Experience from China：In-depth Analysis of China's First Fully Tried Standard Essential Patent Infringement Dispute Case
Standard Essential Patent cases are new and difficult patent infringement cases in China in recent years. Especially when they involve the field of mobile communication with many subjects and complex technologies. This kind of complex cases deeply test the comprehensive professional ability and experience of lawyers. Can the standard essential patentee obtain the injunctive relief? In the case where the mobile phone user does not constitute infringement, does the mobile phone manufacturer constitute indirect infringement? Does the exhaustion of patent exist in the field of method patent?
In a typical case that a prestigious Chinese wireless network technology company represented by Beijing Wis & Weals Law Firm against a dominant mobile phone manufacturing company in Japan regarding WAPI Standard Essential Patent infringement, the court conducted a comprehensive trial of the above issues for the first time and made a groundbreaking judgment. This typical case is the first typical case in China in which almost all legal issues related to standard essential patents were fully examined. Based on this typical case, we discuss the above issues.
I. Legal Requirement of Indirect Infringement
The courts of first and second instances of above-mentioned typical case have different opinions on indirect infringement, which lie in whether indirect infringement should be based on the existence of direct infringement.
As for such a difference, we give the following analysis:
1. Both the courts of first and second instances of the typical case ascertained that the WAPI function combination of the disputed mobile phone is a special tool for the implementation of the disputed patent.
Smartphone is an integration of many independent functions, instead of a single-function device. However, the WAPI module combination composed of hardware and software can only be used to implement the technical solution of the disputed patent (i.e. access to wireless LAN via the WAPI function options), and has no other substantial purposes, so the WAPI special function of mobile phones should not be ruled out for the purpose of the typical case.
2. Some opinions on indirect infringement.
Opinion 1: The defendant's provision of special device constitutes a contributory infringement
Article 21 of the Interpretation (II) of the Supreme People's Court on Several Issues Concerning the Application of the Law in the Trial of Disputes over Patent Infringement stipulates that: "Where the disputed product is provided to others for implementation of the disputed patent for the purpose of production and operation without the patentee's permission while knowing that the products concerned are materials, equipment, parts and intermediaries specially used for patent implementation, the people's court shall support the right holder's claim that the provider's act constitutes a contributory infringement under Article 9 of the Tort Liability Law." It can be seen that in the context of judgment on indirect infringement, even parts and intermediaries specially used for patent implementation are considered meeting the requirements, and it is obvious that these parts and intermediaries do not fail to meet the requirement of "constituting the substantial characteristics of the disputed patent which can be implemented by adding the missing common steps or standard parts" in determining the exhaustion of rights. Similarly, the "devices" specially used for patent implementation do not necessarily meet the "substantial characteristics" requirement in the context of the "exhaustion of rights principle".
Opinion 2: The assertion of indirect infringement should be based on the existence of the "risk" of direct infringement.
Those having this opinion hold that in judging an indirect infringement, the occurrence of "direct infringement" should not be simply identified as "actual occurrence", but should also include the "risk" of direct infringement, or else, the judgment will increase the patentee's burden of proof.
Opinion 3: Even if those who directly implement the process under the disputed patent are all consumers without "production and operation purposes", i.e. without the "capacity for responsibility" for patent infringement, the product manufacturer should be liable for contributory infringement.
Paragraph 2 of Article 9 of the Tort Liability Law stipulates that: "Those who instigate or help persons with no capacity for civil conduct and persons with limited capacity for civil conduct to commit infringements shall bear the liability for infringement." Consumers in cases like this are like the persons with no capacity for civil conduct and persons with limited capacity for civil conduct as stipulated in the Tort Liability Law.
Opinion 4: The judgment of indirect infringement should consider the relevant variants of direct infringement.
As for the judgment of direct infringement, we can use the "liability identification" idea as indicated by "control and direction" to transform the direct infringement upon patent in a behavior transfer manner, i.e. transform some steps of implementation of the patented process by some implementers into deemed implementation by the defendant, so as to judge whether the defendant constitutes a direct infringement upon patent.
