The power of administrative injunctions in patent infringement

By Luo Rui, Han Kun Law Offices
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Injunctions are the best way to remedy patent infringements, but there remain obstacles to enforcement

Injunctions are seen as the best way for patent holders to remedy infringements and can be obtained through the courts or by administrative adjudication. With shorter trial periods and simpler procedures, getting injunctions though administrative adjudication by local IP authorities is an increasingly popular option for patent owners. However, administrative authorities lack the power of compulsory enforcement, and there remains no clear consensus on the most effective way to enforce injunctions.

罗睿-Luo-Rui-汉坤律师事务所-合伙人-Partner-Han-Kun-Law-Offices
Luo Rui

To address this problem, the China National Intellectual Property Administration issued a series of regulations and designated multiple pilot areas.

CLASSIFICATION AND MECHANISM

Similar to the system of patent infringement litigation, there are two types of injunctions in the current administrative adjudication for patents.

(1) Permanent injunction. According to article 65 of the Patent Law, where the patent authority determines that a patent has been infringed, it may order the infringer to cease and desist.

(2) Preliminary injunction. The pilot area of Shenzhen provided for preliminary injunctions in the Regulations of the Shenzhen Special Economic Zone on the Protection of Intellectual Property Rights. Based on these “Shenzhen Regulations,” China’s first ever administrative preliminary injunction was issued in 2021. Such injunctions protect the patentee’s rights by preventing potential infringement before the final settlement of a dispute resolution.

An administrative patent injunction may stop infringement by:

  • Ordering the infringer to cease the manufacture, sale, offering for sale, import and use of the infringing products;
  • Ordering the infringer to destroy any equipment, moulds or other tools dedicated to the manufacture of the infringing products or other manner of patent exploitation;
  • Prohibiting the infringer from selling the unsold infringing products or launching them into the market in any other way; and
  • Ordering the infringer to destroy the infringing products if difficult to preserve.

ENFORCEMENT

Administrative patent injunctions take effect immediately. Their enforcement is not affected by any subsequent administrative litigation or reconsideration. If the infringer refuses to comply, the patent administration may enforce the injunction with assistance from other organisations, or seek enforcement through the courts.

Assistance from other organisations. When patent infringement involves e-commerce platforms, exhibitions or customs, the patent administration may significantly enhance the enforcement of injunctions by requesting the removal of products from shelves, dismantling of displays, or blocking goods from entry.

The Shenzhen Regulations stipulate that authorities may notify the operators of e-commerce platforms to take necessary steps such as deleting, blocking, disconnecting links or terminating transactions and services to enforce the administrative preliminary injunction. Failure of the notified operators to co-operate in a timely fashion may lead to penalties.

In the case of China’s first ever administrative preliminary injunction, the Shenzhen Administration for Market Regulation ordered the sale of allegedly infringing products on an e-commerce platform should cease, which was enforced with the platform’s co-operation.

Through the courts. Only when the infringer neither files an appeal nor ceases the infringement within the stipulated period of a permanent injunction may the patent administration apply to a court for compulsory enforcement, which serves as the last resort for enforcing administrative injunctions.

In addition, the recently issued Intellectual Property Protection Regulations of Hainan Free Trade Port (Draft for Public Comment) further empower patent administrations with the right to enforcement by way of confiscating or destroying the infringing products on their own. However, as these regulations have yet to come into effect, it remains to be seen whether they will be implemented extensively, if at all.

NON-COMPLIANCE OUTCOMES

If the infringer refuses to execute an administrative injunction, it may face a series of penalties including fines, punitive damages and inclusion in the list of dishonest persons.

Fines. At present, both the Shenzhen and Hainan administrations have set out fines for refusing to execute a preliminary injunction under their IP protection regulations. Where infringement is substantiated, a fine of twice the amount of the illegal business revenue generated since the date of issuing the injunction will be imposed. Where the illegal business revenue cannot be calculated or is less than RMB50,000 (USD7,700), a fine of RMB30,000 or RMB50,000, respectively, to RMB100,000 will be imposed.

Punitive damages. The new Patent Law added provisions on punitive damages for patent infringement. Refusal to execute the administrative injunction usually constitutes a severe case of intentional IP infringement. Thus, the punitive damages could be up to five times the normally determined damages. Furthermore, the Shenzhen administration also provides that an act of refusal would trigger heavier damages within the prescribed spectrum.

Inclusion in the list of dishonest persons. Shenzhen, Tianjin, Liaoning, Shanxi, Hainan, Guangdong and a number of other regions have stipulated that the information of infringers refusing to execute administrative injunctions will be included in the list of dishonest persons under the public credit information system. This will affect their future qualification to take part in government-invested projects, become a supplier in government procurement or a recipient of government financial support, commendation or awards.

OBSTACLES TO ENFORCEMENT

Administrative litigation. Administrative litigation may hinder the compulsory enforcement of injunctions by court, but the administration may nevertheless take other steps such as requesting the e-commerce platform to take the infringing products off the shelves.

Invalidation proceeding. During the adjudication of patent infringement disputes, if the infringer initiates an invalidation action, the patent administration may consider suspending the adjudication and additionally lifting any preliminary injunction.

Han-Kun-Law-Offices-汉坤律师事务所

Luo Rui is a partner at Han Kun Law Offices. He can be contacted on +86 10 8516 4130 or by email at rui.luo@hankunlaw.com