les eec webinar china: from worst to first in patent ... · • ^honeymoon over as apple hit with...
TRANSCRIPT
LES EEC WebinarChina From Worst to First
in Patent Enforcement
Erick Robinson
September 17 2018
Erick Robinson
US patent attorney based in Beijing 17 years of experience in litigating and licensing patents worldwide for law firms and companies
Erick Robinson
BA PhysicsComputer Science Pomona College
JD University of Texas MBA Indiana University (2019) IAM Strategy 300 The Worldrsquos
Leading IP Strategists 2015-18 USPTO Registered Patent
Attorney
Mobile (USA) +1 713 498 6047WeChat erickrobinsonEmail ErickRobinsonSIPSasia
2
bull ldquoStronger Chinese Patent Laws Also Help US Companies Chinese Courts Are Increasingly Receptive To Patent Suits Even When They Are Lodged By Foreign Firmsrdquo Wall Street Journal July 20 2016 Interviewed for article and provided data
bull ldquoKorearsquos Antitrust Watchdog Hints Qualcomm Can Expect Another Near $1B Fine in Patent Proberdquo Intellectual Asset Management (Globe Business Media Group) July 18 2016
bull ldquoNPE Enforcement Thirst In Chinarsquos IP Courts May Be More Mirage Than Real Opportunityrdquo The Patent Investor In-Depth Patent Monetization Coverage Vol 26 July 11 2016
bull ldquoBrexit What Asia Makes of UKs Vote to Leave EUrdquo Campaign July 7 2016 bull ldquoChinas Innovators Set to Ratchet Up Patent Warsrdquo Thompson Reuters Breaking News
June 28 2016 See httpwwwubswallstcomubsmkt_storyaspdocKey=1329-L4N19G0OR-1
bull ldquoApple May Be Wise to Settle Infringement Dispute With Chinese Startup Shenzhen Baili To Ease Its Access To The Chinese Marketrdquo The Patent Investor Vol 24 June 27 2016
bull ldquoQualcomm brings enforcement action against Chinarsquos Meizu in Beijing Intellectual Property Courtrdquo The Patent Investor In-Depth Patent Monetization Coverage Vol 24 June 27 2016
bull ldquoWiLAN Marathon and Others Closely Watch Applersquos Dispute With Chinese Startup Ahead Of Their Own Suits In Chinardquo The Patent Investor In-Depth Patent Monetization Coverage Vol 24 June 27 2016
bull ldquoQualcomms Licensing Model Will Be ldquoDestroyedrdquo If It Canrsquot Win Key China Case Says Its Ex-Asian Patent Directorrdquo Intellectual Asset Management (Globe Business Media Group) June 27 2016
bull ldquoApple Should Settle Patent Dispute In China To Ease Access To Chinese Marketrdquo PatentVue from EnvisionIP June 27 2016
bull ldquoHoneymoon Over as Apple Hit With Patent Challenge In Chinardquo Australian Business Review June 20 2016
bull ldquoView From the Desk of Erick Robinson China IP Law Expertrdquo Licensing Economics Review June 1 2016
bull ldquoApple Ordered To Stop Selling iPhone 6 in China Following Patent Disputerdquo Shanghaiist June 18 2016
bull ldquoApplersquos Challenges In China Underlined By Patent Dispute IPhone Patent Case Adds To Increasingly Tough Environment For Western Companiesrdquo Wall Street Journal June 17 2016
bull ldquoQualcomm Caught in Patent Wars in Chinardquo New York Post June 24 2016bull ldquolsquoDawn Raidrsquo Drills May Become De Rigueur as Chinese Authorities Swooprdquo Financial
Times November 20 2015
RECENT PUBLICATIONSPRESENTATIONSbull ldquoWhy China Is A Good Place For NPEsrdquo IP Law360 March 13 2017
bull ldquoNon-Practicing Entities Can Help Support Innovation and Tech Companies in Chinardquo Global
Times (in conjunction with The Peoplersquos Daily) December 28 2016
bull ldquoDefending a Patent Case in the Brave New World of Chinese Patent Litigationrdquo IAM
Magazine December 1 2016
bull ldquoChina New King of the Patent Litigation Hillrdquo IP Dealmakers Forum NYC November 17 2016bull ldquoHow to Obtain Effective Evidence in Chinardquo Managing IP October 2016bull ldquoChinarsquos Evolution From Manufacturing To Innovation Erick Robinson Examines How Patents
And The Anti-Monopoly Law Are Changing The Rules In China And How Companies Can Protect Themselvesrdquo Intellectual Property Magazine July 7 2016
bull Patent Enforcement in China For Executives and In-House Counsel Text To Be Published Early 2017
bull ldquoChina Patent Blogrdquo November 2015-Present (ChinaPatentBlogcom)bull ldquoForeign Companies in China Must Learn That Respect Is Paramountrdquo Financial Times
November 20 2015 bull ldquoChina Increasing Patent Rights as US Goes the Other Wayrdquo IP Law 360 October 22 2015
QUOTED IN MAJOR PUBLICATIONSbull ldquoChina is Rising For Patent Litigationrdquo Lexpert Magazine March 15 2017bull ldquoCautious Optimism As China Mulls Introducing National IP Appeals Courtrdquo Intellectual Asset
Management (IAM) January 23 2017bull ldquoChina Smashes World Patent Record with 1M Filings in a Yearrdquo Financial Times November
24 2016bull ldquoAt Bottom Nowhere to Go But Up Patent Investors Sayrdquo Bloomberg BNA November 18
2016bull ldquoWiLAN Must Navigate Its Local Relationships with Added Care as It Wades Deeper into the
Asian Patent Marketrdquo Intellectual Asset Management (IAM) November 8 2016bull ldquoChinarsquos Patent-Lawsuit Profile Growsrdquo Wall Street Journal November 7 2016bull ldquoSony Sued in China for Patent Infringement WiLANrsquos Move Threatens to Stop Japanese
Group from Selling LTE Smartphones in Countryrdquo Financial Times November 6 2016bull ldquoNPE Assertion Comes to China as WiLAN Subsidiary Files SEP Suit Against Sony in Nanjingrdquo
