PATENT INFRINGEMENT DISPUTE BETWEEN HUAWEI AND SAMSONG

◆ First Instance Docket: (2016) Min05MinChu No. 725

◆ Second Instance Docket: (2017) MinMinZhong No. 501

CASE 9

Fujian Province

[Headnotes]

In assessing damages for infringement, when defendant refuses to provide information on sales and benefit as ordered by court. In the absence of information from either plaintiff or defendant regarding actual damages and illegal gains, a court may actively apply the evidentiary rules on basis of patent law principles for protecting legitimate interests of patentee, taking into consideration of such information as degree of innovation of the patent, defendant’s bad faith, scale and the amount of sales, and the profit, etc., and excise a reasonable amount beyond the statutory figure.

[Synopsis]

Appellants (Defendants below): Huizhou Samsung Co.; Tianjin Samsung Communications Technology Co.; Samsung (China) Investment Co.; Hua Yuan Telecommunications Co. of Quanzhou, Fujian Prov.; and Quanzhou Pengrun Gome Electrical Appliances Co. (Collectively, defendants)

Appellee (Plaintiff below): Huawei Device Co., Ltd. (Huawei)

Huawei was formed on December 24, 2003, with consumer business as core business whose products cover mobile phones, mobile broadband, and home terminals. On January 28, 2010 Huawei filed a patent application for “Method for Displaying and Processing Assembly and User Equipment” which was issued June 15, 2011 under No. ZL201010104157.0 (the Patent). Plaintiff Huawei paid annuities for the patent which remains effective. Through market investigation, plaintiff believes that 23 types of mobile phone and tablet computer products manufactured by Huizhou Samsung and Tianjin Samsung have infringed its patent, which terminal products were purchased under notarization during April 5 through July 13 of 2015 from Quanzhou Gome, Quanzhou Hua Yuan, and Taobao.com. The Patent has 16 claims, of which Huawei asserts 1, 4, 5, 6, 9, 12, 13, and 14 as basis for infringement in the lawsuit that follows.

In the trial process defendants raised the defense of prior art and interference applications. Upon comparison, none of the defendants’ evidence for prior art or interference discloses all elements of the accused devices, and all showing substantial differences with the accused devices. The defense argument of prior art and interference was ruled out.

In sum, Quanzhou Intermediate Court in its decision issued injunction against Huizhou Samsung, Tianjin Samsung, Samsung (China), Quanzhou Gome and Quanzhou Hua Yuan, and assessed damages of 80 million yuan against Huizhou Samsung, Tianjin Samsung, and Samsung (China) for joint liabilities.

After announcement of the judgment, defendants Huizhou Samsung, Tianjin Samsung and Samsung (China) were dissatisfied and appealed. The appeals were rejected and the judgment were affirmed, which has been executed.

[Judge’s Comment]

This case represents the largest dispute amount of patent case since the third civil tribunal was established for Quanzhou Intermediate People’s Court, and also Huawei’s first of its series of cases asserting its rights in China, attracting wide attention of the society and of the media.

As a patent dispute in the mobile communications technology, this cas is distinct from all other cases of the same type in that most other cases involve standard staple patents which have to be employed in making the terminal devices. But in this case relates to a framework core patent for mobile end user graphic terminal interface which brings about differential experience to the end user, a nonstaple patent, which is not necessary in making mobile terminal devices. Huizhou Samsung, Tianjin Samsung and Samsung (China) are the world leading manufacturers smartphones, but they in many of their models of smartphones used the subject matters of this patented technology, a sign of very high market recognizability of this patent. Moreover, both Huawei, an affiliate of Huawei Technologies, and Samsung are world communications equipment giants, having significant position in the business of mobile communications.

As the benchmark for rapid development of informatization and intellegentialization, the mobile communications industry’s core patents have extremely important values in strategic resources, and play a significant role in national intellectual property strategies. The decision in this case generated leading effects in making rules and model conducts for market competition in mobile communications technology areas. During the trial of this case, both plaintiff and defendants submitted large amount of evidence which took tremendous time to go through. Besides, in making technical comparisons, it was necessary to compare the 23 pieces of terminal equipment one by one, and examine the 13 prior art technologies along with interference applications, a huge workload to carry. On the premises of guaranteeing procedural rights for the parties, Quanzhou Intermediate Court adopted the procedures of “Pretrial conference and statement + supplemental written opinions” and “pretrial exchange of evidence + supplemental interim introduction” to encourage the parties to focus on evidence examination and technical comparison, effectively to increase productivity of the trial.

In determining specific relief under the injunction, Quanzhou Intermediate Court, taking note of the special character in this case that involves method patent, and that as infringement media, the mobile terminals can be separate from the infringing method, besides ordering to enjoin the defendants from making, offering to sell and sale of the infringing devices with the patent method, further ordered them to remove the infringing graphic user interface from the mobile terminals’ operation system, ensuring the execution of the judgment.

In determining the amount of the compensatory damages, Quanzhou Intermediate Court ordered an accounting of defendants’ sales figure and profit. When the defendants refused to provide the information, in actively reliance of evidentiary rules, used plaintiff’s IDC data, the Samsung annual financial report for basis of sales and sales income, in combination with MIIT estimate provided by defendant, to form a foundation for the amount of compensatory damages. In addition, in the absence of either plaintiff’s or defendants’ evidence for actual damages and the illegal gains from defendants’ infringing activities, the court sua sponte applied the patent law principle of protecting patentee’s lawful interest by taking comprehensive consideration of the degree of innovation, bad faith on the part of defendants, the amount of sales, the figure of sales, and the profit, thereby making the reasonable amount of damages of 80 million Yuan over and above the statutory damages, giving effective judicial protection of intellectual property rights.