Assessing patent stability before enforcement in China

The Supreme People’s Court’s annual white paper “China’s Intellectual Property Judicial Protection Situation” reveals that the number of patent infringement disputes filed at first instance has been steadily increasing over the last six years, growing from 12,357 in 2016 to 31,618 in 2021. The China National Intellectual Property Administration (CNIPA) also dockets a similar trajectory for complaints filed with local administrative enforcement agencies, with the number more than doubling from 20,859 in 2016 to around 49,800 in 2021. Accordingly, the amount of patent invalidation applications has quintupled from around 1,000 in 2016 to around 5,000 in 2021.

In China, apart from the high-profile cases involving millions of damages, the vast majority patent enforcement cases are initiated by patentees against hundreds or even thousands of petty traders, which may end with the infringer’s quick settlement. The alleged infringer will have strong incentive to seek invalidation of the litigated patent if it faces high damages claims, loss of business opportunities due to a possible injunction (in China’s judicial practice, injunctions are almost automatically granted if the court finds patent infringement) or dented reputation. In the latter case, the chances of waging an invalidation battle is extremely high. One can always find evidence and grounds to file rounds of invalidation applications against the same patent, so far as there is no issue of non bis in idem.

In China, there are three kinds of patents: invention patents, utility models and design patents. In practice, invention patents, which have gone through substantial examination, usually stand a better chance of withstanding invalidation attacks. Design patents, which only go through a formality examination, are incredibly vulnerable. Utility models witness the highest invalidation rate, and are starting to be subject to some form of substantial examination due to the CNIPA’s initiative to discourage “abnormal patent applications”.

Various sources have released empirical data that arrives at a unanimous conclusion: the chances of success in invalidation (and partial invalidation) attempts are fairly high in China. The table below analyses the outcome of CNIPA’s patent invalidation decisions from 2008 to 2018 (with data gathered by Unitalen):

Other publicly available data also attests that the CNIPA’s overall invalidation rate has been hovering somewhere around 48% in recent years.

An alleged infringer’s strategy would be to have the relevant claim invalidated or force the patentee to clarify the claim’s protection scope, while such clarification may constitute estoppel in the parallel patent infringement dispute. In other words, an invalidation action would ultimately be deemed successful so far as the remaining valid claim(s) of the patent no longer covers the alleged infringing product.

Moreover, the alleged infringer may file rounds of invalidation applications against a certain patent, citing different evidence or grounds each time. A new invalidation application may be tailored based on the findings of the previous decision. The vexatious invalidation ‘harassment’ could drag on for years and pose a real challenge to the patentee and thwart the patent enforcement action.

If the relevant claim of the patent at issue is declared invalid or survives the invalidation challenge but no longer covers the alleged infringing product, the patentee will have to withdraw the complaint from the court or local IP office, otherwise the complaint will be dismissed.

Against this backdrop, patentees are strongly recommended to assess a patent’s stability in advance if they intend to enforce it in China, since this will most probably trigger an invalidation action against it. As for design patents and utility models, it is now standard procedure for patentees to provide an official evaluation report or at least a search report to prove a patent’s stability. Invention patents will fare better since they have undergone substantial examination. Still, it would be advisable to review the patent at issue to check most frequently cited grounds of invalidation, in particular:

• novelty (Article 22(2) of the Patent Law);
• inventiveness (Article 22(3));
• insufficient disclosure of specifications (Article 26(3));
• clarity of claim, and/or whether the claim can be supported by the specifications (Article 26(4)); and
• whether the claim lacks necessary technical features (Article 20(2) of the Implementing Regulations).

In cases where a Chinese patent has claimed priority, it is necessary to review the patent family’s filing history in other countries or regions. Examination practice varies among different jurisdictions and foreign examiners may conduct a broader search of prior art in a substantial examination. For that reason, it is possible that the Chinese patent is granted but the corresponding patent in another country or region gets rejected, or the protection scope is significantly limited due to that country or region’s examiner discovering prior art. There have been cases where the alleged infringer cited the prior arts, identified by a Japanese examiner, to successfully challenge the Chinese patent’s validity.

If the case has high stakes for both parties, it is necessary to conduct an additional prior art search to assess the stability of the invention patent at issue – even if such a search has already been conducted prior to or during the patent application process. The CNIPA, experienced patent attorneys and professional prior art search institutes can provide this service. A thorough search may identity prior art that could pose a serious threat to the validity of the patent. It could even help identify the exact kind of prior art the alleged infringer might use when challenging the patent’s validity, especially when both parties entrust the same agency or institute to conduct the ‘nullity search’.

It is paramount that the patentee creates a holistic review of its patent portfolio in China, selects the patent(s) that both covers the alleged infringing product and has strong stability to withstand invalidation attacks and formulates a tailored strategy based on the strength of the patent. For example:

• if the patent is strong, infringement is obvious and the stakes are high, patentees may take aggressive action after collecting sufficient evidence;
• if the patent validity is rather dubious and both parties have room for argument in a patent infringement, but the stakes are high, patentees may still file a civil lawsuit or take moderate measures, such as filing a complaint with a competent administrative agency and reach a quick settlement with the alleged infringer by making some compromises;
• if a patentee believes the outcome of a legal action is uncertain, it may opt to send a cease-and-desist letter or an invitation for out-of-court negotiation and see how the alleged infringer responds; or
• if the patent is rather weak, patentees may refrain from taking any legal action at all.