Judicial Remedy and Provisional Measures for

IP Rights Protection in Civil Procedures in China (3)

By Jiang zhipei

According to the paragraph 3 of the Article 58 of trademark Law of China, applicant for pre-trail evidence preservation shall make guarantee. Therefore, paragraph 2 of the article 6 in the 《Judicial Interpretation on Questions Relating to Applicable Law for Pre-trial Deterring Trademark infringement and Evidence Preservation》, if the pre-trail evidence preservation will cause damage to the other party, People's Court may order damage to the injured party. If the applicant does not put down guarantee, the application of pre-trial evidence preservation shall be rejected.

3. Guarantee for Provisional Measure, super addition and counter guarantee. The Judicial Interpretation of the Supreme People's Court defines the guarantee for application of pre-trial deterring infringement and the format of putting down the guarantee. Without guarantee, application for pre-trial deterring infringement shall be rejected. If the guarantee put down by the applicant is valid and legitimate, People's Court shall accept the guarantee. When considering the amount of the guarantee, People's Court shall consider relevant factors, such as sales income affected by the provisional measure, reasonable fees of storage and maintenance, possible damage to the alleged infringer, etc. Considering that ordering provisional measure may incur further damage to the alleged infringer, this Judicial Interpretation stipulates that further guarantee may be requested by court. Specifically, during the process of carrying out the preliminary injunction, court may request super addition from the applicant of the preliminary injunction if further damage may be incurred by the preliminary injunction. If the applicant of the preliminary injunction will not put down the super addition as requested by court, the preliminary injunction will be ceased. In addition, this judicial interpretation particularly points out that the decision on the issuing of preliminary injunction will not be ceased by the counter guarantee. The applicant for preliminary measures may voluntarily withdraw his application.

4. Reviewing Procedure for Preliminary Measures. If a party does not satisfy with the decision of court on the preliminary measures, the party has the right to file a petition of review. People's Court shall conduct the review of the preliminary measure ordered. During the process of review, People's Court shall examine the evidence and documentation provided by the parties. If the original decision on the preliminary measures is found correct, the petition of the review will be rejected. If the original decision is erroneous, correction or withdraw of the preliminary measures shall be made. In the review, judge shall consider finding of infringement, the irreparable harm, guarantee made and public interest in order to make a decision of the preliminary measures.

5. Carrying out the Provisional Measures. After accepting the application for provisional measures, People's Court shall issue a decision in writing within 48 hours. If the requested provisional measure is granted, it shall be executed immediately. People's Court may inquire one or both parties for finding facts if necessary, and then make a decision on the application for provisional measures. In the Article 5 of this Judicial Interpretation, it stipulates that the order of provisional measures shall not go beyond that of the application. All of these requirements are of great significance 1or People's Court to make prompt and fair decision and prevent abuse of the power.

When taking provisional measures, People's Court may carry it out first and then inform the alleged defendant promptly. The alleged party has the right to file request for review. People's Court shall inform the alleged defendant within 5 days after issuing the order of provisional measures. This is in compliance with the relevant requirement of TRJPS, i.e., taking provisional measures ex parte.

If the patentee, trademark registrant, copyright holder or other interested party does not file a lawsuit on merits after the provisional measures is ordered, People's Court shall cease the provisional measures ordered. If the applicant does not file the lawsuit on merit in time or the provisional measures are erroneously ordered, the damage suffered by the alleged defendant has the right to claim damages by filing a lawsuit with People's Court against the applicant. Also, the alleged defendant may file a counterclaim in the same lawsuit filed by the applicant for damage suffered. People's Court may hear the counterclaim along with the claim of the applicant.

In order to effectively and uniformly carrying out provisional measures in patent infringement cases and maintaining the dignity of law, any offense of disobeying an order of provisional measures shall be charged according to the Article l02 of the Civil Procedure Law of China. Penalty includes fines, custody, and other measures for impeding civil justice order. If the offense commits criminal offense, it shall be pursuit for criminal charge.

