inventor boot camp - geoffrey lin - 10-17-2009

www.lovells.comLovells LLP

PRC Patent Practice – in Comparison with the US

October 2009

www.lovells.comLovells

Overview

• Filing Practice– Differences in Patent Prosecution– Utility Model Patents, Filing Strategies, and Clearances

• An Introduction to Patent Invalidation• An Introduction to Patent Litigation• Case Study: The Schneider Electric Case


Filing Practice


Summary

• Register your inventions as patents in the PRC– value– anti-hijacking

• Often weaker PRC examination, but harmonize international prosecution such that broad and valid PRC patents are issued

• Consider filing UMs and Invention Patents to cover the same concept

• Patent Clearance, Submissions, Miscellaneous


Building a PRC Patent Portfolio

• Strong patent portfolio often the best defence to patent actions from competitors– Competitors concerned about countersuits and invalidation

actions– Strong portfolio increases costs and risks to competitors to take

action against company– Strong portfolio gives leverage in licensing/cross licensing

negotiations

• Put in place appropriate structures ensure important inventions are patented in China

• Exit Strategy: patents in China may be valuable to a purchaser of an invention or company as most large corporations are mfg or selling in China


Examination for novelty

• Examiner considers following criteria when examining for novelty against prior art

• Prior art will be considered identical invention. if they are "in substance, in the same technical field, [have] the same technical solution, and their prospective results are [the] same."

• prior art references are considered individually, rather than

comparing to a combination of references. • Public disclosure in publications in China or

abroad or Public use or knowledge in China or abroad is considered prior art. Proof is an issue.

• No one year grace period


Weaknesses in patent system

• Shortage of Examiners– SIPO had only 900 examiners at the end of 2003, compared to

about 4,000 in the U.S. – Each examiner must examine over 500 patents per year– Average time for examination 46 months in 2001 reduced to 30

months in 2003• Quality of Examiners

– 50% of examiners under 30– 2/3 of examiners have only 1-2 years patent examination

experience– Only 26% of examiners hold graduate degree

• No best mode requirement• No duty of Candor• Result

– Some bad patents are granted


International Harmonization of Patent Prosecution

• Internationally harmonize your patent prosecution– Novelty destroying prior art

• PRC patents allowed with significantly broader claims than your US or EP patent should be reviewed

• Competitors and Infringers will search your counterpart US and EP patent prosecution file histories

• Claim Sets– Sufficiency of Claims– Matching claims with Specification– Use EP claim sets if possible

• Translation Issues


Utility Models – Subject Matter

• Shape and structure only, and the applicant cannot claim a method, function, ingredients, or chemical composition.


Invention Patent vs. Utility Model

• Consider whether to apply for:– Invention patent; and/or– utility model

• Major differences between patent and UM:– UM only can cover product claims– the test for inventiveness is lower for a utility model which means

effectively it is harder to invalidate; – utility models are not examined – utility models are granted for 10 years; patents for 20. – Invention patent infringement actions, are unlikely to be stayed if

an invalidation action is filed; – in the case of a utility model, it is likely the infringement

proceedings will be stayed.


Filing strategies – Dual Filing UM and Invention Patents

• Some companies should consider filing both utility models and patent applications at the same time.

• Rely on the utility model until grant of the patent and once the patent is about to be granted cancel the utility model.

• Whether to follow this route needs to be carefully considered in light of:– Is the technology mechanical in nature?– the length of time new technology is likely to be commercialised

and – the strength of protection required


Defensive Strategies

• Patent Clearance• Invalidation of patents considered a risk• Building own patent portfolio


Patent clearance

• Increasingly important to conduct patent clearance searches for technology both:– prior to entering the market and – after entering the market

• Searches important to identify hijacking of rights where competitor may have registered a patent or utility model after reverse engineering the company's product.

• Particular risk with utility models which are not examined.


Submission re pending applications

• No opposition proceedings under Chinese patent law

• Possible for any party to make submissions as to patentability to examiner in relation to pending application

• Should be strongly considered where threatening pending application found, particularly given that examiner may not locate prior art

• No duty of candour in China


Miscellaneous

• First Filing Rules now confidentiality examination• Divisionals – Similar to EPO style of strict

verbatim support from original specification


Invalidation of Patents


Summary

• Bifurcated System (as with Germany) • No Post Grant amendment (other than combining

claims) so get patents in good order • Divisionals – Similar to EPO style of strict

verbatim support from original specification• Burden of Proof on Applicant to show invalidity• No Discovery and documentary evidence must

be clear• If overseas evidence, must be notarized and

legalized


Invalidation of patents

• Patent invalidation actions filed to Patent Review and Adjudication Board (“PRAB”) in Beijing

• Has good reputation as professional body with good technical skills

• Appeals lie to 1st Intermediate Court in Beijing and then Beijing Higher People’s Court

• Invalidation action based on grounds that patent does not meet requirements for patentability. – E.g. lack of inventiveness, insufficiency

• Experts not generally utilized. Fact witness statements can be utilized.


