The new face of administrative remedies for patent infringement

In the past, patent holders, in particular foreign patent holders, had misgivings about the protection of their patents in the PRC, the main reasons are: (1) seeking protection through a judicial procedure was time consuming and in the course of such procedure, the alleged violator would often apply to the State Intellectual Property Office (SIPO) for invalidation of the rights holder’s patent, potentially leading to a stay in the trial, a longer trial time and creating legal risk for the stability of the rights holder’s patent rights; (2) in patent infringement cases, PRC courts did not accept punitive damages, accordingly the compensation obtainable by rights holders through litigation rarely fully compensated for their losses or genuinely increased the infringers’ costs of violating the law; and (3) although rights holders had the option to seek administrative protection from SIPO when patent rights were infringed, they would sometimes refuse to go that route because of the lack of transparency in administrative procedures.

After the implementation of the new Patent Law, SIPO revised and issued the Administrative Law Enforcement in Connection with Patents Measures on 1 February 2011, with a gradually maturing administrative remedy system for patent infringement.

The administrative procedure

As compared to a civil procedure for patent infringement, an administrative mediation and handling procedure for patent infringement has advantages of a simplified procedure, shorter delay, lower costs and low risk of invalidation.

A simplified procedure

Administrative mediation and handling procedure is divided into the following eight steps: preliminary review of claims, acceptance of claims, review and opening of case, document service, hearing preparation, oral hearing, case conclusion and administrative response. Pursuant to article 19 of the measures, when handling a patent infringement dispute, “the case shall be concluded within four months from the date on which the case was opened”, and for especially complex cases, “the length of an approved extension may not exceed one month”. With respect to the case acceptance and hearing procedures, the measures refer to the civil procedure system, expressly providing for time limits (“a case shall be opened within five working days from the date of receipt of the statement of claim”), a recusal system, investigation, gathering of evidence and jurisdiction. In contrast, in civil infringement procedures involving patent infringement, and particularly foreign-related infringement procedures, courts are not subject to a trial time limit, and the defendant will commonly apply to SIPO for invalidation of the plaintiff’s patent, resulting in a lengthy and tedious procedure.

Relatively low cost

The measures are silent on the administrative charge for mediation and handling application. However, the majority of local intellectual property offices do not charge for patent infringement cases in which an application for administrative mediation and handling is made. Furthermore, as administrative procedures are few in number, the formal requirements in respect of evidence are relatively low, thereby reducing lawyers’ fees and judicial assessment charges.

Low risk of invalidation

As law enforcement by an intellectual property office carries elements of state enforcement, in the majority of circumstances the infringer will not submit an invalidation application or question the stability of the rights holder’s patent rights. In our experience, to date, not one infringer has submitted an invalidation application to SIPO.

Expeditious

When a patent administration authority conducts administrative mediation and a hearing, it will generally use the simplified civil procedure, thereby both safeguarding the procedural rights of the parties and allowing the case to be dealt with in an expeditious manner. Additionally, pursuant to article 60 of the Patent Law, if the patent administration authority determines that infringement has been committed, it can order the infringer to immediately cease the infringement. This strengthens the administrative protection of patents and also makes the procedure expeditious and convenient.

Enforceability

A patent administrative mediation decision is enforceable. Pursuant to article 60 of the Patent Law and article 42 of the measures, the respondent may, if it is dissatisfied with the decision, institute a legal action in a people’s court in accordance with the Administrative Procedure Law within 15 days from the date of receipt of the handling notice. However, if the respondent institutes an administrative action in a people’s court, the enforcement of the decision is not stayed while the action is pending. If the respondent does not institute an action before the expiration of the above-mentioned period and does not cease the infringement, the mediation and handling authority may apply to the people’s court for enforcement.

The administrative mediation and handling of patent infringements also has shortcomings, the major one being the impossibility of mandatorily deciding the measure of damages. Pursuant to article 60 of the Patent Law and based on the handling practice of local intellectual property offices, the patent administration authority may, in the course of administrative mediation and handling, attempt to mediate the measure of damages for the patent infringement only if requested to do so by the parties, and cannot directly render a decision on the measure of damages for the infringement in its handling of a patent infringement dispute decision. If the mediation is unsuccessful, the rights holder is required to institute a separate patent infringement civil action in a people’s court seeking damages.

Shortcomings of local IP offices

Patent cases require law enforcement personnel to have strong professional capabilities, but certain local intellectual property offices are somewhat behind the times in their staffing of law enforcement personnel and thus lack the capabilities to hear complicated invention patent infringement cases. However, with the vigorous implementation of the new measures across the country, SIPO and local governments are actively enhancing the case handling capabilities of law enforcement personnel both technically and legally.

Furthermore, the law enforcement personnel of certain local intellectual property offices, in an effort to avoid administrative risk (their administrative decisions possibly being the subject of an application for reconsideration or an administrative action by either party), place excessive stress on mediation and are unwilling to actively render an administrative handling decision.

However, on the whole, the newly revised Measures offer patent holders an expeditious and convenient way of resolving patent infringement disputes. Particularly when the nature of the infringement is relatively obvious and the principal objective of the rights holder is to promptly put a halt to the infringement, and not to obtain massive damages, administrative relief measures offer clear advantages.

Zhang Xu and Eric Su are partners of HFG