Necessity and Feasibility of Optimizing Patent Invalidation Procedure

Cui Ning,[Patent]

 

Cui Ning

Judge of Intellectual Property Court of Supreme People’s Court

 

To optimize the litigation procedure of patent invalidation by revising Patent Law is necessary on the macro level and urgent at the realistic level. It can overcome the limitations of existing solutions and is feasible. In the specific system design, we also need recommendations and collaboration from IP practitioners to make our patent protection system better.

 

We should discuss the optimization of the litigation procedure of patent right invalidation on the basis or consensus that China's patent system is facing vastly different situations and difficulties from those during the third amendment of Patent Law and the beginning of the forth amendment. In this way, we can no longer apply yesterday's arguments to support the current points. The discussion about the necessity and feasibility of optimizing patent invalidation procedure should be based on the current situations and problems.

 

On the basis of national condition and global vision

Domestically, innovation has been a more powerful driving force for China's economic and social development, thus raising requirements on On the basis of national condition and global vision its protection. Globally, many countries are trying to simplify litigation procedures to improve legal attraction, which has become a common topic in international discussion nowadays. Lately I attended a forum themed The Legal Attraction of France in the French embassy, on which the French judges, officials from the Ministry of Justice, attorneys, notaries, experts and scholars promoted French laws and legal systems, highlighted the highly comprehensive and convenient litigation procedure of France, and even praised the transportation and good weather of Paris. The purpose was to attract people to solve international commercial disputes in Paris. If we want to make China a good spot for international IP litigation, we should think about more than how to operate and amend the current system. Instead, we need a more active attitude towards Patent Law amendment.

In patent protection system, it has been a trend for countries and regions to simplify litigation procedures to improve legal attraction. Japan, as a country applying continental law and traditional dual system, has introduced patent invalidation defense since 2004 and been improving it. In 2011, the Japanese Patent Law stipulated that the invalidation decision of the Japan Patent Office will not be the reason for retrial of an infringement case. That is to say, if the real dispute to be resolved is a civil one, the party only needs to file a civil defense without having to file another invalidation request with the Japan Patent Office. If the invalidation decision of the Japan Patent Office is made after the final decision of the second instance court, the outcome of the infringement case will not be changed. In 2015, Japan further optimized the procedures, introduced opposition system after patent authorization, and restricted the initiators of invalidation procedures. It can be seen that the patent validity disputes are directed to the front-end solution, so that when infringement dispute occurs, the infringement procedure can be as little disturbed by other procedures as possible.

Some experts believe that the changes in the US after 2012 reflect the strengthening of the administrative procedures for invalidation review. We should first notice that the US has always considered its patent protection system superior, and its emphasis on the evidence discovery system and high compensations are very attractive to patent holders. Even so, the US is aware that if there are problems like untimely rulings, long trials, and unclear rights in the administrative or judicial procedures, the development of new technologies will be hindered. Even the US who has advanced patent system is seeking for improvement, which is what we should learn from. Besides, US's changes are based on the insistence that the judicial process can hear invalidation cases. Its administrative procedures for invalidation review from PTAB to CAFC are one layer less than China's, so we cannot conclude from US's past changes that we should also intensify our administrative procedures.

The European Unified Patent Court in preparation has flexible jurisdiction on invalidation cases. But one thing is clear that if the infringement case occurs first, the invalidation case corresponding to it must be first accepted by the court which has accepted the infringement case, and the court has the right to hear the invalidation case.

The reason that I first introduced foreign practices is not that I blindly believe they have superior systems, but that we should notice that global countries are seeking for improvements and changes against the backdrop of global innovative competition. It is surely right for us to base our changes on national situations, yet what are China's national situations exactly? Domestically, it is to promote innovation, and globally, it is to create excellent business environment. With such national situation, we need better patent protection system, especially better litigation procedures for patent invalidation. This is the necessity to optimize the patent invalidation procedure.

 

The current situation of the system and its inner cause

The optimization of the litigation procedure of patent invalidation is not only necessary but also urgent, because there are problems we found in the system's operation, which I've also experienced myself and concluded as the following four aspects:

1. The infringer delays the infringement litigation by taking advantage of the overlapping procedures of patent infringement disputes, validity disputes, and ownership disputes. It's no problem for right holders who initiates an infringement lawsuit to test the validity and ownership of the rights. But when the procedure of such a test is excessively lengthy and even exceeds the should-be procedural time required by the infringement lawsuit, it will inevitably lead to the dissatisfaction of the right holder, and sometimes the accused infringer may suffer damage due to long-term involvement.

2. Change of the decision of invalidation case leads to change in the decision of infringement case. This is a common phenomenon. Statistics show that the rate of withdrawal of administrative patent cases in China has remained below 15% in recent years, in other words, more than 85% of administrative decisions are correct. However, is 15% really low? For those 15% right holders, the probability of them being affected is 100%. Improving the accuracy of court decision is important, but it also requires our attention to improve certainty. For patent rights, uncertainty has a huge impact on the market, and it should be minimized at the institutional level.

