China Foreign Investor Beware. Patriotic Patent Plaintiffs Are Coming For You
Every once in a while, a big intellectual property case comes along in China that makes the foreign investment community sit up and take notice. In order to receive a lot of attention, you need the following:
- The case is in a China People’s Court. Even better if a Chinese plaintiff sues in a foreign court.
- One of the litigants is a foreign company. Even better, the foreign company is the defendant, which is rare.
- Damages are high.
- One or both of the litigants is a famous multinational.
- The verdict results in a foreign company having to pay a license fee to a Chinese company or discontinue production.
Perhaps the last case that caused a huge stir involved France’s Schneider Electric, which lost a patent infringement suit to local plaintiff Chint Group. Schneider was ordered to stop manufacturing certain products plus pay Chint roughly USD 45 million (the parties later settled).
In addition to cases like Schneider, many patent infringement cases have been filed against foreign companies in China that later prove to be frivolous. Many of these have involved the designs of high-profile electronic products, such as mobile phones.
This Monday, eyebrows were raised as a large Chinese electronics firm filed suits against two foreign multinationals, and hinted at additional cases against other enterprises, using a patent infringement theory.
Aigo, a Chinese consumer electronics giant of Beijing Huaqi Information Digital Technology Co Ltd., is suing Hewlett-Packard (HP) and Toshiba of infringing on its six patents for USB Plus, a storage port technology used in many laptop computers, according to reports Monday.
On Monday Aigo filed a lawsuit against HP in a Beijing court and against Toshiba in a Xi’an court, said Aigo lawyer Lu Ersong.
The company is demanding compensation of 1 million yuan ($146,000), according to the lawsuit. It lists PC models using its USB port technology, which included HP’s Compaq Presario and Pavilion models and Dell’s Inspiron, Studio and Vostro computers.
So will this case end up getting the attention of a dispute like Schneider or be ignored as yet another frivolous suit filed by a local Don Quixote-ish inventor? Probably somewhere in between.
The case is certainly not very big. One million RMB (not sure whether that is for each case or a total) is not much, particularly for patent infringement. The amount in controversy obviously pales in comparison to Schneider.
However, Aigo (Chinese: ???, which means patriot), the brand name of Huaqi, does not represent an insignificant enterprise. This is a big local firm that is attempting to enforce domestically-created IP — in short, the poster child for Beijing’s indigenous innovation policy.
Notwithstanding the strength of the infringement claims themselves, one has to assume that the cases filed by Huaqi will be quite favorably received by judicial authorities, which are already quite predisposed to support China’s economic development policies. When it comes to supporting local technology, a full-court press is on and, to mix metaphors, the judiciary certainly knows which way the wind is blowing.
If we end up with this Chinese “Patriot” successfully asserting its homegrown patent rights against some of the biggest players in the global electronics industry, then the amount in controversy will cease to be important, and the case will be automatically catapulted to fame (or infamy, depending on who you ask).
Leaving aside the political nature of Chinese courts, what I am looking forward to in these cases is some clearer idea of the criteria the courts will use to decide these cases. Stan, to what extent to courts document the rationale behind their decisions? Is precedent becoming more important in court decisions here?
Cases are more useful than they used to be, but that’s not saying much. Judgments are still hard to come by unless the case is famous (and someone releases the verdict), or the SPC or academic puts together a casebook. Of the three, an SPC casebook of notable decisions carries the most weight, but it’s still not really binding in a Common Law/stare decisis way. Similarly, if you are in a particular province and can review a case decided by that province’s High Court, it’s worth something.
Of more value are the opinions issued by the SPC. These judicial opinions often include specific guidance on how a court should decide a particularly kind of criminal or civil action. Compared to the number of cases out there, of course, there are very few judicial opinions.
Without stare decisis of course, it is much easier for things like local protectionism and political influence to creep into the process. On the other hand, there are benefits to not having the burden of Common Law precedents to deal with or a jury system.