(3) Applying Damages in Civil Remedy by Chinese Court

6. Damages for Infringement cases. Article 60 of Patent Law of China is a new one made in this revision. This article provides 3 methods of calculating damages in two steps. The first is to calculate the damages on the basis of the loss suffered by patentee or the illegal profit obtained by infringer. When both of these methods are not practical, the third method will apply, i.e., reasonable multiplication of patent royalty will be the basis of damage. This article has not only defined the first two methods in compliance with the frequently used damage calculation methods in the patent cases, it also adds the new method of damage calculation on the basis of reasonable multiplication of royalty. However, this article does not include the statutory damage that has been used often in the practical cases. Therefore, in the Judicial Interpretation of Supreme People's Court, the principle of "whole damage" is explained in terms of the Article 60 of the Patent Law for providing specific guidance to the damage calculation.

First of all, according to the article 20 of the "Provisions of Judicial Interpretation of Supreme People's Court on the Applicable Laws in Deciding Patent damages on the basis of loss suffered by the patent right holder or illegal profit obtained by the infringer. People's Court will not choose any of these methods on its own initiative. Loss suffered by patent right holder may be calculated by multiplying the decreased number of patent products in sale with the profit of a patented product. When the total decreased number suffered by the patent right holder is hard to determinate, the total number of infringing product sold multiplying the profit of a patented product can be deemed as the loss suffered by patent right holder, i.e., damages of the patent right holder. The reason of such guidance is that very often the patent right holder can hardly prove the decreased number of the patented product sold due to the infringement. It might be comparatively easier to find out the total sales of the infringing product, but the sales price of the infringing product is most of time lower than that of the genuine product. Therefore, it might not be appropriate to utilize the illegal income of the infringer as damage for providing adequate compensation to actual loss suffered by patent right holder. In fact, this kind of calculation of damage has already been used in patent trails in many People's Courts. The relevant judiciary practice has proved that this type of damage calculation is a reasonable damage calculation method fitting in many practical cases for protecting legitimate right of patent right holder without prejudice to the infringer.

The illegal profit obtained by infringer normally is calculated by multiplying the number of infringing product sold with the profit of each piece of the infringing product. When defining the illegal profit, it is the business profit of the infringer that will be used. For the professional infringer, the sales profit is utilized to define the illegal profit. Considering the expenses of accounting, management and so on takes a certain portion of the actual expenditures in an enterprise under normal operation, these expenses shall be deducted from the illegal profit when calculating business profit. In many actual cases, the defendant manufactures the infringing products along with other legitimate products. However, the expenses in the accounting book reflect the total expenses of the enterprise. Therefore, People's Court shall be careful in deciding the expense for the infringing products according to the practical situation. Sometimes, it is necessary to retain the service of an audit. For the professional infringer, sales profit can be used for calculating damages because the professional infringer normally will not keep a clean accounting book. By doing it this way, the punishment to the intentional infringement is realized. Besides, when calculating damage on the basis of illegal profit of the infringer, it is worthy note the role-played and the proportion taken by the patented technology in the infringing product. When the patented technology plays a role on only a small part of the infringing product, for example, a design patent is utilized on one part of whole package of the infringing product, it is not appropriate to utilize the entire profit made in selling the infringing product as the damage.

In addition, the article 2l of the Judicial Interpretation of the Supreme People's Court has explained the meaning of "multiplication" used in the Article 60 of Patent Law of China as well as how to apply the "Ration Damage". When both the methods of loss suffered by patent right holder and illegal profit obtained by infringer are not calculating the damage as l-3 times of the royalty in consideration of the nature, scope, duration and other parameters of the patent license. The "patent license royalty can be used as reference" means that the plaintiff provides information of similar patent license royalty in the same technical field. It is not necessary for the plaintiff to provide patent license royalty between the plaintiff and the licensee in regarding to the subject patent before filing the lawsuit.

