How can Chinese firms defend IP rights in overseas trades?

In an increasingly complex international environment, Chinese enterprises are facing ever greater challenges in carrying out trade activities abroad. Intellectual property (IP), as a key area of concern for all countries, has become an essential matter with which enterprises going abroad must deal.

This article analyses a cross-border IP dispute case handled by the author to discuss the litigation idea and strategy to help Chinese enterprises defend their IP rights in the global market, effectively prevent the abuse of litigation rights to infringe on their lawful interests, adapt to the international climate and economic situation, and enhance their competitiveness.

Case briefing

On 27 May 2022, Portus Singapore, a smart-home and remote monitoring technology company, and its US subsidiary, Portus, filed a patent infringement lawsuit in the US District Court for the Eastern District of Texas against Uniden America, a US-based marketer of wireless consumer electronics.

Under section 271 of the US patent law, title 35 of the US Code, Portus alleged that the wired and wireless cameras sold by Uniden America infringed its US patents No. 8,914,526 and No. 9,961,097 for intelligent remote control and monitoring technology for homes. Portus sought cessation of infringement and attorneys’ fees from Uniden America, as well as punitive damages up to three times the amount found, under section 284 of the US Code.

The manufacturer of the products at issue is Ansjer Electronics, located in Zhuhai, China, which specialises in the R&D, manufacturing and marketing of security and monitoring products. Based on the agreement between Uniden America and Ansjer Electronics, if the products are involved in IP infringement, Ansjer Electronics must be held jointly and severally liable for all damages.

Therefore, once the products at issue constitute infringement, Ansjer Electronics will face significant damages, which will also seriously affect its products already sold in the US and bring great risks to its export business, worth tens of millions of US dollars per year.

Upon receipt of Uniden America’s notice, Ansjer Electronics immediately appointed the author’s team from Kangda Law Firm to fully represent it in the case. After examining the patent technology and litigation claims in the complaint, the team, jointly with the R&D, technology development, marketing and finance departments of Ansjer Electronics, analysed the function-way result or tripartite test established in Graver Tank v Linde Air Products (1950), a classic US Supreme Court case in assessing patent infringement, as well as the elements constituting equivalence infringement, and found that the technology of the products concerned was clearly different from the patent technology that Portus claimed had been infringed.

The team then fully explained the fundamental differences between the two technologies in terms of function, means and effect, and provided a strong analysis and illustration that the products at issue did not constitute an infringement.

Based on the above-mentioned analysis, the author’s team requested of Uniden America that it make an affirmative defence of non-infringement. In the end, Portus, the plaintiff, withdrew the case, and the court closed the case on 13 April 2023 with a ruling of dismissal with prejudice, which strongly safeguarded the legitimate rights and interests of Ansjer Electronics.

The status quo

When it comes to overseas IP disputes, Chinese enterprises still have many problems to solve. On one hand, when such disputes arise, very few Chinese enterprises actively respond to them, with most choosing not to do so. As a result, they often end up paying significant damages or high royalties for patents and trademarks, or even withdrawing from that country’s market.

On the other hand, the IP arrangements of Chinese enterprises are deficient. When expanding into overseas markets, many of them do not make global IP strategy deployments or undertake systematic long-term plans for IP. When facing frequent IP lawsuits and disputes, they often pay large amounts of money to settle the cases.

Advice and insights

In this case, Ansjer Electronics actively responded to the lawsuit, not only to protect its legitimate rights and interests, but also to remove obstacles for its products to enter the US market, and to strive for more market opportunities, offering a valuable example to Chinese enterprises to defend their rights in similar situations.

The author advises Chinese enterprises to make good arrangements for their IP in advance, according to their actual position, when expanding into overseas markets to establish external rights protection mechanisms to avoid infringement of products and to refine their marketing channels.

At the same time, they should conduct in-depth research on the IP risks of the industry and other competitors, draw on the experience of professional organisations, familiarise themselves with IP laws and policy rules of the target country in advance, and properly arrange for dispute response mechanisms.

For an enterprise, engaging in overseas trade is like taking a voyage, one mixed with opportunities and challenges. Only by constantly adapting to the wind and adjusting the sails can it manage to travel smoothly forward and ultimately arrive at its destination.

Zhou Zhengping is a senior partner at Kangda Law Firm. He can be contacted on +86 139 7518 1755, or by e-mail at zhengping.zhou@kangdalawyers.com