First Declaratory Judgment
Ruled by the IP Tribunal of PRC Supreme
People’s Court 1
The IP Tribunal of China Supreme People’s Court reached a decision of declaratory judgment of patent non-infringement on July 3, 2019, considered to be a guiding case for the application of laws and interpretation of prerequisites for the acceptance of lawsuits in pursuant of declaratory relief from a court. This case is also the first non-infringement declaratory judgment case adjudicated after the IP Tribunal of Supreme People’s Court was established on January 1st, 2019.
Safe-Run Huachen Machinery (Suzhou) Co., Ltd., the appellee in the case, is a holder for a Chinese utility model2. Safe-Run detected and found the appellant, Cooper Kenda Tire (Kunshan) Company Ltd., the plaintiff in the trial, for using “single stage semi-steel radial tire molding machine” supplied by VMI Holland B.V., which was suspicious of infringing its utility model patent right. Hence, Safe-Run filed a complaint to Suzhou IP Office on May 24, 2018, in request of administrative enforcement against Cooper. As a response, Cooper activated an invalidity proceeding against Safe-Run’s disputed utility model before the Patent Review Board of CNIPA. Suzhou IP Office then halted the administrative enforcement because the invalidation action has been filed. Subsequently, VMI served a written reminder to Safe-Run on September 24, 2018, asserting that Safe-Run’s series of activities had caused unrest to VMI’s regular business operation.
Safe-Run filed a lawsuit against VMI and Cooper for patent infringement on October 19, 2018, the date when Suzhou Intermediate Court received Safe-Run’s complaints with accompanying documents. On the other hand, it was about 10 days later that Cooper and VMI filed another suit to the same court for declaratory judgment on October 29, 2018. Though Suzhou intermediate Court dismissed Cooper and VMI’s claim, it made appeal to the Supreme People’s Court where its IP Tribunal carried out review.
China resorts to the use of declaratory judgment of non-infringement to resolve a prospective dispute at its early phase3. As an auxiliary instrument, the declaratory relief is available to an interested party exposed to uncertainty of regular business operation as of competing patentee’s interference like sending warning notices, and asserting patent infringement but without resorting to legal proceedings. To entitle an interested party to initiate a declaratory judgment, it prevents the abuse of rights and ascertains if the patent is infringed as soon as possible by the patentee, as well as terminates the uncertainty at law. The three prerequisites to lawfully establish a suit for non-infringement declaration at the court are respectively as: (1) the patentee serves a warning letter, (2) the receiving party replies in a written reminder urging the patentee to take necessary actions, and (3) the patentee fails to either withdraw his warning or initiate a patent infringement lawsuit within a reasonable period of time, namely one month upon receipt of the reminder or two months from sending of the same.
Several questions of law were presented to the appellate court pending analysis, whereas the facts of the case were correctly found during the first instance of trial by Suzhou Intermediate Court, according to the Supreme People’s Court acting as the appellate court.
First, the appellate court found the trial court erred in ruling that Safe-Run’s request for administrative enforcement as a warning notice in pursuant to the Patent Act. To reject the request as a warning notice, the trial court was overly strict construing the definition of a warning notice for it is considered as one of the three prerequisites to file for a non-infringement declaration. When Safe-Run made its request to the IP Office against Cooper, VMI’s product supply business and related operation would be inevitably influenced. In addition, when VMI’s product is considered to have infringed a utility model, the sales of products would foreseeably decrease. Even worse, since VMI is not a participant in a potential administrative proceeding, it would not have an opportunity to immediately make any response to Safe-Run’s any accusation. As such, if VMI’s standing for a non-infringement declaratory judgment can be entitled, it could likely help VMI to evade the risk of such instability in its commercial operations. Therefore, it was reasonable to construe Safe-Run’s request for administrative enforcement to be a warning notice.
Another prerequisite is the lapse of a reasonable timeframe to take a judicial action by the patentee against the accused party, which legitimizes the necessity and/or appropriateness for a declaratory relief. In the absence to file an infringement lawsuit in one month from receiving the accused party’s reminder, or two months from sending the same, a declaratory relief becomes mature to help resolve an uncertainty of law. The trial court and the appellate court were consistent in the finding to this issue. VMI sent a written reminder on September 24, 2018, and then Safe-Run received the same on September 26 of the same year, suggesting that Safe-Run had to either file a lawsuit or withdraw its warning before November 24 or October 26 according to the court’s record. As indicated, Safe-Run filed the case with necessary documents on October 19, 2018, and the trial court later registered it as on November 7, 2018. The appellate court reasoned that the timing to “file for an infringement lawsuit” was supposedly to be the time the plaintiff expressed to the court its intent to enforce its rights, instead of the time the court has actually docketed the file. An intent to seek remedy effectuates when it reaches the court. Therefore, both the trial and the appellate levels found Safe-Run has timely taken legal action. Since the uncertainty at law with VMI can be resolved within the same infringement lawsuit, a declaratory relief is reckoned as no longer necessary.
Last, though unrelated to any of the three prerequisites, the appellate court reviewed if VMI’s inclusion of an extra claim in a declaration beyond the scope of Safe-Run’s warning notice is lawful. The appellate court explained that the scope of a declaratory judgment is an auxiliary defensive instrument, and its claims should only matches the scope of the patentee’s warning notice, which is also the scope of the later infringement lawsuit. In this case, Safe-Run only indicated Cooper’s use of a specific model A as an act of infringement. But, VMI added, during the trial, another model B which was absent from Safe-Run’s warning notice, in the hope that model B could also be resolved by the same declaratory judgement. Therefore, the addition of model B was not considered lawful.
To conclude, Safe-Run timely had filed an infringement lawsuit within the legal timeframe. Nonetheless, the three prerequisites to establish a request for a declaratory judgment were not sufficient; as viewed, the IP Tribunal of the Supreme People’s Court as the appellate court dismissed VMI and Cooper’s appeal. Thus, the ruling for the case was affirmed and final.
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