In the article 21 of the Judicial Interpretation of Supreme People's Court, it also defines that When using patent license royalty as reference is not available or obviously not reasonable, People's Court may apply ration damage in a range of 5,000 Yuan RMB to 300,000 Yuan RMB in consideration of the nature of the subject patent, nature of the infringement and other factors. The ration damage shall not exceed 500,000 Yuan RMB at most. According to this guidance, when plaintiff do not provide reference of patent license royalty or the royalty provided is not comparable to the subject patent, ration damage may apply. What shall be clarified is that the ration damage will apply only when none of the 3 methods of damage calculation is available, facts of infringement is clear, the plaintiff can not prove the loss suffered or the illegal profit obtained by infringer, nor the patent license royalty is available. The ration damage charges the defendant to make economic compensation to the plaintiff under the situation mentioned above. This is another method of calculating damage in consideration of the characteristics of intellectual property infringement, in compliance with the "pre-fixed damage" of TRIPS as well as "Statutory Damage" adopted by some other countries. In order for the People's Court at various level applying the ration damage uniformly, the Supreme People's Court defines the ration damage in a range of 5,000 Yuan RMB to 500,000 Yuan RMB on the basis of years of experience.

In addition, the article 22 of the Judicial Interpretation has defined that the reasonable expenses of the patent right holder for investigating and deterring the infringement can be included in the damage upon the request of the patent right holder and the facts of the case. However, there are two issues need to be clarified. First, request made by the patent right holder is a prerequisite for including these expenses as part of damage and People's Court shall hold that such a request shall sustain under the circumstance of the actual case. Second, the expense for investigating and deterring infringement shall not include attorney fee. The requirement of TRIPS in this regard is "may include appropriate attorney fee". This leave a plenty room for member States to make their own rules depending on the specific situation of these member States. In consideration of the reality of China and the relevant provision in the Anti-Unfair Competition Law of China, this Judicial Interpretation does not require to include attorney fee in the amount of damage. However, in the judgment of each specific case, People's Court may order the defendant to compensate the plaintiff with reasonable amount of attorney fee depending on the specific facts of the case.

7. Damage of Trademark Infringement Cases. Along with the revision of Trademark Law of China. civil judicial protection has been strengthened. People's Court has the sole jurisdiction of hearing civil dispute regarding to trademark infringement and deciding damage. Administrative agencies are no longer able to decide damage in civil dispute. Judges have more methods of damage calculation to apply. The damage of trademark infringement is the illegal interest obtained by the infringer, or the loss suffered by the trademark owner, including reasonable expenses for investigating and deterring the infringement. When the illegal interest and the actual loss suffered is hard to determinate, People's Court may decide damage up to 500,000 Yuan RMB depending on the facts. The sellers who unknowingly selling infringing goods shall be ordered to pay damage if they can not prove the legitimacy of their goods and the provider of the goods.

In the 《Judicial Interpretation on Questions Regarding to Jurisdiction and Applicable Laws in Trademark Trial》, the Supreme People's Court further explained how to apply the Article 50 of the revised Trademark Law of China. For the trademark infringement cases happened before the revision of the trademark law and undecided by the time of the implementing of the revised trademark law, if the infringement has been found but the loss suffered and illegal interest were hard to calculate, the article 8 of the Judicial Interpretation stipulates that the damage will be calculated according to the Article 50 of the revised Trademark Law of China. Thus, it provides a standard of damage calculation for the litigation involving trademark infringement conduct happened before the implementation of the revised Trademark Law of China.

Supreme People's Court issued 《Judicial Interpretation on Questions of Applicable Laws Concerning Computer Network Domain Name Related Civil Dispute》 in July of 200l. It extends the protection of trademark to the environment of computer network, sets the legal protection mechanism for well Known trademark, increases the judiciary protection to well known trademark, balances the interest of the owner of domain name and the owner of registered trademark. It clearly stipulates that registering someone's well known trademark as a domain name for commercial purpose and 3 other kind of conducts are the prerequisite of malignity. Thus, it provides more comprehensive protection to the legitimate interest of trademark owners.

8. Damage of Copyright infringement Cases. According to the Article 48 of Copyright Law of China, People's Court has the authority to order damage on the basis of the actual loss suffered by the copyright holder in cases of infringing copyright and related rights. If the actual loss is hard to calculate, damages can be ordered on the basis of illegal income of the infringer. The damage shall also include reasonable expenses of the right holder for investigating and deterring infringement. When the actual loss and illegal income is not available, People's Court may apply the ration damage up to 500,000 Yuan RMB depending on the fact.