Intellectual Asset Management (IAM) November 4 2016bull ldquoThe Cheap Phone Is Dead in Chinardquo Bloomberg October 19 2016bull ldquoGlobal Patent Concerns for 2016 10 Patent Industry Leaders Provide Their Insightrdquo Legal IQ
Global Patent Congress 2016 September 26 2016bull ldquoErich Spangenberg Leads Marathon Patent Grouprsquos lsquoTransformationalrsquo Focus On
Enforcement in Chinardquo The Patent Investor In-Depth Patent Monetization Coverage Vol 31-32 August 29 2016
bull ldquoIP Litigation in China Foreign Companies Still Face Challengesrdquo The American Lawyer Asia Edition August 8 2016
Chinese Patent Litigation Expertise
USA Courts Congress and USPTO Acting to Decrease Patent Rights
2006 eBay v MercExchange
most injunctions eliminated
2012 Inter-partesreexam
85 result in cancellation of at least one patent (rdquoPatent Death
Squadsrdquo)
PTAB uses broadest claim
construction for inter-partes
reexams (different than in
litigation)
Alice v CLS BankMost software
patents invalid as implementing an
unpatentableldquoabstract ideardquo
USA Courts Congress and USPTO Acting to Decrease Patent Rights
Other Changes That Hurt US Patentees
Major Changes Hurting Patentees1 Increased Pleading Standard2 Obviousness easier to prove (KSR v Teleflex))3 Patentees cannot send notice letters with any level of detail without
exposure to declaratory judgment jurisdiction4 Willfulness harder to prove5 Damages harder to prove6 Scope of damages narrow geographically as well as in relation to
infringing products7 Experts harder to qualify8 Liberalization of awarding of attorney fees in failed cases9 Presidential ldquovetordquo of a ITC exclusion order banning import of Apple Incrsquos
iPhones and iPads found by the ITC to infringe Samsung Electronics Co Ltds patents
10 Allowing patentees to be ldquotrolledrdquo at trial11 Media advocacy that patent abuse has gone wild12 Obama administrationrsquos love of everything Google
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful only around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
High win rate (75 - 95)
That makes the winning rate for patent owners around
82
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Erick Robinson
US patent attorney based in Beijing 17 years of experience in litigating and licensing patents worldwide for law firms and companies
Erick Robinson
BA PhysicsComputer Science Pomona College
JD University of Texas MBA Indiana University (2019) IAM Strategy 300 The Worldrsquos
Leading IP Strategists 2015-18 USPTO Registered Patent
Attorney
Mobile (USA) +1 713 498 6047WeChat erickrobinsonEmail ErickRobinsonSIPSasia
2
bull ldquoStronger Chinese Patent Laws Also Help US Companies Chinese Courts Are Increasingly Receptive To Patent Suits Even When They Are Lodged By Foreign Firmsrdquo Wall Street Journal July 20 2016 Interviewed for article and provided data
bull ldquoKorearsquos Antitrust Watchdog Hints Qualcomm Can Expect Another Near $1B Fine in Patent Proberdquo Intellectual Asset Management (Globe Business Media Group) July 18 2016
bull ldquoNPE Enforcement Thirst In Chinarsquos IP Courts May Be More Mirage Than Real Opportunityrdquo The Patent Investor In-Depth Patent Monetization Coverage Vol 26 July 11 2016
bull ldquoBrexit What Asia Makes of UKs Vote to Leave EUrdquo Campaign July 7 2016 bull ldquoChinas Innovators Set to Ratchet Up Patent Warsrdquo Thompson Reuters Breaking News
June 28 2016 See httpwwwubswallstcomubsmkt_storyaspdocKey=1329-L4N19G0OR-1
bull ldquoApple May Be Wise to Settle Infringement Dispute With Chinese Startup Shenzhen Baili To Ease Its Access To The Chinese Marketrdquo The Patent Investor Vol 24 June 27 2016
bull ldquoQualcomm brings enforcement action against Chinarsquos Meizu in Beijing Intellectual Property Courtrdquo The Patent Investor In-Depth Patent Monetization Coverage Vol 24 June 27 2016
bull ldquoWiLAN Marathon and Others Closely Watch Applersquos Dispute With Chinese Startup Ahead Of Their Own Suits In Chinardquo The Patent Investor In-Depth Patent Monetization Coverage Vol 24 June 27 2016
bull ldquoQualcomms Licensing Model Will Be ldquoDestroyedrdquo If It Canrsquot Win Key China Case Says Its Ex-Asian Patent Directorrdquo Intellectual Asset Management (Globe Business Media Group) June 27 2016
bull ldquoApple Should Settle Patent Dispute In China To Ease Access To Chinese Marketrdquo PatentVue from EnvisionIP June 27 2016
bull ldquoHoneymoon Over as Apple Hit With Patent Challenge In Chinardquo Australian Business Review June 20 2016
bull ldquoView From the Desk of Erick Robinson China IP Law Expertrdquo Licensing Economics Review June 1 2016
bull ldquoApple Ordered To Stop Selling iPhone 6 in China Following Patent Disputerdquo Shanghaiist June 18 2016
bull ldquoApplersquos Challenges In China Underlined By Patent Dispute IPhone Patent Case Adds To Increasingly Tough Environment For Western Companiesrdquo Wall Street Journal June 17 2016
bull ldquoQualcomm Caught in Patent Wars in Chinardquo New York Post June 24 2016bull ldquolsquoDawn Raidrsquo Drills May Become De Rigueur as Chinese Authorities Swooprdquo Financial
Times November 20 2015
RECENT PUBLICATIONSPRESENTATIONSbull ldquoWhy China Is A Good Place For NPEsrdquo IP Law360 March 13 2017
bull ldquoNon-Practicing Entities Can Help Support Innovation and Tech Companies in Chinardquo Global
