Monday, October 13, 2014

Preliminary Injunctions and Irreparable Harm in China

As I discuss in my book, article 66 of China's Patent Law authorizes the court to award preliminary injunctions “[i]f the patentee or interested party has evidence to prove that another person is committing or is about to commit a patent infringement, which, unless being checked in time, may cause irreparable harm to his lawful rights and interests . . . ."  Moreover:
Commentators agree that preliminary injunctions are less frequently granted in patent than in trademark litigation; and that annually the number of patent cases in which preliminary injunctions are granted is fairly small, due in large part to Chinese courts’ strict understanding of the petitioner’s burden of proof and the difficulty of obtaining sufficient evidence of irreparable harm. Such caution may be warranted, however, given the statutory framework under which such proceedings are initiated prior to the initiation of the infringement action and are supposed to be decided within forty-eight hours (p.351).
In addition, article 14 of the Supreme People's Court's April 21, 2009 Opinion on Certain Issues with Respect to Intellectual Property Judicial Adjudication Under the Current Economic Situation (an English translation of which can be found in Douglas Clark's book Patent Litigation in China (Oxford Univ. Press 2011)), advises the lower courts to "cautiously use preliminary injunction measures." It also suggests that such measures "are suitable mainly in cases where the facts are relatively clear and infringement easy to judge," and that courts should try to avoid "unfairly caus[ing] trouble to the production and operations of the enterprise sued," though at the same time courts should limit the "public interest" defense to cases involving "public health, environmental protection, and other circumstances of major social interests."   
Anyway, the May/June 2014 issue of China Intellectual Property features an article by Kevin Nie and Jessie Chen titled Landmark IP Cases of China in 2013.  Case number 1 is the Abbott Milk Container Case, (2013) SanZhongMinBaoZi No. 01933 Civil Judgment, Beijing Third Intermediate People's Court, which the authors describe as involving "an issue of first impression in a Beijing court  . . . of great significance both in theory and practice."  (The case is also discussed in this post by Benjamin Bai on the Kluwer Patent Blog, which I mentioned here this past May.)  According to Nie and Chen, Abbott, the licensee of a design patent for a milk container, commenced a proceeding for a preliminary injunction against Yilong Company, which allegedly made and sold infringing containers.  The court concluded that the plaintiff was faced with irreparable harm based on the following factors:  (1) the defendants sold the containers at wholesale to milk powder producers, who in turn would resell them, so that infringement was likely to occur "at each point of sale," thus causing Abbott "increasing costs and difficulty in protection of its rights"; (2) design patent rights last for only ten years; and (3) "designs for containers don't last long and may be easily replaced" (p.28).  On this basis, the court issued the injunction, after which the parties settled.  (Mr. Bai, in his account noted above, also mentions that the court found found "a high likelihood that Abbott could prevail on its infringement claim," that "Abbott’s harm, if a PI was not issued, would be greater than the infringers’ harm if a PI was issued," that "Abbott posted an adequate bond," and that "no public interest would be adversely impacted.")

In my view, it's not so clear why the fact that the patent may be separately infringed by the retailer should matter all that much in determining irreparable harm, since one would normally expect the infringing manufacturer to pay a royalty for the use of the patent (which apparently is what wound up happening anyway); any separate harm accruing from the separate infringement by the retailer seems rather abstract, in my view.   Put another way, I don't see how the sales to the retailers make the harm any more or less reparable.  I'm also not sure why the fact that the containers are easily replaced makes the infringement any less reparable, if the defendant could be ordered to pay damages--though one theory might be that retailers would get used to doing business with the defendant and continue doing business with that entity, even after it switches to another product.  In any event, given the small number of cases in which Chinese courts have granted preliminary injunctions in patent disputes, it's helpful to have another data point in the mix.

The Nie & Chen article also discusses a case in which the Beijing Second Intermediate People's Court issued a preliminary injunction against an alleged copyright infringement in a well-known writer's letters, and another in which the First Intermediate Court of Shanghai issued a preliminary injunction in a trade secret case brought by Eli Lilly.  For further discussion on this blog of this last case, and of preliminary injunctions in China generally, see here and here.

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