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China’s Supreme People’s Court: Declaratory Judgement Actions Involving Invalidated Patents are Possible

In a recent decision highlighted by the Intellectual Property Tribunal of the Supreme People’s Court, the Court ruled that even though a patent was invalidated by the China National Intellectual Property Administration (CNIPA), it was still possible to file a declaratory judgement action to confirm non-infringement of the invalidated patent.  Specifically, the Court held “that the invalidation decision of a patent does not become legally effective as soon as it is made, and that the decision is only effective when the patentee does not file an administrative lawsuit against the invalidation decision within the deadline or if it does, the court judgement affirming invalidity goes into effect.”  Accordingly, the entity facing a claim of infringement can file a declaratory judgement action until the patentee exhausts all judicial remedies regarding the invalidation.

On November 14, 2019, with Zhang Xuezhi as the defendant and Zhang Jintao as the third party, the Bank of Dongguan filed the declaratory judgement action with the Guangzhou Intellectual Property Court, requesting confirmation of their apps did not infringe on Zhang Xuezhi’s patent rights involved in the case, and requesting Zhang Xuezhi to pay the Bank of Dongguan a reasonable expenditure of 890,100 RMB for rights protection.

 On August 31, 2018, the Patent Reexamination Board of the CNIPA declared the patent invalid.

On September 9, 2019, Zhang Xuezhi sent an infringement warning letter to Dongguan Bank, stating that he had filed a lawsuit with the Beijing Intellectual Property Court for the invalidation decision of the patent involved. Zhang Xuezhi also complained to Apple that the Dongguan Bank App involved infringement and requested that the App be removed from Apple’s App Store.

On November 6, 2019, the Bank of Dongguan issued a letter to Zhang Xuezhi regarding its complaint to Apple about the infringement of the patent right by the Bank of Dongguan, requesting Zhang Xuezhi to immediately withdraw the relevant complaint or file a relevant infringement lawsuit to the People’s Court as soon as possible.

The appellant Bank of Dongguan Co., Ltd.  then filed a declaratory judgement seeking confirmation of non-infringement of patent rights of Chinese Patent No. ZL200910038860.3 .

The court of first instance held that the invalidated patent was deemed to have not existed from the beginning. Therefore, in the case that the patent in question had been previously declared invalid, the bank of Dongguan’s request to confirm that it did not infringe the patent in the case lacked a factual basis. The lawsuit does not meet the legal acceptance conditions.

The court of first instance ruled that the suit against Bank of Dongguan would not be accepted. Dongguan Bank refused to accept it and appealed to the Supreme People’s Court. The Supreme People’s Court ruled on June 12, 2020 to revoke the original ruling and instructed the case to be accepted by the Guangzhou Intellectual Property Court.

The Supreme People’s Court reasoned,

Only when the administrative counterparty and interested parties waived their right to remedy or exhausted their right to remedy re the administrative decision, the patent right invalidation request review decision becomes indisputable. At this time, the validity of the patent right is final…

The parties who disagree with an invalidation decision of the patent right may initiate judicial relief procedures. The result of the judicial remedy procedure will affect the determination of the legal status of the patent right…Therefore, the patent authorization and confirmation procedure will only come to an end in the true sense when the party concerned fails to initiate a lawsuit or the judicial decision maintaining the review decision becomes legally effective after the expiration of the  litigation period stipulated by the Patent Law. 

In this case Zhang Xuezhi has filed an administrative lawsuit with the Beijing Intellectual Property Court, and the review decision declaring the patent right has not yet taken effect. Dongguan Bank, as the person being warned, has the right to file a lawsuit confirming that it does not infringe the patent right.

The decision is (2020)最高法知民终225号 released August 2, 2021 and the full text is available here (Chinese only).

Principal, and Director of the China Intellectual Property Practice

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