Times (in conjunction with The Peoplersquos Daily) December 28 2016
bull ldquoDefending a Patent Case in the Brave New World of Chinese Patent Litigationrdquo IAM
Magazine December 1 2016
bull ldquoChina New King of the Patent Litigation Hillrdquo IP Dealmakers Forum NYC November 17 2016bull ldquoHow to Obtain Effective Evidence in Chinardquo Managing IP October 2016bull ldquoChinarsquos Evolution From Manufacturing To Innovation Erick Robinson Examines How Patents
And The Anti-Monopoly Law Are Changing The Rules In China And How Companies Can Protect Themselvesrdquo Intellectual Property Magazine July 7 2016
bull Patent Enforcement in China For Executives and In-House Counsel Text To Be Published Early 2017
bull ldquoChina Patent Blogrdquo November 2015-Present (ChinaPatentBlogcom)bull ldquoForeign Companies in China Must Learn That Respect Is Paramountrdquo Financial Times
November 20 2015 bull ldquoChina Increasing Patent Rights as US Goes the Other Wayrdquo IP Law 360 October 22 2015
QUOTED IN MAJOR PUBLICATIONSbull ldquoChina is Rising For Patent Litigationrdquo Lexpert Magazine March 15 2017bull ldquoCautious Optimism As China Mulls Introducing National IP Appeals Courtrdquo Intellectual Asset
Management (IAM) January 23 2017bull ldquoChina Smashes World Patent Record with 1M Filings in a Yearrdquo Financial Times November
24 2016bull ldquoAt Bottom Nowhere to Go But Up Patent Investors Sayrdquo Bloomberg BNA November 18
2016bull ldquoWiLAN Must Navigate Its Local Relationships with Added Care as It Wades Deeper into the
Asian Patent Marketrdquo Intellectual Asset Management (IAM) November 8 2016bull ldquoChinarsquos Patent-Lawsuit Profile Growsrdquo Wall Street Journal November 7 2016bull ldquoSony Sued in China for Patent Infringement WiLANrsquos Move Threatens to Stop Japanese
Group from Selling LTE Smartphones in Countryrdquo Financial Times November 6 2016bull ldquoNPE Assertion Comes to China as WiLAN Subsidiary Files SEP Suit Against Sony in Nanjingrdquo
Intellectual Asset Management (IAM) November 4 2016bull ldquoThe Cheap Phone Is Dead in Chinardquo Bloomberg October 19 2016bull ldquoGlobal Patent Concerns for 2016 10 Patent Industry Leaders Provide Their Insightrdquo Legal IQ
Global Patent Congress 2016 September 26 2016bull ldquoErich Spangenberg Leads Marathon Patent Grouprsquos lsquoTransformationalrsquo Focus On
Enforcement in Chinardquo The Patent Investor In-Depth Patent Monetization Coverage Vol 31-32 August 29 2016
bull ldquoIP Litigation in China Foreign Companies Still Face Challengesrdquo The American Lawyer Asia Edition August 8 2016
Chinese Patent Litigation Expertise
USA Courts Congress and USPTO Acting to Decrease Patent Rights
2006 eBay v MercExchange
most injunctions eliminated
2012 Inter-partesreexam
85 result in cancellation of at least one patent (rdquoPatent Death
Squadsrdquo)
PTAB uses broadest claim
construction for inter-partes
reexams (different than in
litigation)
Alice v CLS BankMost software
patents invalid as implementing an
unpatentableldquoabstract ideardquo
USA Courts Congress and USPTO Acting to Decrease Patent Rights
Other Changes That Hurt US Patentees
Major Changes Hurting Patentees1 Increased Pleading Standard2 Obviousness easier to prove (KSR v Teleflex))3 Patentees cannot send notice letters with any level of detail without
exposure to declaratory judgment jurisdiction4 Willfulness harder to prove5 Damages harder to prove6 Scope of damages narrow geographically as well as in relation to
infringing products7 Experts harder to qualify8 Liberalization of awarding of attorney fees in failed cases9 Presidential ldquovetordquo of a ITC exclusion order banning import of Apple Incrsquos
iPhones and iPads found by the ITC to infringe Samsung Electronics Co Ltds patents
10 Allowing patentees to be ldquotrolledrdquo at trial11 Media advocacy that patent abuse has gone wild12 Obama administrationrsquos love of everything Google
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful only around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
High win rate (75 - 95)
That makes the winning rate for patent owners around
82
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull ldquoStronger Chinese Patent Laws Also Help US Companies Chinese Courts Are Increasingly Receptive To Patent Suits Even When They Are Lodged By Foreign Firmsrdquo Wall Street Journal July 20 2016 Interviewed for article and provided data
bull ldquoKorearsquos Antitrust Watchdog Hints Qualcomm Can Expect Another Near $1B Fine in Patent Proberdquo Intellectual Asset Management (Globe Business Media Group) July 18 2016
bull ldquoNPE Enforcement Thirst In Chinarsquos IP Courts May Be More Mirage Than Real Opportunityrdquo The Patent Investor In-Depth Patent Monetization Coverage Vol 26 July 11 2016
bull ldquoBrexit What Asia Makes of UKs Vote to Leave EUrdquo Campaign July 7 2016 bull ldquoChinas Innovators Set to Ratchet Up Patent Warsrdquo Thompson Reuters Breaking News
June 28 2016 See httpwwwubswallstcomubsmkt_storyaspdocKey=1329-L4N19G0OR-1
bull ldquoApple May Be Wise to Settle Infringement Dispute With Chinese Startup Shenzhen Baili To Ease Its Access To The Chinese Marketrdquo The Patent Investor Vol 24 June 27 2016
bull ldquoQualcomm brings enforcement action against Chinarsquos Meizu in Beijing Intellectual Property Courtrdquo The Patent Investor In-Depth Patent Monetization Coverage Vol 24 June 27 2016
