Icon IP won patent infringement lawsuit in Beijing

[By Arthur Tan-Chi Yuan]

[Author’s note: Key lessons for non-Chinese litigants: evidence gathering, patent litigation jurisdiction; statute of limitation; stay]

Beijing Second Intermediate People’s Court

Icon IP Inc. (plaintiff)

v.

Jinan Yibang Corp. and Beijing Kangan Century Tech Corp. (defendants)

October 19, 2011

Facts:

A Logan, UT based company, Icon IP Inc., filed a patent infringement lawsuit against two Chinese companies on January 19, 2011.  The Chinese patent in question is an invention patent number ZL02808814.X entitled “Apparatus for Treadmill with Frameless Base” (“‘814 patent”).  SIPO issued this patent on December 21, 2005 based on a national stage application claiming priority to a PCT application filed on June 11, 2002, published as WO03022370A1 (whose US parent patent, US patent 6,743,153).  Currently, this Chinese patent is still valid with the last annuity paid on May 23, 2011.  There does not appear to be an equivalent national stage application for the US.

Plaintiff Icon IP alleged that the first defendant Jinan Yibang Corp. (“Yibang”) first showed three allege infringing products at a trade show in Chengdu, China in May 2007.  After an IP commission at the trade show determined that an infringement had indeed occurred, Yibang’s products were removed from the trade show and Yibang also agreed that it would not manufacture or sell infringing products.

Unfortunately, plaintiff continued to discover that Yibang continued to manufacture and offered to sell infringing products.  In August 2008, plaintiff bought one of the infringing products from a third party retail store.  In December 2010, plaintiff also bought one of the infringing products from a store in Beijing owned by the second defendant Beijing Kangan Tech Corp. (“Kangan”).  In addition, Kangan also offered to sell Yibang’s product on its website.

As such, Icon IP filed the suit seeking:

1.        Injunctive relief against the two defendants;

2.       Compensatory damages totaling ¥1,000,000 CNY (¥400,000 for T007 product; ¥400,000 for T067S product; and $200,000 for 4 other products) for infringing the ‘814 patent;

3.       Reasonable cost of investigation and evidence gathering totaling ¥100,000 CNY;

4.      Statements of admission of infringement on defendants’ websites; and

5.       Defendants shall be responsible for litigation cost.

Not surprisingly, Yibang moved to dismiss the case with the following:

1.        The alleged infringing products do not infringe the ‘814 patent directly or under the doctrine of equivalents;

2.       No evidence supporting the infringement;

3.       No evidence substantiating plaintiff’s the damages were caused by the allegedly infringing products;

4.      No evidence supporting plaintiff’s cost of investigation;

5.       Request to stay the proceeding pending decision from the Patent Reexamination Board of SIPO (“PRB”).

In addition, Kangan moved to dismiss the case based on:

6.      Alleged products were made by Yibang;

7.       Kangan’s website didn’t offer to sell Yibang’s products as pictures of Yibang’s products were merely for demonstration purposes; and

8.      Kangan purchased Yibang’s alleged infringing products legally and should not be liable for infringement.

Opinion:

The court focused on claims 15-19 of the ‘814 patent in its analysis of the infringing products.  The court also next spent a substantial length in the decision detailing plaintiff’s evidence gathering.  In the end, the court admitted plaintiff’s proffered evidence regarding T007 and T067S products while rejecting plaintiff’s evidence on other products in considering the case.  The court rejected those pieces of evidence because plaintiff merely produced demonstrative evidence of those other products, and the actual infringing products are required when analyzing the claim elements.

Of course, the judges also reviewed the claims of the ‘814 patent.  The court construed the claim elements of claims 15-19 as if conducting a Markman hearing.  The court then applied the definitions of the construed claims to the alleged infringing products.  The court found the T007 and T067S products infringe the ‘814 patent.  The court didn’t find for plaintiff with respect to other products due to insufficient evidence.

With respect to the damages, the court found that plaintiff failed to present evidence showing actual loss as a result of the infringing acts and evidence showing defendants’ profits.  So, the court would decide the amount of damages based on a totality of circumstances.

Judgment:

1. Yibang shall cease manufacturing, selling and offering to sell the T007 and T067S products which infringe the ‘814 patent;

2. Kangan shall cease selling and offering to sell the T007 and T067S products which infringe the ‘814 patent;

3. Yibang shall pay to Icon IP Inc. a sum of ¥530,000 CNY to for damages and reasonable litigation cost within 10 days of the judgment; and

4. Dismisses other claims asserted by Icon IP Inc.

The case acceptance fee is ¥14,700 and Icon IP Inc. has already paid ¥4,000.  As such, Yibang shall also be responsible for ¥10,000 and Kangan shall be responsible for ¥700 of the case acceptance fee within 7 days of the judgment.

Key lessons for non-Chinese litigants:

1.        Evidence gathering: In this case, the panel of three judges discussed how the alleged products were purchased, including the date, the place, the manner of purchase and the expenses.  In addition, all purchases were made in the presence of a public notary.  Therefore, while China does not have the discovery process known to US attorneys, prudent evidence gathering is needed.  And in this case, plaintiff’s Chinese counsel from the firm Unitalen was instrumental and diligent in this process.

2.       Jurisdiction: According to section 2 of the Supreme's Court's Regulations on Issues Relating to the Application of Law in Patent Dispute Cases, effective since July 1, 2001 (“Regulations”), an intermediate people’s court designated by a high people’s court or an Intermediate People’s Court in provincial level, autonomous region, or provincial city level shall be the first instance court to adjudicate a patent litigation law suit. 

3.       Statute of limitation: It is 2 years calculated from the date when the patentee or patent beneficiary knows or should have known of the infringing activity.  For lawsuits filed after the two-year statute of limitation has lapsed, if the infringing activities continue and the patent is still valid, the adjudicating court should order the defendant to cease infringing activities and the calculation of damages should start from 2 years before the right holder files the law suit.  See also section 23 of the Regulations. 

4.      Stay: It is typical in China for a defendant to concurrently seek an invalidity administrative action before the PRB during a pending patent infringement lawsuit before the Intermediate People’s Court.  As such, the defendant will likely raise the invalidity defense and request the court to stay the court proceeding pending the outcome from the PRB.  In this situation, if the patent in question is an invention patent, the intermediate people’s court can reject the request, per section 11 of the Regulations.  If the patent in question is a utility model patent or a design patent, and if the PRB has upheld the validity of the utility model patent or the design patent, the intermediate people’s court can also reject the request.


 

[Author’s note: The summary and translation from the original decision in Chinese are author’s work, and any errors thereof are mine and shall not be attributed to any portion of the original Chinese decision.]

Translated Decisions: 
IP: