The Supreme People's Court, in a case involving infringement of a patent for utility model, held that: when multiple infringers in an effective patent infringement judgment fulfill their respective compensation obligations at different points in time, and it is necessary to determine whether the invalidation decision has retroactive effect, consideration must be given both to whether the enforcement is completed before or after the date the invalidation decision is issued, and to the principle of fairness, so as to equally protect the legitimate rights and interests of all parties.
This case involves a patent for utility model (hereinafter referred to as the "the patent concerned"), titled "Foldable Mobile Terminal Support". The patentee is natural person Z, who claimed that the mobile phone case brackets manufactured and sold by Company A and sold by Company B fell within the protection scope of his patent, and sued to request the aforementioned companies to cease the infringing acts, destroy their inventory, and compensate him for his economic losses and reasonable expenses for protecting his right.
The first-instance court, after hearing the case, found that the accused infringing technical solution fell within the protection scope of the patent concerned. Company B, without authorization from the patentee, displayed and sold the accused infringing products on its online store for profit. However, it submitted evidence proving that the accused infringing products it sold were originated from Company A. In the absence of other evidence from Company A proving the source of the accused infringing products, the first-instance court presumed that the accused infringing products were manufactured by Company A and sold to Company B. The first-instance judgment ordered Company B to cease selling products that infringe on the patent concerned and destroy its inventory, ordered Company A to cease infringement, destroy its inventory, and compensate Z for economic losses and reasonable expenses for protecting his right, totaling 30,000 yuan, and ordered Company B to compensate Z for reasonable expenses for protecting his right, totaling 2,000 yuan.
After the first-instance judgment was issued, none of the parties appealed. Subsequently, Company A applied to the Supreme People's Court for retrial on the grounds that the patent concerned had been declared invalid by Examination Decision for a Request for Invalidation issued by the China National Intellectual Property Administration (CNIPA).
Upon review during the retrial, The Supreme People's Court found that: The CNIPA issued an Examination Decision for a Request for Invalidation on November 14, 2022, declaring the patent concerned entirely invalid. None of the parties filed an administrative lawsuit against this Decision within the legally specified time limit. The first-instance court accepted Z's request for compulsory enforcement on February 18, 2022, and delivered the proceeds of enforcement of 2,000 yuan paid by Company B to Z on March 29, 2022. On April 2, 2022, the first-instance court issued a consumption restriction order against Company A. Due to the need to lift the consumption restriction measures to renew a bank loan, Company A paid over 30,000 yuan of proceeds of enforcement to the first-instance court on October 31, 2024, and Z received these enforcement proceeds on December 25, 2024.
Regarding the Examination Decision for a Request for Invalidation, during the examination of the retrial application and the retrial proceedings, the Supreme People's Court repeatedly explained the legal effect of the Examination Decision for a Request for Invalidation to Z and informed him of Company A's inability to renew its loan due to the consumption restriction measures. Z explicitly stated that he firmly refused to withdraw the request for compulsory enforcement in the first-instance judgment.
The Supreme People's Court's rendered a retrial judgment: revoking the first-instance judgment, and dismissing all of Z's claims. Z was ordered to return the enforcement proceeds and compensate for the losses for occupation of funds to Company A and Company B within seven days from the effective date of the retrial judgment.
The Supreme People's Court held that: Article 47(1) of the Patent Law stipulates that any patent which has been declared invalid shall be deemed to be non-existent from the beginning. Based on this, the benefits obtained by the right holder based on the patent constitute unjust enrichment and shall be returned. However, to maintain established order, Article 47(2) of the Patent Law legitimizes the unjust enrichment that has been completely enforced before the patent is declared invalid. In addition, the proviso of Article 47(2) and Article 47(3) of the Patent Law, based on the principle of fairness, limit the scope of this legitimization. In this case, the Examination Decision for a Request for Invalidation of the patent concerned had already become effective, and the patent concerned is deemed to be non-existent from the beginning. Z's infringement claim in this case is therefore unfounded due to lack of a valid right, and his lawsuit should be dismissed. The first-instance court, acting upon Z's request, has already enforced the monetary payment obligations against the accused infringers, Company A and Company B, as established by the first-instance judgment. Regarding the proceeds already enforced by the two accused infringers, the people's court may, upon request by the parties or ex officio, reverse the enforcement and order Z to return the principal already obtained and interest thereof.
Firstly, given that the right of the patent concerned had been declared invalid, and despite repeated judicial explanations from the court, Z firmly refused to withdraw the request for compulsory enforcement against Company A, causing Company A being compelled to pay the proceeds of enforcement in order to remove the consumption restriction measures imposed on them, which inevitably triggered subsequent enforcement recovery procedures, and Zhou's conduct was clearly in contrary to litigation good faith. Secondly, Company A paid the proceeds of enforcements to the first-instance court after the date the Examination Decision for a Request for Invalidation was issued. That is, the relevant enforcement was completed after the date the Examination Decision for a Request for Invalidation was issued. This does not fall within the circumstance stipulated in Article 47(2) of the Patent Law, where the decision declaring the patent invalid shall have no retroactive effect on any judgment decision of patent infringement. Finally, Company B paid the proceeds of enforcement before the date the Examination Decision for a Request for Invalidation was issued. If Article 47(2) of the Patent Law were applied, the Examination Decision for a Request for Invalidation of the patent concerned would have no retroactive effect on Company B's fulfillment of obligation.
However, this would lead to the problem that, compared to Company A, Company B's proactive fulfillment of obligation on the first-instance judgment brought a negative impact on its legitimate rights and interests, preventing the recovery of the proceeds of enforcement that it should not have paid, which is clearly unfair. Based on maintaining the stability of the socio-economic order, Article 47(2) of the Patent Law makes exceptional provisions for patent infringement judgments, mediation statements, handling decisions, implementation licenses, and transfer contracts that have already been executed or fulfilled, preventing them from being revoked due to the retroactive effect of an Examination Decision for a Request for Invalidation. However, for patent infringement judgments involving multiple accused infringers, if the applicability of these provisions is determined solely due to different points in time for fulfilling the compensation obligations by different accused infringers, causing the proactive performer to bear the adverse consequence of not recovering the proceeds of enforcement, it would objectively encourage passive performance, delayed performance, or even non-performance . This is neither conducive to the protection of patents nor beneficial to the construction of a litigation good faith system. In such cases, based on the principle of fairness, the provisions of Article 47(3) of the Patent Law should be actively applied to initiate the enforcement recovery procedure and equally protect the legitimate rights and interests of all parties.
Through the aforementioned retrial judgment, the Supreme People's Court clarified that in patent infringement litigation, for patent infringement judgments involving multiple accused infringers, where the compensation obligations of multiple accused infringers are enforced respectively before and after the date an Examination Decision for a Request for Invalidation is issued, when determining whether the Examination Decision for a Request for Invalidation has retroactive effect on the infringement judgment, the appropriate legal provisions should be applied based on the principle of fairness so as to equally protect the legitimate rights and interests of all parties.
(2024) Zui Gao Fa Zhi Min Zai No. 1
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