bull ldquoWiLAN Marathon and Others Closely Watch Applersquos Dispute With Chinese Startup Ahead Of Their Own Suits In Chinardquo The Patent Investor In-Depth Patent Monetization Coverage Vol 24 June 27 2016
bull ldquoQualcomms Licensing Model Will Be ldquoDestroyedrdquo If It Canrsquot Win Key China Case Says Its Ex-Asian Patent Directorrdquo Intellectual Asset Management (Globe Business Media Group) June 27 2016
bull ldquoApple Should Settle Patent Dispute In China To Ease Access To Chinese Marketrdquo PatentVue from EnvisionIP June 27 2016
bull ldquoHoneymoon Over as Apple Hit With Patent Challenge In Chinardquo Australian Business Review June 20 2016
bull ldquoView From the Desk of Erick Robinson China IP Law Expertrdquo Licensing Economics Review June 1 2016
bull ldquoApple Ordered To Stop Selling iPhone 6 in China Following Patent Disputerdquo Shanghaiist June 18 2016
bull ldquoApplersquos Challenges In China Underlined By Patent Dispute IPhone Patent Case Adds To Increasingly Tough Environment For Western Companiesrdquo Wall Street Journal June 17 2016
bull ldquoQualcomm Caught in Patent Wars in Chinardquo New York Post June 24 2016bull ldquolsquoDawn Raidrsquo Drills May Become De Rigueur as Chinese Authorities Swooprdquo Financial
Times November 20 2015
RECENT PUBLICATIONSPRESENTATIONSbull ldquoWhy China Is A Good Place For NPEsrdquo IP Law360 March 13 2017
bull ldquoNon-Practicing Entities Can Help Support Innovation and Tech Companies in Chinardquo Global
Times (in conjunction with The Peoplersquos Daily) December 28 2016
bull ldquoDefending a Patent Case in the Brave New World of Chinese Patent Litigationrdquo IAM
Magazine December 1 2016
bull ldquoChina New King of the Patent Litigation Hillrdquo IP Dealmakers Forum NYC November 17 2016bull ldquoHow to Obtain Effective Evidence in Chinardquo Managing IP October 2016bull ldquoChinarsquos Evolution From Manufacturing To Innovation Erick Robinson Examines How Patents
And The Anti-Monopoly Law Are Changing The Rules In China And How Companies Can Protect Themselvesrdquo Intellectual Property Magazine July 7 2016
bull Patent Enforcement in China For Executives and In-House Counsel Text To Be Published Early 2017
bull ldquoChina Patent Blogrdquo November 2015-Present (ChinaPatentBlogcom)bull ldquoForeign Companies in China Must Learn That Respect Is Paramountrdquo Financial Times
November 20 2015 bull ldquoChina Increasing Patent Rights as US Goes the Other Wayrdquo IP Law 360 October 22 2015
QUOTED IN MAJOR PUBLICATIONSbull ldquoChina is Rising For Patent Litigationrdquo Lexpert Magazine March 15 2017bull ldquoCautious Optimism As China Mulls Introducing National IP Appeals Courtrdquo Intellectual Asset
Management (IAM) January 23 2017bull ldquoChina Smashes World Patent Record with 1M Filings in a Yearrdquo Financial Times November
24 2016bull ldquoAt Bottom Nowhere to Go But Up Patent Investors Sayrdquo Bloomberg BNA November 18
2016bull ldquoWiLAN Must Navigate Its Local Relationships with Added Care as It Wades Deeper into the
Asian Patent Marketrdquo Intellectual Asset Management (IAM) November 8 2016bull ldquoChinarsquos Patent-Lawsuit Profile Growsrdquo Wall Street Journal November 7 2016bull ldquoSony Sued in China for Patent Infringement WiLANrsquos Move Threatens to Stop Japanese
Group from Selling LTE Smartphones in Countryrdquo Financial Times November 6 2016bull ldquoNPE Assertion Comes to China as WiLAN Subsidiary Files SEP Suit Against Sony in Nanjingrdquo
Intellectual Asset Management (IAM) November 4 2016bull ldquoThe Cheap Phone Is Dead in Chinardquo Bloomberg October 19 2016bull ldquoGlobal Patent Concerns for 2016 10 Patent Industry Leaders Provide Their Insightrdquo Legal IQ
Global Patent Congress 2016 September 26 2016bull ldquoErich Spangenberg Leads Marathon Patent Grouprsquos lsquoTransformationalrsquo Focus On
Enforcement in Chinardquo The Patent Investor In-Depth Patent Monetization Coverage Vol 31-32 August 29 2016
bull ldquoIP Litigation in China Foreign Companies Still Face Challengesrdquo The American Lawyer Asia Edition August 8 2016
Chinese Patent Litigation Expertise
USA Courts Congress and USPTO Acting to Decrease Patent Rights
2006 eBay v MercExchange
most injunctions eliminated
2012 Inter-partesreexam
85 result in cancellation of at least one patent (rdquoPatent Death
Squadsrdquo)
PTAB uses broadest claim
construction for inter-partes
reexams (different than in
litigation)
Alice v CLS BankMost software
patents invalid as implementing an
unpatentableldquoabstract ideardquo
USA Courts Congress and USPTO Acting to Decrease Patent Rights
Other Changes That Hurt US Patentees
Major Changes Hurting Patentees1 Increased Pleading Standard2 Obviousness easier to prove (KSR v Teleflex))3 Patentees cannot send notice letters with any level of detail without
exposure to declaratory judgment jurisdiction4 Willfulness harder to prove5 Damages harder to prove6 Scope of damages narrow geographically as well as in relation to
infringing products7 Experts harder to qualify8 Liberalization of awarding of attorney fees in failed cases9 Presidential ldquovetordquo of a ITC exclusion order banning import of Apple Incrsquos
iPhones and iPads found by the ITC to infringe Samsung Electronics Co Ltds patents
10 Allowing patentees to be ldquotrolledrdquo at trial11 Media advocacy that patent abuse has gone wild12 Obama administrationrsquos love of everything Google
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful only around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
High win rate (75 - 95)
That makes the winning rate for patent owners around
82
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
USA Courts Congress and USPTO Acting to Decrease Patent Rights
2006 eBay v MercExchange
most injunctions eliminated
2012 Inter-partesreexam
85 result in cancellation of at least one patent (rdquoPatent Death
Squadsrdquo)
PTAB uses broadest claim
construction for inter-partes
reexams (different than in
litigation)
Alice v CLS BankMost software
patents invalid as implementing an
unpatentableldquoabstract ideardquo
USA Courts Congress and USPTO Acting to Decrease Patent Rights
Other Changes That Hurt US Patentees
Major Changes Hurting Patentees1 Increased Pleading Standard2 Obviousness easier to prove (KSR v Teleflex))3 Patentees cannot send notice letters with any level of detail without
exposure to declaratory judgment jurisdiction4 Willfulness harder to prove5 Damages harder to prove6 Scope of damages narrow geographically as well as in relation to
infringing products7 Experts harder to qualify8 Liberalization of awarding of attorney fees in failed cases9 Presidential ldquovetordquo of a ITC exclusion order banning import of Apple Incrsquos
iPhones and iPads found by the ITC to infringe Samsung Electronics Co Ltds patents
10 Allowing patentees to be ldquotrolledrdquo at trial11 Media advocacy that patent abuse has gone wild12 Obama administrationrsquos love of everything Google
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful only around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
High win rate (75 - 95)
That makes the winning rate for patent owners around
82
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
2006 eBay v MercExchange
most injunctions eliminated
2012 Inter-partesreexam
85 result in cancellation of at least one patent (rdquoPatent Death
Squadsrdquo)
PTAB uses broadest claim
construction for inter-partes
reexams (different than in
litigation)
Alice v CLS BankMost software
patents invalid as implementing an
unpatentableldquoabstract ideardquo
USA Courts Congress and USPTO Acting to Decrease Patent Rights
Other Changes That Hurt US Patentees
Major Changes Hurting Patentees1 Increased Pleading Standard2 Obviousness easier to prove (KSR v Teleflex))3 Patentees cannot send notice letters with any level of detail without
exposure to declaratory judgment jurisdiction4 Willfulness harder to prove5 Damages harder to prove6 Scope of damages narrow geographically as well as in relation to
infringing products7 Experts harder to qualify8 Liberalization of awarding of attorney fees in failed cases9 Presidential ldquovetordquo of a ITC exclusion order banning import of Apple Incrsquos
iPhones and iPads found by the ITC to infringe Samsung Electronics Co Ltds patents
10 Allowing patentees to be ldquotrolledrdquo at trial11 Media advocacy that patent abuse has gone wild12 Obama administrationrsquos love of everything Google
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful only around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
High win rate (75 - 95)
That makes the winning rate for patent owners around
82
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Other Changes That Hurt US Patentees
Major Changes Hurting Patentees1 Increased Pleading Standard2 Obviousness easier to prove (KSR v Teleflex))3 Patentees cannot send notice letters with any level of detail without
exposure to declaratory judgment jurisdiction4 Willfulness harder to prove5 Damages harder to prove6 Scope of damages narrow geographically as well as in relation to
infringing products7 Experts harder to qualify8 Liberalization of awarding of attorney fees in failed cases9 Presidential ldquovetordquo of a ITC exclusion order banning import of Apple Incrsquos
iPhones and iPads found by the ITC to infringe Samsung Electronics Co Ltds patents
10 Allowing patentees to be ldquotrolledrdquo at trial11 Media advocacy that patent abuse has gone wild12 Obama administrationrsquos love of everything Google
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful only around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
High win rate (75 - 95)
That makes the winning rate for patent owners around
82
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful only around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
High win rate (75 - 95)
That makes the winning rate for patent owners around
82
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
High win rate (75 - 95)
That makes the winning rate for patent owners around
82
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
China Welcomes Foreign Plaintiffs
httpwwwiam-mediacomblogDetailaspxg=8dc59dc8-6405-4b86-b241-27e89afc6089
httpwwwcorpcounselcomid=1202764600143IP-Litigation-in-China-Foreign-Companies-Still-Face-Challengesmcode=0ampcurindex=0ampcurpage=ALL
One study that suggests foreign companies are now better able to protect their intellectual property was done by the London-based law firm Rouse In analyzing 346 first-instance patent infringement cases initiated by foreign plaintiffs between 2006 and 2014 the firm which runs the Beijing-based intellectual properties litigation database CIELA found an 82 percent win rate (282 cases)
In a separate study Beijing-based Kangxin Intellectual Property Agency Co Ltd an affiliate of law firm Kangxin Partners found an 89 percent win rate in 114 first-instance patent cases initiated by foreign plaintiffs (102 cases won) between 2013 and 2015
11
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Virtually Guaranteed Injunctions
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Virtually Guaranteed Injunctions
All Courts Beijing Only
Source CIELAcn
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
China Is Granting Injunctions
15
httpswwwbloombergcomnewsarticles2018-07-03micron-chip-sales-banned-in-china-on-patent-case-rival-umc-says
Preliminary
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
China Is Granting Injunctions
16
$116M
Plus
Injunction
httpwwwipwatchdogcom20170413huawei-earns-first-victory-against-samsung-china-smartphone-patentsid=81871
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
China Is Granting Injunctions in SEP cases too
17
$13 million in damages
Plus
$69k in expensesfees
Plus
Permanent Injunction
First Injunction in an SEP case in China
httpwwwiam-mediacomblogdetailaspxg=f0c6f49d-487a-4e2a-9fd8-e0ebf5e3c052
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Apple Understands the Danger of Injunctions in China
18
Injunctions Can Be World-Wide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Short time from filing to trialjudgment (6-14 months)
Invention Patent Cases ndash All Courts
Source CIELAcn
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
China Largest Sales Market for Smartphones
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
China Largest Sales Market for Smartphones
httpswwwthevergecom20179616259810huawei-apple-global-smartphone-sales
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
China Largest Manufacturer Worldwide
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull Also called
Non-Practicing Entities
Patent Assertion Entities
Licensing Companies
Patent Arbitrage Companies
Patent Trolls
bull Difference between NPEs and rdquoPatent Trollsrdquo
Patent Trolls
◼ Use low-quality patents
◼ Use dubious infringement arguments
◼ Seek low settlement values usually lower than the cost of defending the lawsuit
◼ Act unfairly by leveraging their bad acts against small companies that do not have resources or pre-IPO companies
What is an NPE
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Why NPEs Are Important To China
Such licensing companies sometimes called non-practicingentities (NPEs) have a unique ability to support innovation inChina and help Chinese technology companies Such firmsare already in China and beginning to file cases which aretargeting foreign companies By putting pressure on foreignenterprises such licensing companies can assist Chinesebusinesses in gaining greater market share at home andabroad NPEs can also work directly with Chinese companiesto provide needed expertise and experience in patentstrategy as well as monetize their patents Many of the goalsof the Chinese government regarding elevating innovationand growing the domestic market can likely only beachieved or achieved in a short time with the directassistance of foreign NPEs
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Why NPEs Are Important To China
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Why NPEs Are Important To China
NPEs Can Be a ldquoFriend of Chinardquobull Rule No 1 for foreign companies in China is to be a ldquofriend of Chinardquo This
command has been issued by multiple members of the Chinese government For NPEs this can mean setting up scholarships at Chinese universities for STEM creating and funding incubators in China for innovation providing free teaching and counseling regarding intellectual property and innovation to schools and companies or simply donating a small percentage of any profits from litigation in China to universities technology incubators or promising students
bull Having good relationships with Chinese companies agencies and government officials is crucial This is not about encouraging any form of corruption quid pro quo or other nefarious activity Rather it is simply common sense make friends that will be able to provide good advice and recommendations and can vouch for the company at the necessary time By doing right by China NPEs can be a part of the solution rather than the problem
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Why NPEs Are Important To China
bull NPEs also have decades of experience in licensing monetizing litigating and enforcing patents They are fertile ground for advice regarding patent enforcement and strategy for a country and its technology leaders that may be incredibly bright and business-smart but with little experience in the patent realm
bull NPEs can work directly with Chinese companies to provide needed expertise and experience in patent strategy as well as monetize their patents For example a major foreign NPE is currently working with a top Chinese technology company to monetize its patents
bull This relationship not only provides the Chinese company with revenue but also allows it to outsource a task in which it is not an expert (patent licensing and litigation) so that it can spend its resources on developing and building innovative products
