The Supreme People's Court issued a final judgment in a dispute over the infringement of an invention patent. The Court held that where the patentee can prove or reasonably demonstrate that it is highly probable that the infringing manufacturer possesses or controls a mold specifically used to manufacture the infringing product, and the manufacturer fails to submit sufficient evidence to rebut such, the court may order the litigation claim for destruction of the mold. In addition, to effectively prevent continued infringement, the judgment imposed a monetary penalty for delay on the infringer.
[Factual Background]
Individual A was the patentee of the invention patent in suit. A filed a lawsuit alleging that Company B had manufactured, sold, and offered for sale products falling within the scope of the patent without authorization, which constituted infringement, and after receiving a cease and desist letter, Company B continued to sell the infringing products, causing substantial economic harm to the patentee. A requested the court to order Company B to immediately cease its infringing activities, including manufacturing, selling, and offering for sale the accused products, to remove online sales links, to destroy its inventory of infringing products and the molds used to manufacture them, and to pay a total of CNY 800,000 in economic damages and reasonable enforcement expenses. Company B argued that the accused product did not fall within the scope of the patent.
The first instance court found that the accused product fell within the scope of the patent and ordered Company B to stop infringing and to pay A CNY 80,000, including reasonable enforcement expenses. With respect to A's request to destroy Company B's inventory and manufacturing molds, the first instance court found that A had not provided sufficient evidence that Company B possessed such inventory or molds and therefore denied that request. Both A and Company B appealed.
During the second instance proceedings, Company B admitted that molds were used to manufacture the accused product but claimed that they were not in its possession or control but rather were held by a contract manufacturer. After being instructed by the second instance court, Company B failed to submit evidence supporting this claim.
[Judgement]
The Supreme People's Court affirmed the first instance court's finding of infringement and the order to stop the infringing activities. However, the Court modified the judgment, ordering that Company B destroy the dedicated molds used to manufacture the accused product under judicial supervision or in the presence of A. The Court also increased the damages award CNY 300,000, including reasonable enforcement expenses, and imposed a monetary penalty for delay on Company B.
1) With respect to whether Company B possessed the molds and whether destruction should be ordered, the second instance court held that based on factors such as the nature and characteristics of the accused product, Company B's business scope and its online promotional materials, new evidence submitted by A in the appeal, and Company B's own admissions, it was highly probable that dedicated molds existed for the manufacture of the accused product. Company B argued that the molds were held by a third party, and it shall accordingly bore the burden of proving that claim. Having failed to do so after being instructed, the court found that the molds were in Company B's possession and control. Because the continued existence of the molds presented a real risk of continued infringement and further harm, it was necessary to take effective and reasonable measures to fully and effectively stop Company B's infringing activities. Therefore, the court granted A's appellate request to order Company B to destroy the molds.
2) With respect to enforcement of the destruction order, the second instance court held that after receiving A's cease and desist letter, Company B failed to respond and continued the infringement. During the second instance proceedings, after being instructed, Company B also failed to comply with its litigation obligations by refusing to provide specific information about the molds. This raised a real risk that Company B might continue to infringe, either directly or through third parties, after the judgment took effect. To effectively and specifically prevent continued infringement and further harm, and to compel Company B to comply with its legal obligations, the court ordered Company B to hand out and destroy the dedicated molds under judicial supervision or in A's presence within a specified period. The court further ordered that if Company B failed to comply without justifiable reason, it would be required to pay a daily monetary penalty for delay to A.
[Significance]
This decision is significant in several respects. First, it clarifies the analytical framework for determining whether to order the destruction of molds used to manufacture accused products in patent infringement litigation. Second, by imposing a monetary penalty for delay, it strengthens the court's ability to compel compliance with a judgment, effectively deterring continued infringement and preventing further harm. Lastly, it reflects a strong judicial commitment to robust patent protection, demonstrating the court's effort to achieve both a just legal outcome and a meaningful practical result. This decision provides important reference and guidance for the handling of similar cases.
(2024) Zui Gao Fa Zhi Min Zhong No. 403
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