Guiding Case No. 20

Shenzhen Siruiman Fine Chemicals Co., Ltd. v. Shenzhen Kengzi Water Supply Co., Ltd. and Shenzhen Kangtailan Water Treatment Equipment Co., Ltd. An Invention Patent Infringement Dispute

GC No.:
20
GC Date of Release:
2013/11/08
GC Batch No.:
5
Area(s) of Law:
Keyword(s):
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Full Text of the Guiding Case

Keyword(s)

Main Points of the Adjudication

Where the Patent Law does not prohibit the manufacture, sale, and importation of an alleged patent-infringing product within the provisional protection period, which begins after the invention patent application is published and ends when the patent is granted, the subsequent use, offer for sale, and sale [of the product] are, despite the lack of a license from the patentee, not regarded as infringements of the patent. But the patentee may, in accordance with law, demand that the entity or individual who exploits the invention within the provisional protection period pay an appropriate fee.

Articles 11, 13, and 69 of the Patent Law of the People’s Republic of China

Basic Facts of the Case

Shenzhen Siruiman Fine Chemicals Co., Ltd. (深圳市斯瑞曼精细化工有限公司) (hereinafter referred to as “Siruiman Co.”) applied to the State Intellectual Property Office for an invention patent on January 19, 2006. The patent [1] was made public on July 19, 2006, and [the patent] was granted and gazetted on January 21, 2009. The granted patent was named “Equipment for Preparing High-Purity Chlorine Dioxide” (制备高纯度二氧化氯的设备) and Siruiman Co. was the patentee. The most recent annual fee payment for the patent [2] was made on November 28, 2008. On October 20, 2008, Shenzhen Kengzi Water Supply Co., Ltd. (深圳市坑梓自来水有限公司) (hereinafter referred to as “Kengzi Water Supply Co.”) and Shenzhen Kangtailan Water Treatment Equipment Co., Ltd. (深圳市康泰蓝水处理设备有限公司) (hereinafter referred to as “Kangtailan Co.”) signed a Purchase and Sale Contract. Kengzi Water Supply Co. purchased a set of Kangtailan chlorine dioxide generators from Kangtailan Co. for a price of RMB 260,000. On December 30, 2008, Kangtailan Co. requested that the tax authority issue a unified invoice regarding the aforementioned product sale price. The aforementioned Purchase and Sale Contract stipulated that Kengzi Water Supply Co. make the payment for the equipment to Kangtailan Co. in installments and that Kangtailan Co. provide installation, adjustment and testing, repair, maintenance, and other technical support and after-sale services to Kengzi Water Supply Co.

On March 16, 2009, Siruiman Co. claimed to the Intermediate People’s Court of Shenzhen Municipality, Guangdong Province, that: it holds the invention patent named “Equipment for Preparing High-Purity Chlorine Dioxide” (hereinafter referred to as the “invention patent-at-issue”), and Kangtailan Co.’s production and sale of the chlorine dioxide production equipment and Kengzi Water Supply Co.’s use [thereof] fall within the scope of protection of the invention patent-at-issue. Siruiman Co. requested that the two defendants be ordered to cease the infringement, pay RMB 300,000 in compensation for economic losses, and bear the cost of the litigation and other fees. In this case, Siruiman Co. did not bring a litigation claim for payment of provisional protection period royalties for invention patents; the court of first instance clarified [this], but Siruiman Co. still insisted on [making] the original litigation claim.

Results of the Adjudication

On January 6, 2010, the Intermediate People’s Court of Shenzhen Municipality, Guangdong Province, rendered the (2009) Shen Zhong Fa Min San Chu Zi No. 94 Civil Judgment: Kangtailan Co. is to cease the infringement, and Kangtailan Co. and Kengzi Water Supply Co. are to jointly compensate Siruiman Co. RMB 80,000 for economic losses. Kangtailan Co. and Kengzi Water Supply Co. both appealed. On November 15, 2010, the Higher People’s Court of Guangdong Province rendered the (2010) Yue Gao Fa Min San Zhong Zi No. 444 Civil Judgment: reject the appeal and uphold the original judgment. Kengzi Water Supply Co. was dissatisfied with the second instance judgment and applied to the Supreme People’s Court for a retrial. On December 20, 2011, the Supreme People’s Court rendered the (2011) Min Ti Zi No. 259 Civil Judgment: revoke the first and second instance judgments and reject Siruiman Co.’s litigation claim.