bull This model also allows the Chinese company a more politically correct way of attacking its competitors
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Example of True ldquoPatent Trollrdquo
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Example of True ldquoPatent Trollrdquo
bull Husband and wife bought between 600 and 700 Chinese patents for very little money and began attempting to license them in 2015 with a particular focus on companies about to float on the stock exchanges in Shanghai and Shenzhen
bull Accused of forging a backdated license agreement
bull From March to July 2017 Sun and Li sued ldquoCompany Ardquo for patent infringement in the Beijing IP Court and reported it to the China Securities Regulatory Commission in an effort to delay its IPO Company A decided to settle for 800000 RMB ($119000)
bull Sun and Li subsequently fabricated an exclusive license agreement with a shell company run by an individual surnamed Gao but really controlled by Li Gao was induced to sue Company A again because he had the exclusive (but fake) right to do so Company A again settled for 800000 RMB in order to have zero risk going into its IPO
bull From 2015 to 2016 Li 1048737 led more than a dozen patent infringement lawsuits against ldquoCompany Brdquo Though Company B knew there was no infringement it chose to settle for 50000 RMB (about $7500) rather than fight the cases in court
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Example of True ldquoPatent Trollrdquo
bull From 2015 to 2016 Li initiated more than 20 patent infringement lawsuits against ldquoCompany Crdquo another company that was seeking financing Li also reported the alleged infringement to e-commerce providers succeeding in getting some of Company Crsquos product listings removed Though Company C knew there was no infringement it settled for 225000 RMB (about $33500) due to concerns the cases could affect its financing
bull In October 2017 Li filed three patent suits the Xiamen Intermediate Peoplersquos Court against ldquoCompany Drdquo which was preparing to list on the main board of the Shenzhen Stock Exchange Li also complained to the CSRC in an attempt to disrupt the listing Even though one of the patents had been invalidated by the PRB Company D settled for 228000 RMB (about $34000)
bull Classic ldquotrollrdquobull Unfair actsbull Bad patents with no infringementbull Low settlement values
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Although a civil law system judges seek out and respect prior decisions
As described by Judge Liu Dequan the general editor the sources includebull Judicial interpretationsbull the spirit of judicial policy (from the speeches of
the SPC president and vice presidents responsible for the substantive area)
bull responses (答复) issued by the various divisions of the SPC
bull opinions (意见)bull answers (解答)bull trial case handling guidance (审判办案指南)bull research opinions of the research office (研究意
见)bull and other guidance issued by the various
divisions of the SPC and speeches given by the heads of those divisions at national court conferences
bull guiding casesbull SPC cases andbull SPC bulletin cases
httpssupremepeoplescourtmonitorcom20170308how-the-supreme-peoples-court-uses-case-law-other-sources-when-it-guides-the-lower-courts
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Although a civil law system judges seek out and respect prior decisions
On 22 March 2016 the China Supreme Peoplersquos Court released its latest Interpretations on Certain Issues Concerning the Application of Law in the Trial of Patent Infringement Cases
Shifting of Burden for Proving Damages to the Accused Infringer
bull Article 27 shifts the burden of proof from the patentee to the accused infringer when proof of damages is difficult to obtain except through receiving information from the defendant
bull Specifically in instances when the patentee has reasonably attempted to fulfill the burden of proof and evidentiary standards required but meaningful evidence is possessed only by the accused infringer the court may require the defendant to submit damages evidence
bull If the accused infringer refuses to provide such account books and materials without justification or provides false account books and materials the peoplersquos court may determine damages based on the reasonably supported claims of the patent holder
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
This has led to increasing damages
The Beijing IP Court on 8 Dec 2016 awarded damages of 50000000 RMB ($73M) in a patent case This included 49 million RMB in civil compensation plus 1 million RMB in legal fees This is one of the first instances of a court awarding legal fees to a prevailing party based on the time spent on the matter
This is one of the first cases after the new burden-shifting rules for damages Thus damages were not limited to statutory damages This is the beginning of a new phase in patent damages in China
bull Chinese v Chinesebull Relatively small casebull Technology related to USB securitybull Largest damages by that courtbull One of first cases after damages burden-
shifting rule
39
Chen Jinchuan deputy director of the court stated The market is the best frame of reference to determine the value of IPs he said