PRAB procedures

• Applicant files invalidation action• Served by PRAB on patentee• Patentee files defence• Served by PRAB on applicant• Can be decided on paper but now normally oral hearing• Oral hearing held; both parties make oral and written

submissions• Decision• General time line: Minimum 1 year; maximum 5 years

plus


Patent Infringement Litigation


Summary

• There are no jury trials.• Infringement and validity are tried separately;• The burden of proof is high:

• PRC Courts rely principally rely on documentary evidence and require notarization and legalization for overseas evidence;

• Oral evidence is extremely rare;• Judges do not usually make inferences

• There is no oral or written discovery by right


Construction and Proof

• There is no "Markman" style hearing. • Claim construction – like Article 69 of EPC. • Claims are interpreted based on the wording of

the claims when read with the specification and drawings; and,

• Every element of a patent claim must be proved by the plaintiff


Litigation - Forum Shopping

• Forum shopping venue selection is a key– Consider carefully the forum to

bring action• Beijing and Shanghai have better

courts, but busy

• Local protectionism

• Where can infringing products be found?


The Courtroom


Trial

• Preliminary injunction require bond• PRC case similar in burden and evidence

necessary to a US Preliminary Injunction case• Experts and expert evidence (e.g., testing

reports) can be utilized• Independent third party expert may be appointed

by the court in complex cases


Asserting various claim types and patent types

• Litigations involving Utility Models are usually stayed if defendant applies for invalidation

• Method claims less useful to assert, but indirect infringement theory exists

• Product by Process claims cover a new product may be used to shift the burden of proof


The Schneider Electric Case

Geoffrey Lin

Lovells Shanghai


Utility Models – Weak in theory

• In theory weaker than an invention patent in terms of validity, but injunction and damages are available.

• The record amount of damages for all IP infringement decisions in China (approx. USD48 million) has been granted for the infringement of one UM in 2007:

• The CHINT Group v. Schneider Electric Case


PRC IPR Verdict Comparison

0

50

100

150

200

250

300

350

Millions (Dollars)

•0.28

•48.73

•7.28

•2.91•0.54

•Highest reported Verdict for Utility Model Infringement prior to Chint v. Schneider - Zhongji Tonghua Auto v. Huanda Auto Assembly (Dec. 2006)

•Highest reported Verdict for Utility

Model Infringement-Chint v. Schneider Verdict (Sep. 2007)

•Highest reported Verdict for Invention Patent Infringement -Holley Communication V. Samsung (December 2008）

•Highest reported Verdict for Copyright Infringement - Educational Testing Service (US) v. New Oriental School (Dec. 2006)

•Highest reported Verdict for Trade Mark Infringement - Zhao v. G2000 (Jan. 2008)

•Highest reported verdict for Design Patent Infringement - Neoplan Bus GmbH V. Zonda (January 2009)

•3.07


CHINT v. Schneider - Company Profiles

• Schneider Electric– Fortune 500 company, based in Paris.– Market leader in electric systems.– Completed major M&As in Europe and China.

• CHINT Group– Chinese manufacturer of low-voltage electric circuit

breakers, based in Wenzhou, Zhejiang Province. – Started as a garage shop in mid-1980's and emerged

as a major local player in early 2000's.

• Litigation– Multiple patent infringement suits between the two in

Europe and China.


CHINT v. Schneider – Wenzhou Casemid-Nov. 1997 CHINT applies for a utility model for "a miniature circuit breaker".

March 1999 CHINT obtains its utility model.

late July 2006 CHINT files its Complaint against Schneider at the Wenzhou Intermediate People's Court. CHINT initially sought 500,000 RMB in damages from Schneider.

late August 2006 Schneider applies to invalidate CHINT's utility model patent before the Patent Review and Adjudication Board (PRAB) of SIPO.

Dec. 2006 The PRAB holds oral hearings on Schneider's invalidation filed in December 2006.

late April 2007 The PRAB issues its decision upholding the validity of CHINT's utility model,

with respect to Schneider's invalidation filed in late August 2006.

late- April 2007 Heard by the Wenzhou Court

late Sept. 2007 The Wenzhou Court issues its record judgment (about USD47 million).

October. 2007 Schneider appeals the Wenzhou Court's judgment to the Zhejiang Higher People's Court and appeals the PRAB decision to the Beijing Intermediate Court


Comparison of Schneider Prior Patent with CHINT UM Patent


CHINT v. Schneider – Wenzhou case

• Outcome (as reported by media)– Settled in April 2009 right before appellate trial.– Settlement with payment of approx. USD22 million to

CHINT.– Worldwide settlement of all disputes.


CHINT v. Schneider – Wenzhou case

• Lessons to learn:– UMs ("mini patents") can be used aggressively and

can be difficult to invalidate.– Monitor a local competitor's IP portfolio, including its

UMs (file for invalidation if necessary).– Evidence: keep complete original records– Forum Shopping: Consider filing declaration of non-

infringement in your selected venue first– Consider expanding patent portfolios in China to

include more UMs and using them against competitors .

– Consider Dual Filing – Expect a higher burden of proof for foreign companies.


For further informationPlease contact

Geoffrey Lin, Counsel

Lovells Shanghai LLP

[email protected]

Tel: +86 21 6138 1688

Fax: +86 21 62792695

inventor boot camp - geoffrey lin - 10-17-2009

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