Reasons for the Adjudication

The Supreme People’s Court opined: in this case, Siruiman Co. did not bring a litigation claim for payment of provisional protection period royalties for invention patents. The main focuses of the dispute in this case are, therefore, whether Kengzi Water Supply Co. infringed the invention patent-at-issue by using the alleged patent-infringing product¾bought from Kangtailan Co. during the provisional protection period of the invention patent-at-issue¾after the invention patent-at-issue was granted, and whether Kangtailan Co. infringed the invention patent-at-issue by providing after-sales services to [support] Kengzi Water Supply Co.’s use of the alleged patent-infringing product after the invention patent-at-issue was granted.

With respect to the determination of patent-infringing acts, the related provisions of the patent law should be thoroughly and comprehensively considered. Based on the time of the allegedly infringing acts, this case should apply the Patent Law of the People’s Republic of China as revised in 2000.[3] Article 11, Paragraph 1 of the Patent Law stipulates:[4]

“After an invention or utility model patent is granted, except where otherwise provided for in this Law, no entity or individual may, without a license from the patentee, exploit the patent, that is, may not manufacture, use, offer to sell, sell, or import the patented product for production or business purposes; or use the patented process; or use, offer to sell, sell, or import a product directly obtained through the patented process.”

Article 13 stipulates: [5]

“After an invention patent application is published, the applicant may demand the entity or individual exploiting his [6] invention pay an appropriate fee.”

Article 62 stipulated: [7] 

“The time limit for filing a suit for the infringement of a patent is two years, counted from the date on which the patentee or any stakeholder knows or should have known of the infringing act.

Where no appropriate royalty is paid for the use of the invention during the period after the invention patent application is published but before the patent is granted, the time limit for the patentee to file a suit to demand the payment of royalties is two years, counted from the date on which the patentee knows or should have known of the use of his invention by another person. However, where the patentee knew or should have known of [the use] before the date on which the patent was granted, [the time limit] is counted from the date of the grant.”

Comprehensively considering the aforementioned provisions, [it is clear that] the Patent Law stipulates that the applicant may demand an entity or individual who exploits the invention after the invention patent application is published but before the patent is granted (i.e., within the provisional protection period for patents) pay an appropriate fee; that is, [he] has the right to request payment of provisional protection period royalties for invention patents. However, the applicant, with regard to acts exploiting the invention within the provisional protection period for patents, does not have the right to request that the exploitation cease. Therefore, exploiting related inventions within the provisional protection period for invention patents is not a type of act prohibited by the Patent Law. Where the Patent Law does not prohibit the manufacture, sale, and importation of an alleged patent-infringing product within the provisional protection period for patents, the subsequent acts of using, offering to sell, and selling the product should, despite the lack of a license from the patentee, also be allowed. In other words, a patentee does not have the right to prohibit others from subsequently using, offering to sell, or selling an alleged patent-infringing product manufactured, sold, or imported during the provisional protection period for patents. Of course, this does not negate the patentee’s right to demand those exploiting his invention pay an appropriate fee that he can exercise in accordance with Article 13 of the Patent Law. With regard to alleged patent-infringing products that are manufactured, sold, or imported during the provisional protection period for patents, the seller or user should not bear the liability to pay an appropriate fee as long as the seller or user provides legal origins [for those products].

With respect to products that were obtained by exploiting inventions during the provisional protection period for invention patents, it is determined that the use, offer for sale, sale, and other acts of exploitation of these products after the invention patent is granted do not constitute infringements and do conform to the legislative purpose of the Patent Law. On the one hand, the patent system is designed to “make [inventions] public in exchange for protection” and permit protection to be requested only after the patent is granted. Regarding invention patent applications, the exploitation of the related invention before the date when [an invention] is made public does not constitute infringement. After the date when [an invention] is made public, the acts of exploitation of products that were obtained before this date by exploiting the invention should also be permitted. From the date when [an invention] is made public to the date when the patent is granted, the invention patent application is given provisional protection. The exploitation of the related invention during this period is not prohibited by the Patent Law. Similarly, those acts of exploitation of products obtained by exploiting the invention that take place after [this provisional protection] period should also be allowed, but, after obtaining the patent, the applicant has the right to demand those who exploited his invention during the provisional protection period pay an appropriate fee. Because the Patent Law does not prohibit acts of exploitation taking place before the invention patent is granted, subsequent exploitations of products manufactured before the patent is granted also do not constitute infringements. Otherwise, it would violate the original legislative intent of the Patent Law by providing protection to technical solutions that are not yet made public or patented.

