By Denning Jin King & Wood Mallesons’ IP Litigation Group Shanghai Office

In June of 2012, the Shanghai No. 1 Intermediate People‘s Court issued several orders against individuals responsible for violating a preliminary injunction, including fines and detention. This event was significant because it was the first time a court in Shanghai took such measures to compel enforcement of a preliminary injunction.

In June, 2012, a Belgian Company discovered that a Guangdong Company was likely infringing one of its design patents. According to the Belgian company, the Guangdong Company was selling products with an appearance that was substantially similar to designs covered by the Belgian Compan’s design patent at an exhibition being held at the Shanghai New International Expo Center. Subsequently, the Belgian company applied to the Shanghai No. 1 Intermediate People’s Court for a preliminary injunction. The application for preliminary injunction requested that the court demand the Guangdong Company to immediately stop selling and offering to sell the allegedly infringing product. On the date of the application, the court reviewed the application and issued a preliminary injunction. The preliminary injunction ordered the respondent company to stop selling and offering to sell the allegedly infringing products at the exhibition.

After the injunction was issued, the judges in charge of executing the injunction went to the exhibition to serve the order on the Guangdong company. As part of execution of the preliminary injunction, the judges also ordered the company to remove displays of the allegedly infringing products. The judges gave the Guangdong Company 24 hours to comply with the orders. Several days later, the Court responsible for executing the order discovered that the Guangdong Company had not ceased the sale and display of the allegedly infringement products. The Court quickly assembled a group of more than ten judges and bailiffs to go to the Expo Center and enforce the order. At the Expo Center, enforcement was obstructed by employees of the Guangdong company. In response, the judges took the employees to court and punished the Guangdong company and certain individuals through fines and detention.

Preliminary Injunction

A preliminary injunction is a temporary remedy for a party whose right has been infringed. At present, in China’s litigation legal system, preliminary injunctions are only available in intellectual property disputes. Article 66 of the PRC Patent Law provides that if the patentee or an interested party has evidence to prove that another person is committing or is about to commit patent infringement, which, unless said activity ceases, may cause irreparable harm to his lawful rights and interests, he may, before taking legal action, file an application to request a people’s court to order a party to cease the allegedly infringing activity. Additionally, the Several Provisions of the Supreme People’s Court for the Application of Law to Pre-trial Cessation of Infringement of Patent Right specifies further requirements regarding the applicants, jurisdiction, evidence, bonds and ruling, etc. that must be met before a preliminary injunction may issue. The PRC Copyright Law, the PRC Trademark Law and their respective judicial interpretations contain similar provisions.

Criteria for Reviewing Preliminary Injunctions

Courts generally consider the following criteria when determining whether or not to issue a preliminary injunction:

1. The applicant holds a stable and valid intellectual property right

This criterion comprises two requirements: first, the applicant must be the owner of or an interested party with regard to the intellectual property right at issue; second, the applicant must submit prima facie evidence to prove that its right is legitimate, valid and stable. When determining whether or not an intellectual right is stable, a tribunal mainly considers whether the right is in dispute. With regard to trademarks and patents, the tribunal would take into consideration whether they were undergoing revocation or invalidation procedures, respectively.

2. The respondent’s conduct can be deemed as infringement after a preliminary review

This criterion comprises of four requirements: first, the respondent is the party that commits the alleged infringement; second, the applicant has evidence to prove that the respondent is highly likely to have been committing the alleged infringement; third, the alleged infringement has been committed or is about to be committed; forth, after a preliminary review, the alleged act is highly likely to be deemed as an infringement.

As to this criterion, the determination of the “likelihood” of finding infringement is the key issue. Such criterion requires the judge to evaluate the applicant’s likelihood of success from the evidentiary materials submitted by the applicant and the hearing before the substantive hearing.

3. The applicant will be irreparably harmed if the infringement is not stopped

Proving irreparable harm is usually the most difficult practical issue that applicants face when applying for a preliminary injunction. Courts are generally reluctant to find harm that cannot be compensated for through a later award of damages. However, irreparable harm may be presumed under the following circumstances:

  • The alleged infringement harms personality rights, such as copyright-related moral rights;
  • Occurrence or continuous occurrence of the alleged infringement will severely affect the applicant’s market share or other significant interests; or
  • The alleged infringement’s scope and harm, if not stopped, would severely expand. For example, in the case discussed above, the alleged infringing products were displayed at an international exhibition. If the alleged infringement was not stopped, the harm caused to the applicant would expand beyond the damages incurred from a simple, one time sale of the products at issue..

In addition, when evaluating “irreparable harm”, the court also considers the respondent’s creditworthiness and solvency. The worse a respondent’s creditworthiness, the more likely that a preliminary injunction will be issued against him. In a preliminary injunction application regarding a design patent for thermos bottles, the tribunal heavily considered such factor. In that case, the respondent was a small company registered in a suburban area and had weak credit. Therefore, if a preliminary injunction was not issued, the applicant might not obtain any compensation after a final judgment. Under such circumstance, after the applicant submitted evidence of right and posted bond and the tribunal decided that the likelihood of infringement was quite high, the tribunal issued a preliminary injunction and immediately served the order.

Enforcement of Preliminary Injunctions

In China, respondents may refuse to obey a preliminary injunction even after it has been served to them by a court. Such disobedience severely diminishes the value of the preliminary injunction system and may seriously injure the applicants’ interests. The issue of determining how to enforce a preliminary injunction has not yet been effectively resolved. A recent case involving the application of a preliminary injunction by an entertainment company against a singer and another entertainment company demonstrates the typical difficulties that arise when preliminary injunctions are issued. In that case, the first in which a preliminary injunction targeted which songs could be performed at a concert, the court demanded the singer not sing the allegedly infringing songs at a concert due to alleged copyright infringement. However, the signer ignored the injunction and sang the allegedly infringing songs. The court subsequently fined the infringing parties a total amount of RMB210,000, an amount considered grossly inadequate compared to the harm suffered by the applicant for the alleged infringement.

Issuing orders such as fines and detention directly against individuals responsible for violating a preliminary injunction shows the increasing willingness of Shanghai No. 1 Intermediate People’s Court to enforce preliminary injunctions. The use of such methods to compel compliance with preliminary injunction may encourage other courts in Shanghai and China to use similar methods in the future.