Balancing ‘act preservation’ measures in intellectual property actions

Article 100 of the new Civil Procedure Law (as amended in 2012), implemented from 1 January 2013, specifies the conditions and procedure for preservation (including property preservation and act preservation) in legal actions. Before the most recent revisions, the Civil Procedure Law only provided for property preservation measures and was silent on act preservation measures. The author believes that act preservation measures will play an important role in enhancing the promptness and effectiveness of intellectual property (IP) protection.

Recent revisions to the Civil Procedure Law will have a positive impact on the application of act preservation in the field of IP infringement actions, but at the level of IP judicial practice the system requires further improvement.

Civil preservation system

The act preservation established by the new Civil Procedure Law makes the civil preservation system more systematised and reasonable, providing legitimacy for the dedicated laws such as the Trademark Law, Patent Law, Copyright Law, etc., and related judicial interpretations existing in the IP field, giving the system a legal basis at the level of basic procedural law.

At the time that China acceded to the World Trade Organisation, in accordance with the requirements of the Trade Related Aspects of IP Rights Agreement, it amended such dedicated regulations as article 57 of the Trademark Law, article 66 of the Patent Law, and article 50 of the Copyright Law around 2001, adding content on pre-trial act preservation and marking the first appearance of act preservation measures. Subsequently, by way of judicial interpretations, the Supreme People’s Court extended the period for applying for act preservation from pre-trial to mid-trial, thereby, however, introducing inconsistencies between the relevant provisions of the above-mentioned dedicated laws and judicial interpretations. Provisions corresponding to the procedural provisions of the dedicated laws could no longer be found in the basic procedural law.

The new Civil Procedure Law not only makes the parallel legal status of act preservation and property preservation clear but also, at the level of basic procedural law, expressly provides that the period of applicability of act preservation includes both pre-trial and mid-trial. While improving the civil preservation system, it also provides legitimacy for dedicated laws and related judicial interpretations in the IP field.

Unfair competition

Before the implementation of the new Civil Procedure Law, relevant laws and judicial interpretations were silent on whether act preservation measures were applicable to fields relating to IP in the Law Against Unfair Competition and the Anti-Monopoly Law. The additions to, and supplementation of, the act preservation system in the recent revision provide the legal basis for its application in the above-mentioned fields.

Although the Law Against Unfair Competition contains provisions on trade secrets, which fall within the field of IP, it lacks provisions on the application of act preservation measures, which led to a long-running debate in theoretical circles and judicial circles as to whether act preservation measures could be extended to apply to the Law Against Unfair Competition. The amended Civil Procedure Law resolves the issue of whether act preservation is applicable to civil law relationships, including those covered by the Law Against Unfair Competition.

Taking the closely watched Guangzhou Pharmaceutical Holdings v JDB advertising slogan unfair competition case as an example, Guangzhou Pharmaceutical Holdings applied to the court to prohibit JDB from using alleged unfair advertising publicity. The time at which this act preservation measure was applied for was precisely the stage at which the new Civil Procedure Law was replacing the old Civil Procedure Law, and JDB’s lawyers argued that “there is no legal basis for the application of provisional act preservation measures in the field of unfair competition disputes”.

Court ruling

However, when the court rendered its ruling, the new Civil Procedure Law had been formally implemented, whereupon the court rendered a ruling prohibiting the use of the disputed advertising slogan based on article 100 of the new law, thus becoming the first case in which a court rendered a relatively closely watched ruling on a provisional act preservation measure in the unfair competition field based on the new Civil Procedure Law.

A further example is the Eli Lilly act preservation application case, included by the Supreme People’s Court among its typical cases, in which the court rendered a ruling prohibiting the respondent from disclosing or using documents for which the applicant requested protection of trade secrets. This is the first case in China of the application of act preservation measures in a trade secrets infringement action based on the amended Civil Procedure Law.

These two cases show the positive impact of the amendments to the Civil Procedure Law on the application of act preservation.

How is balance to be struck?

Act preservation is of great significance to the prompt and effective protection of IP rights holders, but the amendment of the Civil Procedure Law remains insufficient to resolve existing problems.

As the objects of IP are intangible, the value of act preservation in IP actions is particularly salient. For example, in a trade secrets case, the rights holder is fully aware that the alleged infringer has the rights holder’s core trade secrets at its disposal, and should the alleged infringer disclose the trade secrets, the losses incurred by the rights holder could be incalculable, so the court must use act preservation measures to promptly and effectively protect the rights of the rights holder. Such an effect is absent from such measures as property preservation.

However, improperly used, act preservation can harm the lawful rights and interests of the alleged infringer. For example, certain patent infringement determinations involve complex technology comparison issues, and if a ruling that prohibits the alleged infringer from producing and selling the alleged infringing products is rendered rashly, it could have a major impact on the alleged infringer’s production and operations, turning act preservation into an instrument used by the rights holder to strike at a competitor.

In short, act preservation in IP cases requires judges to be well balanced in their determinations. However, at present the conditions and criteria for the application of act preservation remain inconsistent, and the determination of such issues as “irreparable loss” still lacks specific regulations and interpretations. The author is of the opinion that the amendment to the Civil Procedure Law presents the opportunity and framework for resolving problems, but the actual resolution of such problems still awaits the issuance of detailed operating rules and related judicial policies.