The Supreme People's Court made a final judgment on a declaratory judgment action for patent non-infringement between the appellant, a Nanjing company, and the appellee, a Wuxi company, and determined that in the declaratory judgment action for patent non-infringement, it was inappropriate to support the plaintiff’s (Wuxi company) request for compensation for reasonable expenses from the defendant Nanjing company.

The plaintiff (Wuxi company) manufactures and sells a fully automatic anti-permeation equipment. The defendant (Nanjing company) is the patentee of the utility model patent "Concrete Impermeability Test Device". The Nanjing company sent a warning letter to a distributor for the Wuxi company, informing that the fully automatic anti-permeation meter equipment it sold was suspected of patent infringement, the Nanjing A company had preserved evidence of the infringement, and intellectual property disputes would be involved if the selling continued. After learning about the warning letter, the Wuxi company sent the Nanjing company a lawyer's letter, requesting the Nanjing company to withdraw the warning letter or file an infringement lawsuit with the court within one month. Because the Nanjing company neither withdrew the warning letter nor filed a lawsuit with the court, the Wuxi company took a declaratory judgment action for non-infringement of Nanjing company’s patent, and requested that the Nanjing company bear attorney fees of 22,000 yuan incurred by the Wuxi company for this action.

After trial, the court of first instance held that the accused infringing products manufactured and sold by the Wuxi company did not fall within the scope of the patent involved. This case was a patent infringement dispute. It was indeed necessary to hire a lawyer to participate in the litigation. The attorney fees incurred were reasonable litigation expenses. Therefore, in the judgment, the court determined that the Wuxi company did not infringe the Nanjing company’s patent, and ordered that the Nanjing company pay 10,000 yuan for the attorney fees incurred by the Wuxi B company for this case.

The Nanjing company was dissatisfied with the original judgment and appealed, arguing that it should not be ordered to pay attorney fees to the Wuxi company.

The Supreme People's Court, upon trial, held that in the declaratory judgment action for patent non-infringement, it is inappropriate to support the warned person or interested party’s claim for compensation from the right holder for reasonable expenses such as attorney fees and other reasonable expenses.

First of all, in the current laws and judicial interpretations, there are no special provisions supporting plaintiffs’ claims for compensation for reasonable expenses such as attorney fees in a declaratory judgment action for patent non-infringement.
Reasonable expenses are indirect losses suffered by the rights holder for maintaining the market value of intellectual property, conducting investigations and evidence collection, and stopping infringement. It is a special system designed in the compensation system for intellectual property infringement, which embodies the policy of strict intellectual property protection and the principle of comprehensive compensation and is of great value in sanctioning infringements and protecting rights. Pursuant to the provisions of the Chinese Patent Law and relevant judicial interpretations, the amount of compensation for patent infringement shall include the reasonable expenses paid by the right holder for stopping the infringement. If the right holder claims that it paid reasonable expenses for stopping the infringement, the court may calculate compensation for reasonable expenses separately beyond the amount of compensation determined in Article 65 of the Patent Law. However, claiming compensation for reasonable expenses in a declaratory judgment action for patent non-infringement does not meet the statutory applicable conditions.

The application scope of the above provisions is limited to disputes over patent infringement, and does not extend to declaratory judgment actions for patent non-infringement. Therefore, there is no legal basis for the Wuxi company to claim compensations from the Nanjing company for its reasonable expenses, including attorney fees.

Secondly, from the specific dispute involved in a declaratory judgment action for patent non-infringement, it can be seen that there is no basis for the transfer of payment of attorney fees. A declaratory judgment action for patent non-infringement is a remedial action for protecting the warned or interested party from being disturbed by the uncertainty of whether it has infringed the patent of others. Such actions are classified as civil negative declaratory judgment actions and generally do not involve liabilities for damages. Unless there is evidence proving that the patentee has abused its rights or engaged in unfair competition behaviors such as commercial defamation, it is usually difficult to determine the subjective liability of the patentee.

In this case, the dispute between the two parties is whether the fully automatic anti-permeation equipment manufactured and sold by the Wuxi company infringed the patent of the Nanjing company, and the dispute to be resolved is whether the Wuxi company infringed the patent. The Wuxi company in this case did not claim that the Nanjing company had engaged in abuse of rights, unfair competition, etc. In the absence of a dispute over damages, there was no basis for a separate trial of the dispute over the transfer of payment of attorney fees in this case.

Moreover, the hiring of a lawyer by the Wuxi company in a declaratory judgment action for patent non-infringement was a civil action initiatively chosen by the company based on its own circumstances and had no inevitable causal relationship with the behavior of the Nanjing company. In absence of special provisions in the law, the constituent elements of damages are not established.

Furthermore, determination of patent infringement is a highly professional matter, and it is not appropriate to impose strict restrictions on the way in which patent is exploited or to order the right holder to bear liability in absence of a clear legal basis. Implementing strict intellectual property protection requires a fair, convenient and efficient rights protection mechanism to protect the rights and interests of patentees and stimulate their innovation and creativity. Sending infringement warning letters is a relatively simple, effective, and widely used way to safeguard a patentee’s rights. Making the patentee bear adverse consequences just because of sending an infringement warning letter lacks legal basis and is not conducive to the protection of patents. Therefore, the patentee should not be liable for compensation solely for its act of sending an infringement warning letter.

Of course, it needs to be pointed out that the patentee also has the necessary duty of prudence and attention when issuing infringement warning letters, to make sure that its actions comply with the requirements of legality and legitimacy, follow the principles of good faith and non-abuse of rights, and do not harm the legitimate exercise of rights and normal business order of the warned persons or interested parties.

Finally, if the patentee abuses its rights, or engages in unfair competition and other behaviors that cause damage to the rights and interests of the warned person or an interested party, the aggrieved party may separately claim damages in accordance with the provisions of the Anti-Unfair Competition Law and its judicial interpretations.

In this case, the Supreme People's Court clarified that the reasonable expense counter-compensation system does not apply in declaratory judgment actions for patent non-infringement. It also specified the remedy channels for damages where a patentee abuses rights or unfairly competes and causes damage to the rights and interests of the warned person or an interested party. This clarification is of reference significance for the trial of such disputes.

——（2022）Zui Gao Fa Zhi Min Zhong No. 1009

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