagues. In addition US courts have granted copyright protection to Chinese sports broadcasts in a recent case. Tencent has also signed an important licensing deal with the NBA to make content available online.
Noting the challenges posed by new technologies to the protection of copyright, China and the United States will continue discussions and share respective experiences and practices on combating the unauthorized online distribution of audiovisual content made possible by media boxes. China clarifies it is to enhance enforcement against such media boxes and the providers of unauthorized content in accordance with its laws and regulations.
Reference: A recent US media box case involving Chinese content is discussed here.
In order to address the civil, administrative and criminal enforcement challenges caused by the rapid development of e-commerce, as part of the JCCT IPR Working Group, China and the United States will enhance engagement and exchanges between U.S. and Chinese government IPR policy and enforcement officials, IP right holders, business representatives and online sales-platform operators, among other relevant stakeholders. This engagement will cover current and anticipated challenges in protecting and enforcing IPR online by sharing respective practices, discussing possible improvements in each country’s systems, facilitating information exchange and training between our two countries, and increasing cooperation on cross-border enforcement. The goal of this effort is to enhance existing legal and cooperative regimes among businesses, rights holders and governments in civil, administrative and criminal online IPR enforcement. Appropriate criminal matters will be referred, if necessary, to law enforcement agencies through the Joint Liaison Group (JLG) IP Criminal Enforcement Working Group or domestic law enforcement officials.
References: there have been numerous Chinese domestic efforts to deal with on-line infringement, including copyright-related campaigns, and an important role for Chinese Customs.
The United States welcomes that the Supreme People’s Court has established a database for searching intellectual property-related court decisions. In order to increase the understanding of each other’s legal systems, the United States and China agree to dialogue and to share experiences on their respective databases containing IP cases.
References: Whether or not China is developing “case law with Chinese characteristics,” understanding how Chinese courts handle cases can help guide sound business decisions.
Given the importance of addressing bad faith trademark filings, both sides agree to continue to prioritize the issue of bad faith trademark filings, and to strengthen communication and exchange on this issue through existing channels.
References: This is a continuation of earlier efforts.
The United States and China are to continue exchanges on the development of their respective copyright laws. China clarifies that its Copyright Law is in the process of amendment and useful principles and interpretative guidance from the Supreme People Court’s 2012 Judicial Interpretation on Internet Intermediary Liability will be considered in the law, if appropriate and feasible.
The final judicial interpretation is available here. Here is a blog on the 2014 State Council draft of the Copyright Law revision, and a blog on a 2012 NCA draft.
Recognizing the success and experience of recent exchanges on IP legislation through the JCCT IPR Working Group, programs under the Cooperation Framework Agreement and other fora, as well as the desire of the United States and China to further understand recent developments in this area, the United States and China agree to exchange views on their legislative developments in IP and innovation including on pending reforms in copyright law, patent law, trade secret law (anti-unfair competition law), science and technology achievement law, etc., with relevant legislative bodies.
References: This is a broad commitment, with much legislative activity planned in China in areas such as trade secrets, copyright, patents and related regulations.
The United States and China agree to hold exchanges on the protection of new plant varieties through bilateral meetings and other means to be determined.
References: China and Switzerland agreed to extend plant variety protections in the Swiss-China FTA.
Updated: December 2 and 3, 2015, December 26, 2018.

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