On the other hand, the Patent Law provides for prior user rights. [The law] only provides that the prior user’s continued manufacturing of the same product and use of the same process within the original scope are not regarded as infringements; [it] does not provide for whether subsequent acts of exploitation of the same products that were manufactured or of the products that were manufactured using the same process constitute infringements. But the aforementioned subsequent acts of exploitation cannot be determined to constitute infringements merely because the Patent Law does not have clear provisions. Otherwise, the prior user rights stipulated by the Patent Law would be meaningless.

In this case, the sale of the alleged patent-infringing product by Kangtailan Co. took place within the provisional protection period of the invention patent-at-issue. This act was not prohibited by the Patent Law. Under these circumstances, Kengzi Water Supply Co.’s subsequent acts of using the alleged patent-infringing product that it purchased should also be allowed. Therefore, Kengzi Water Supply Co.’s subsequent acts of using [the product] did not infringe the invention patent-at-issue. Likewise, Kangtailan Co.’s provision of after-sales services, after the invention patent-at-issue was granted, to [support] Kengzi Water Supply Co.’s use of the alleged patent-infringing product also did not infringe the invention patent-at-issue.

Endnotes

*           The citation of this translation of the Guiding Case is: 《深圳市斯瑞曼精细化工有限公司诉深圳市坑梓自来水有限公司、深圳市康泰蓝水处理设备有限公司侵害发明专利权纠纷案》(Shenzhen Siruiman Fine Chemicals Co., Ltd. v. Shenzhen Kengzi Water Supply Co., Ltd. and Shenzhen Kangtailan Water Treatment Equipment Co., Ltd., An Invention Patent Infringement Dispute), China Guiding Cases Project, English Guiding Case (EGC20), Feb. 4, 2014 Edition, available at https://cgc.law.stanford.edu/guiding-cases/guiding-case-20.

This document was primarily prepared by Steven (Di) Yao and Thomas Rimmer, and was reviewed by Randy Wu. The document was finalized by Dimitri Phillips and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and boldfacing the headings to correspond with those boldfaced in the original Chinese version, was done to make the piece more comprehensible to readers. The following text, otherwise, is a direct translation of the original text and reflects formatting of the Chinese document released by the Supreme People’s Court.

The following Guiding Case was discussed and passed by the Adjudication Committee of the Supreme People’s Court of the People’s Republic of China and was released on November 8, 2013, available at http://www.chinacourt.org/article/detail/2013/11/id/1150429.shtml. See also The Supreme People’s Court’s Notice Concerning the Release of the Fifth Batch of Guiding Cases (最高人民法院关于发布第五批指导性案例的通知), Nov. 8, 2013, available at http://www.chinacourt.org/law/detail/2013/11/id/147238.shtml.

[1]           Translators’ note: the term “专利” (“patent”) is used here, but “发明” (“invention”) is more likely the term meant, as there was no patent for this invention until it was granted on January 21, 2009.

[2]           Translators’ note: the term “专利” (“patent”) is used here, but “专利申请” (“patent application”) is more likely the term meant, as there was no patent for this invention until it was granted on January 21, 2009. For details about the annual fee payment system for patent applications, see 专利缴费指南 (Patents Payment Guide), available at http://www.sipo.gov.cn/zlsqzn/sqq/zlfy/200804/t20080422_390241.html.

[3]           Translators’ note: here the term “修改” (“revise”) is used. The Patent Law was adopted on March 12, 1984 and amended (“修正”) on September 4, 1992, August 25, 2000, and December 27, 2008. See 中华人民共和国专利法 (Patent Law of the People’s Republic of China), available at http://www.gov.cn/flfg/2008-12/28/content_1189755.htm.

[4]           Translators’ note: the provision remains the same as of the publication of this translated guiding case. See id.

[5]           Translators’ note: the provision remains the same as of the publication of this translated guiding case. See id.

[6]           Translators’ note: “he” and “his” as used herein are gender-neutral terms that also refer to “she” and “her”.

[7]           Translators’ note: this provision is now Article 68. See id.