March 03, 2016 | Jacky Y. TAN
(as published in China IP Update)

When coming to patent infringement litigation, valid patent, infringement evidence, eligibility of plaintiff and defendant are all essential elements. What happens if the former three elements are well prepared, but the infringer appears to be an underground workshop without business registration? Let's look at an example below.

Summary of Case

Mr. Yunhai Xie’s patent was granted on 19 May 2010 with number ZL200920155645.7. It was soon noted that products similar to Mr. Xie's patented product were sold in the market by Mr. Liang with a lower price and inferior quality.

Entrusted by Mr. Xie, investigator from Jiaquan IP Law Firm visited the alleged infringer's premises and purchased the alleged infringing product witnessed by the notary public. It was discovered that Mr. Liang's premises was an underground workshop not registered before the Administration of Industry and Commerce (hereinafter referred to as "AIC"). In China, entity without proper business registration is not eligible as defendant in litigation. Based on his extensive experience, the investigator believed that there would be an eligible entity behind the scene. Represented by Jiaquan's attorney, Mr. Xie reported the illegal unlicensed business before the AIC. On the other hand, Mr Xie submitted a petition to AIC for evidence preservation. In the raid performed by AIC on Mr. Liang's premises, it is discovered that the legal entity behind the underground workshop is a shoe factoryand the owner of this factory was Mr. Liang.

After the hearing, the court affirmed the infringement and ordered that all infringing products and equipments shall be destroyed. The defendant was ordered to pay a damage of CNY 80,000 (about USD 13,000/ EUR 11,000) to the plaintiff.

Legal Basis

The Patent Law of the People's Republic of China

Article 11.1 After an invention or a utility model patent right is granted, unless otherwise specified in this Law, no organization or individual may exploit the patent without licensing from the patentee, i.e., they may not, for the purposes of production and business operation, produce, use, offer to sell, sell, or import the patented products, nor use the patented method or use, offer to sell, sell or import products that are acquired directly through the patented method.

Article 65.2 If the losses of the patentee, gains of the infringer, or royalties of the patent cannot be easily determined, the people's court may, on the basis of the factors such as the type of patent right, nature of the infringement, and severity of the case, determine the amount of compensation within the range from RMB 10,000 to RMB 1,000,000 (about USD 1,600 to USD 160,000/ EUR 1,400 to EUR 140,000).

Review

In this case, the infringer hided his identity by operating the business in a premises without business registration. Obtaining the infringer's real identity through AIC proceedings proved to be an effective way for enforcement against underground workshops. In addition, infringement evidence preserved in the raid performed by AIC acted as the key evidence leading to the success of the case.