New judicial trends and IP protection strategies

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    Intellectual Proprety (IP) litigation is not only an effective means of protecting the lawful rights and the interests of rights holders, but also an important method of securing and maintaining a competitive advantage, throttling competitors and even obtaining the IP of the other party. From IP judicial practice in 2016, it can be seen that Chinese courts spent great effort in mitigating the difficulties faced by plaintiffs in adducing evidence, improving the relief system and increasing the amount of damages awarded. IP lawyers also need to pay attention to, and take advantage of, these trends when formulating protection strategies for rights holders.

    You Minjian Managing Partner Co-effort Law Firm
    You Minjian
    Managing Partner
    Co-effort Law Firm

    Application of adverse inference to mitigate difficulties in adducing evidence

    The difficulty in adducing evidence is one of the most common obstacles preventing right holders from protecting IP rights in legal practice. In practice, even if the plaintiff has a court writ of inquiry in hand or has applied to the court for preservation of evidence, the defendant’s direct control over the evidence of infringement will still shackle the plaintiff’s efforts to adduce evidence. Accordingly, when the defendant refuses to provide or refuses to cooperate in providing relevant evidence, the plaintiff can invoke the rule of adverse inference in article 75 of the Several Provisions of the Supreme People’s Court on Evidence in Civil Procedures: “Where there are evidences to prove that a party possesses the evidence, but refused to provide it without good reasons and, if the other party claims that the evidence is unfavorable to the possessor of the evidence, it may be deduced that the claim stands.”

    In the Dassault software copyright infringement case accepted by the Guangzhou IP Court, the defendant disrupted the court’s evidence preservation by using a power stoppage. The court, based on the fact that both of the two computers it had examined before the power stoppage had pirated software installed, inferred that all of the 65 computers on the site subject to preservation had the software installed on them. Although the above mentioned provision is not the most recent legislation, such overt application was rare in past software rights protection cases.

    Yet application of the inference rule must satisfy certain preconditions: firstly, the plaintiff is required to have evidence showing that the other party holds evidence and refuses to provide the same without just cause. Secondly, the content of such evidence must be adverse to the holder of the evidence. Thirdly, the inference is relatively clear, i.e., the content of such evidence asserted by one of the party’s is adverse to the evidence holder. Accordingly, IP litigation lawyers can propose using the rule of adverse inference in practice to lighten the plaintiff’s burden of proof and assist in rights protection.

    Multi-dimensional adducement of evidence and increase in the measure of damages

    The small amount of damages awarded in IP judicial adjudication has continually been a major issue harped upon, but, in 2016, several sensational cases let us watch with delight Chinese courts expending efforts to increase the measure of damages for infringement. In one patent infringement case, the Beijing IP Court rendered a judgment ordering the payment of damages in the amount of RMB50 million and, for the first time, confirmed in its judgment attorney’s fees in the amount of RMB1 million calculated on an hourly basis.

    Frank Zhu Partner Co-effort Law Firm
    Frank Zhu
    Partner
    Co-effort Law Firm

    In China, the measure of damages for IP infringement varies slightly among different IP rights, but it is generally determined based on the actual loss incurred by the plaintiff as a result of the infringement or the illegal income derived by the defendant through infringement. Where neither of the above mentioned amounts can be substantiated, the court can apply the statutory damages based on the circumstances of the infringement. Through the recent amendment of laws, the statutory measure of damages for trademark rights has been increased to RMB3 million, with a provision for punitive damages; the draft amendments to the Copyright Law and the Anti-Unfair Competition Law also greatly increase the statutory measure of damages. Accordingly, rights holders are fully empowered to claim high damages in legal actions. This requires lawyers, when preparing for litigation, to place emphasis on collecting evidence that reflects the market value of the IP in question, including the sales turnover of the product, royalties, etc.; additionally, attention needs to be paid to the subjective bad faith of the author of the act, emphasizing repeat infringement and willful infringement.

    Judicious use of pre-trial injunctions to prevent irreparable losses

    Pre-trial injunctions are a form of relief often seen in IP litigation in developed countries such as the US and UK. China also has relevant provisions, but, in the past, the attitudes of courts to pre-trial injunctions have been extremely cautious. However, in the judicial practice of Chinese courts in 2016, there were two typical cases in which pre-trial injunctions were applied: one being a ruling by the court concerning the famous variety show The Voice of China ordering a halt to the use of the programme title “中国好声音” and “The Voice of China” and related registered trademarks, and the other a ruling prohibiting the performance of Wemade Entertainment’s licensing contract with Kingnet.

    In the latter case, the plaintiff, Actoz Soft, and the defendant, Wemade, co-own the software copyrights in the game Mir2, but the defendant licensed the copyrights to Kingnet without the consent of the plaintiff. Co-effort Law Firm, as counsel to the plaintiff, through interpretation of article 9 of the Implementing Regulations for the Copyright Law, persuaded the court to issue a pre-trial injunction prohibiting the performance of the invalid licensing contract in question, effectively preventing the actual occurrence of the infringement. In examining the above mentioned cases, the key as to whether the rights holder can successfully apply for a pre-trial injunction lies in whether it can concretize this abstract condition: “failure to timely halt the act being carried out or about to the be carried out by the respondent would cause irreparable harm to the lawful rights and interests of the applicant”.

    In conclusion, both the improvement in legal provisions and the new trends in judicial adjudication point to intensification of protection of IP rights in China. Also, the riotous sprouting of various types of intermediary service firms and the vigorous development of multifaceted dispute resolution mechanisms signify the improvement in the IP protection environment in China.

    You Minjian is the managing partner of Co-effort Law Firm. He can be contacted on +86 21 5887 1657 or by email at ymj@co-effort.com

    Frank Zhu is a partner of Co-effort Law Firm. He can be contacted on +86 21 6886 5170 ext. 107 or by email at frank.zhu@co-effort.com