By Jing Xu, Chao Zhang King & Wood Mallesons’ Intellectual Property Group
On December 10, 2019, the IP Tribunal of Supreme People’s Court of China (“the Court”) announced the final judgement for the appellate case with respect to patent infringement dispute between the appellant Company A and the appellee Company B.
In this case, the patent asserted by Company B protects “a simplified method for accessing portal website of a network service provider”, and the accused products are routers made by Company A. According to the factual findings of the Court, all of the steps limited in Claims 1 and 2 of the method patent would be fully implemented when an end user uses the accused routers with the mode of “Web authentication enabled”. The Court holds in this case that if the material contents of the patented method are solidified into the accused products by the manufacturer for the purpose of production and business, and such act of solidification or its result plays a non-substitutable material role for all technical features of the claim of the patent being presented, i.e. the process of the patented method can be naturally reproduced when an end user uses the accused products in a normal operation, then the manufacturer of the products used by the end users shall be found as implementing the patented method and infringing the patent.
The biggest breakthrough of this case is the extensive interpretation made to Article 11 of the Patent Law of the PRC. Manufacturers and sellers of products are actually not implementers of the patented method, instead they only provides products and conditions for actual implementers. Therefore, conventionally, if a patent only include method claims, the patentee would have to argue “indirect infringement” stipulated in Article 21 of Interpretation (II) of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Patent Infringement Dispute Cases against manufacturers and sellers of products for implementing the patented method. In such a case, the patentee would face the issue to prove the prerequisite of “having clear knowledge” stipulated therein, and the debate regarding whether the “indirect infringement” shall be founded based on the premise of “direct infringement”. In this case, by fully considering that the fields of network and communication are “featured in interconnection, information sharing, cooperation of multiple parties and continuous innovations”, reasoning from the perspective of “fully respecting the innovations and development rules in the industry to assure the material protection of the patentee’s legal rights, sustainable innovations and fair competitions in the industry”, the Court finds that if the products play a “non-substitutable material role” for implementing the patented method, the manufacturer of products shall assume liabilities of direct infringement, although it is not the actual implementer of the patented method.
In this case, the Court substantially made an extensive interpretation for the “use” of patented method as stipulated in Article 11 of the Patent Law, and establishes a “non-substitutable material role” rule for finding infringing acts for method patents. According to our understanding of the Court’s final judgement, we think at least the following conditions shall be fulfilled, for applying the “non-substitutable material role” rule established in this case:
(1) All of the steps of the patented method will be reproduced when an end user uses the accused product, that is, all technical features of the patented method are presented during the process of using the accused product by the end user;
(2) For the purpose of production and business, the accused infringer solidifies the material contents of the patented method into the accused products, such as in form of software, i.e. such act of solidification or its result plays a non-substitutable material role for all technical features of the claim of the patent being presented.
The second condition, i.e. condition of “non-substitutable material role”, is a key element for finding the direct infringement by the product manufacturer. The reasoning of the Court further divides the condition into two sub-conditions of “material role” and “non-substitutable role” and provides effective guidelines:
- “Material role”: If an end user can completely implement the patented method by using the accused products with common equipment and conditions, i.e. if no other specialized equipment or conditions are required, the accused products shall be found as a “material role” for reproducing the patent method.
- “Non-substitutable role”: If the distinguishing feature of the patented method is also presented by the accused products when the patented method is reproduced, it indicates the accused products are “non-substitutable” for reproducing the patent method. According to the reasoning of the Court, the distinguishing feature can be a feature distinguishing the patented method from other methods as described in the patent (i.e. the inventive point alleged in the patent). We opine that, when the patented method is reproduced, if the feature distinguishing the patent from the prior art evidence is presented by the accused products, it would be also a convincing proof indicating the accused products are non-substitutable for reproducing patented method.
The sub-condition of “non-substitutable role” is a further requirement relative to the sub-condition of “material role”. It substantially requires that the accused products shall utilizes the innovations and contributions of the patent relative to prior art.
The court judgement of this case was made by the IP Tribunal of Supreme People’s Court of the PRC, which is the present uniform appeal tribunal for all patent cases in China. Therefore, the judicial principles and rules reflected in this case will have substantial influence for all the Chinese patent trial courts in finding infringing acts for method patents. Although the patent involved in this case relates to the fields of network and communication, we opine that the “non-substitutable material role” rule in this case would be also a good reference and guideline for method patents of other fields. For example, in the manufacturing and electric industry, many methods are also solidified in the products in forms of software. When end users operate these products, the steps of the patented method would be only mechanically implemented as well, which has been already solidified in the products. As such, we believe the patentee of such method patents would also have a chance to establish the direct infringement of the manufacturer, by referring to the “non-substitutable material role” rule established in this case with analysis of illegal profits earned by the accused infringer and unbalanced interest allocations. Therefore, the rule of this case provides a more direct and more effective protection for method patents, which will also influence the patentee in selecting candidate patents and formulating litigation strategies.
The judgement of the IP tribunal of SPC may be not the end of the dispute. According to the Civil Procedure Law of the PRC, Company A is entitled to file an application for retrial within 6 months. If Company A files an application, the application will be reviewed by the No. 3 Civil Tribunal of SPC. Then, how the judges of No. 3 Civil Tribunal view the extensive interpretation made by the IP tribunal to Article 11 of the Patent Law, would decide on the survival of the “non-substitutable material role” rule. We will continue to follow and share our opinions and suggestions.
See full text of the court judgement (in Chinese): https://mp.weixin.qq.com/s/pfGFvUSAQ9GMUsfkQbcV6w