httpwwwebeijinggovcnBeijingInformationBeijingNewsUpdatet1461670htm
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
The Chinese government has demanded that the courts enforce IP rights
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
The Chinese government has demanded that the courts enforce IP rightsAccording to Xinhua news Xi declared that
intellectual property rights protection
contributes greatly to improving Chinarsquos
investment and business environment as well
as the overall economy He called on
authorities to advance IP laws and regulations
improve the quality and efficiency of IP
examinations and accelerate institution
building for IP in ldquoemerging sectors new
industries and business typesrdquo Xi also signaled
determination to toughen IP enforcement in
China saying ldquoWrongdoing should be
punished more severely so that IP
infringers will pay a heavy pricerdquo
This appears to be the first time that Xi has
publicly commented so extensively on IP
matters and what he said represents an
extremely direct and firm message from the
very top of Chinarsquos leadership While it is rare
for US or European heads of government to
spare more than a few cursory words on IP
policy the Chinese leader addressed these IP
issues in a top financial policy meeting ndash
underlining the Chinese leadershiprsquos
conviction that IP can help further the
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
bull High win rate (75 - 95)
bull Foreign plaintiffs win more than Chinese plaintiffs (but must do their homework)
bull Virtually guaranteed injunctions (gt95)
bull Short time from filing to trialjudgment (6-14 months)
bull Sparse discovery = Low cost
bull Validity challenges are successful around 30 of the time (for invention patents)
bull Dominant Chinese market for sales (largest worldwide for many electronics) and manufacturing (largest worldwide)
bull Specialized IP Courts and judges that take pride in their skill and fairness (no discrimination against NPEs)
bull Although a civil law system judges seek out and respect prior decisions
bull Government has demanded that the courts be fair and create a strong enforcement system
bull Forum shopping available (a Best Buy in Longviewhellip)
bull Pre-trial asset and evidence freezes available ndash freezing bank accounts inventory a useful negotiating tactic
bull System for blocking goods due for export at Customs is well developed
Why China
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Qualcomm Is Using China For Enforcement
httpwwwbloombergcomnewsarticles2016-06-24qualcomm-to-test-strength-of-china-agreement-with-patent-suit
ldquoWersquore asking the court to assist us and get them in compliancerdquo said Don Rosenberg Qualcommrsquos general counsel in a telephone interview ldquoChina is really making a concerted effort including having the special IP courts to enforce intellectual property rights and to value intellectual property rights Wersquore putting our faith in the court system there and we wouldnrsquot do that if we didnrsquot think we were in capable handsrdquo
46
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Qualcomm Is Using China For Enforcement
httpswwwcnbccom20171013reuters-america-qualcomm-files-lawsuits-in-china-to-ban-iphones--bloomberghtml
47
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Judgment
Appeal filed (stays injunction)
Court hearing
Evidence submission and exchange
Court serves response on plaintiff
Defendant files response
Court initiates service of complaint
Court accepts complaint
Litigation Timeline
Plaintiff files civil complaint
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Injunction
1 ndash 4 months 1 ndash 4 months 1 ndash 3 monthslt 30 days lt 30 days57
Filing to judgment in just over a year
(Appeal is additional 6-12 months)
Defendant can file challenge to jurisdiction (to be decided within 45 days by statute)
Defendant files invalidity action at Patent review board (patent litigation rarely stayed) (pendency 1 - 25 years)
MONTH
ldquoPreliminaryrdquo Injunction
48
When an appeal is filed by the defendant the injunction is normally stayed
For maximum leverage a ldquopreliminaryrdquo injunction request can be filed or renewed after winning at first instance (trial court) Because the patentee has already shown infringement this PI request will likely be granted
However a bond must be posted by the patentee before the PI is enforced (no bond is required if the defendant does not appeal or the defendant loses the appeal)
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
Bond Calculation for Preliminary Injunction
bull The amount of bond required is generally inconsistent across courts and judges and no statistics are available
bull Only consistency is that the amount is much less than the amounts required in Germany
bull The local courts generally use the same standards and the applicant mustprovide bond equal to the amount of damages claimed
bull According to Beijing higher courtlsquos provisions where the applicant cannotprovide the bond equal to the amount claimed if the parties rights and responsibilities are clear and irreparable damage will occur the court mayrequire 20 of the amount claimed
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia
THANK YOU
Erick RobinsonWeChat erickrobinson
Email erickrobinsonSIPSasia