Permitted Patent Infringement Continuance

CHINA ENVIRONMENTAL PROJECT TECH INC. (“CEPT”) owns an invention patent titled “Aeration Sea Water Type Technology for Removing Sulphur from Smoke and Aeration Device”.

Fujikasui Engineering Co. LTD (“Fujikasui”), without the authorization of the CEPT, produced a sulphur removing device covered by above patent, and HUAYANG Electrical Company (“HUAYANG”) applied this removing sulphur device to generator sets for commercial use.

In CEPT vs. Fujikasui and HUAYANG, the court offirst instance (High Court of Fujian Province) and the court of second instance (Supreme Court) both affirmed that: considering the infringing product “sulphur removing device” installed at the power station of HUAYANG has been put into operation, disusing the infringing product will have a serious impact on the local residents.  Thus, the courts of first and second instances did not order HUAYANG to stop using the device but to pay royalties of the patent.

Similar judgement happened on KING CEBERAL ENGINEERING (“KCE”) vs. Norinco International and SHENZHEN Airport.  In particular, KCE owns a utility model patent titled “Curtain wall mobile connection device”. Norinco Internationalproduced the connection device associated with above patent during the curtain wall construction project of SHENZHEN Airport.

In KING CEBERAL ENGINEERING (“KCE”) vs. Norinco International and SHENZHEN Airport, the court of first instance (Intermediate Court of Shenzhen City) affirmed that: the infringing product is applied in the airport which is a special public place, so disusing the infringing product will not conform to the actual condition.  Thus, the court of first instance did not order SHENZHEN Airport to cease tort but to pay royalties of the patent.

In the second instance, the court of secondinstance (High Court of Fujian Province) presided over the mediation and the SHENZHEN Airport was even exempted from any liability because of its unwitting and use in good faith.

From these two cases, it can be seen that the court is more and more thinking of a balanced-interest between patent owner or licensee and the public.  Once the tort cease may harm the public interest, tort continuance may be permitted.

Recently, the China Supreme Court issued a new Judicial Interpretation in which Article 25 reads:Where a party uses, promises to sell, or sells a patent-infringing product for the purpose of production and operations without the knowledge that such product is manufactured and sold without the permission of the patentee, and puts to the proof to prove such product has legal sources, the people's court shall support the request of the right holder that the above use, promise to sell or sale should be stopped, except that the user of the alleged infringing product puts to the proof to prove that it has paid reasonable consideration for such product.

"without the knowledge" mentioned in Paragraph 1 refers to the situation in which a party has no actual knowledge and ought not to have knowledge.

"legal sources" mentioned in Paragraph 1 refers to use of legal sales channels, a usual purchase and sales contract and other normal commercial manners to obtain a product. For legal sources, a user, a person who promises to sell or a seller shall provide relevant evidence in line with trading practice.

Article 26 reads:

Where the defendant commits the patent right infringement, the people's court shall support the request of the right holder that the defendant should be ordered to stop the infringement; however, the people's court may, instead of ordering the defendant to stop the act against which the lawsuit is filed, order the defendant to pay corresponding reasonable fees based on the consideration of the national interest and the public interest.

According to an observer’s comments, the so-called “national interest” and especially “public interest” would possibly be a good excuse for infringers to escape from infringement.  Adopt of the above Articles should be rather prudential.

-by Qian HUANG (Eric) of Intelightip