Opinion 5: The product manufacturer "controls" consumers, and the behavior of consumers should be attributed to the product manufacturer.
At present, the United States judges the joint infringement based on the existence of "control or direction". In other words, the participants in some steps must have implemented the "control or direction" of the whole process patent, and each step should be attributed to the controlling party who controls the consumers like manipulating puppets, in which case, the controlling party should be considered to constitute a direct infringement.
Opinion 6: The act of a party to joint infringement upon patents is a kind of indirect infringement upon patents.
Although indirect infringement upon patents often occurs by aiding others, it should be noted that joint infringement upon patents, which is juxtaposed with contributory infringement upon patents, is also a kind of indirect infringement upon patents.
II. The Exhaustion of Rights to Process Patents
1. Exhaustion of rights is only applicable to product patents, but not process patents
Paragraph 1 of Article 69 of the Patent Law stipulates that "After a patented product or a product directly obtained by using the patented method is sold by the patentee or sold by any unit or individual with the permission of the patentee, any other person uses, offers to sell, sells or imports that product" which comes in line with the exhaustion of rights rule. Thus, the exhaustion of rights does not apply to the use of process patents, but only to the sale, offering for sale, use and import of products.
2. The exhaustion of rights can only be stipulated by law, and must not be created in individual cases, nor arbitrarily presumed
The exhaustion of rights is a severe restriction on patent rights, involving the deprivation of the rights of civil subjects, which can only be stipulated by law and cannot be deprived of without being prescribed by the law.
According to Articles 11 and 69 of the Patent Law, the legislators are fully aware of the difference between manufacturing method (under which products can be directly obtained) and non-manufacturing method. Article 11 classifies the patented products and "using, offering to sell, selling and importing products directly obtained according to the patented method" into one category, and "patented method other than manufacturing method" into another category. Article 69 differentiates the manufacturing method and non-manufacturing method under the "exhaustion of rights" principle, i.e. "patented method other than manufacturing method" are not included in the category of exhaustion of rights, which shows that the Chinese law explicitly stipulates that "patented method other than manufacturing method" do not apply to the exhaustion of rights principle, leaving no space for broader interpretation.
Whoever has the right to grant rights has the right to deprive of rights. The Patent Law is a special law under the civil law. The rights granted under the Patent Law shall neither be deprived of in individual cases nor be arbitrarily presumed unless stipulated by the Patent Law or expressly waived by the parties concerned.
III. Injunctive Relief for Standard Essential Patents
Both the courts of first and second instances in the typical case supported the injunctive relief in the light of the fact that defendant is in fault. We hold that the SEP injunctive relief should also take the following into consideration:
1. From the economic perspective of innovation activities such as cost and return, the injunctive relief for standard essential patents should not be deprived of.
Innovation means the sacrifice of short-term profits, as well as the existence of huge risks and uncertainties. The essence of the patent system is precisely to provide innovators with the expectation of high, stable profits in the future through the injunctive relief for infringement. The essence of patent right is a kind of "prohibitive right" rather than "right to use". If a SEP right holder is deprived of its prohibitive relief, standard essential patent will become an empty shell.
2. The prohibition right is the essence of a patent right. Article 11 of the Patent Law confers the prohibition right on the patentee, which right shall not be restricted or deprived of for any reason unless stipulated by the law or expressly waived by the parties concerned.
In China's current legal system, the General Principles of the Civil Law, General Provisions of the Civil Law, Property Law, Tort Liability Law and other host laws do not restrict the patentees' exercise of their statutory prohibition rights. Article 11 of the Patent Law, a special law, stipulates about the patent prohibition rights to the extent that the patentees' exercise of their prohibition rights should not be restricted or deprived of without permission.
3. There are substantial differences between FRAND commitment and patent prohibition right.
FRAND commitment is only a unilateral commitment made by a patentee to a non-specific subject regarding the patentee's consent to patent licensing negotiations, and does not have the purpose and indication of concluding a contract with the specific subject. Meanwhile, FRAND statement is not an invitation for offer, but it is only submitted to the organization for standardization for archiving, rather than issued to the non-specific implementers.