3. With many invalidity reasons and evidence combinations, if the court makes revocation and orders the administrative agency to rework, the administrative agency also has to review other reasons and claims. In the process of invalidation request, the parties often raise a lot of invalidity reasons and evidence, but if the administrative agency believes one of the reasons is enough to invalidate the patent right, it will not examine the rest based on efficiency considerations. However, this kind of practice may cause problems. That is, if the court believes the above reason is not sufficient and there has no right to change, after the patent right is revoked, the administrative agency must not only review the above reason but also examine the other reasons. In addition, in maintaining an effective invalidation decision, if it is a review of creativity, since the scope of protection of the independent claim is the largest, the administrative agency only needs to judge the inventiveness of the independent claim without judging that of the subordinate claims. However, in the infringement case, the party often makes subordinate claims. At this time, if the court believes that the administrative agency's decision of maintaining validation is wrong, therefore makes revocation and orders to rework, it means that after a long wait, the right holder has to be reexamined even before its claims going through invalidation review.

4. Authorization and confirmation cases are backlogged in exclusive jurisdiction courts, creating a vicious circle. In terms of this phenomenon, it is no use to simply compare the efficiency of administrative review with that of the judiciary, because in China's patent protection system, the two are not in parallel, but are interlocking and interactive. Besides, since the judiciary makes the final decision, we ultimately have to focus on the judiciary. From 2015 to 2018, Beijing Intellectual Property Court accepted 4,989 administrative patent cases and 2,310 civil patent cases, and more than two-thirds of the cases were from the National Intellectual Property Administration. In terms of the court's ability to handle cases, 4,250 patent cases were concluded in four years. That is to say, if it were a general court for patent cases, Beijing Intellectual Property Court has more than enough capability. Can we draw a conclusion that one of the main reasons for the vicious circle is that the administrative cases accounted for more than two-thirds of all cases? Since it is the parties' civil rights to initiate civil cases, and the number is hard to control, yet the procedures for administrative cases still have room for simplification. To solve the problem, why not improve our patent protection procedure from this perspective?

The existence of the above four phenomena shows that although the current patent relief procedures in China can be operated, they are lengthy, complicated and even highly uncertain. These problems render the procedures unattractive, impede innovation and the creation of a good business environment. The reason lies neither in the administrative agency, nor in the judiciary, but in the dual system itself.

 

Limitations of the Current solutions

At present, the solutions in the judicial and administrative procedures respectively cannot solve the problems brought by the "dual system" concerning patent right confirmation and infringement. Some of the measures are just temporary. For example, Article 2 of the Interpretation (II) of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Patent Infringement Dispute Cases stipulates that, "If the right claimed by the patentee in a patent infringement action is declared invalid by the Patent Reexamination Board, the People's Court hearing the case of dispute over infringement of patent rights may decide to reject the right holder's lawsuit based on the invalidation claim." In practice, it has shortened the trial cycle, however, this solution is a temporary measure at the expense of the interests of right holders without modifying the legal solution to the drawbacks of the dual system. When the invalidation decision changes, the parties need to restart the progress. In this scenario, the market loss of the right holders, and the costs of restarting the progress are not compensated. This kind of solution cannot serve as a substitute for legislation to solve the shortcomings of the "dual system".

 

The judiciary and the administration can work together to solve some specific problems, but because they have different purposes, the coordination can be costly and sometimes unachievable, especially on certain major issues. Therefore, coordination must be carried out at the legislative level. As for the view that the administrative agency is more capable in the specialized fields and the judicial procedure can be simplified into a procedural review, it does not conform to the spirit of the TRIPs Agreement.

 

The feasibility of the optimization of the patent invalidation procedure

During the "two sessions" in 2019, Luo Dongchuan, the vice president of the Supreme People's Court, made four legislative proposals for the revision of the Patent Law:

1. People's courts should be clearly granted the judicial power to modify administrative acts;

2. Patent invalidation defense should be clearly stipulated;

3. It should be made clear that the patent administration department under the State Council cannot act as a defendant in patent invalidation proceedings;

4. It should be made clear that the patent administration department under the State Council may, when necessary or in accordance with the requirements of the people's courts, appear in court to express opinions on specific issues.

We believe these four recommendations are feasible in legislation:

1. There are no technical obstacles to legislation. At present, the main countries and regions of intellectual property rights have basically recognized the particularity of patent litigation procedure, especially the procedure of invalidation of patent right. It is difficult to classify it simply into civil or administrative proceedings. Even if some countries, such as Japan, stipulate the invalidation of patent rights in the Administrative Litigation Act, its specific provisions are still different from the special provisions of general administrative litigation. This will help us break through some of the limitations in our past thinking. Moreover, the above legislative proposals can also be traced back to China's Administrative Litigation Law and Civil Procedure Law. At present, the judicial power to modify administrative acts has been applied in administrative punishment with good effect. It is also legitimate to examine the basis of rights in civil proceedings, and the current practice is based on valid presumption.

2. Patent invalidation defense will not increase the burden on the court. First, the reason for introducing patent invalidation defense is not to evaluate whether the judicial or the administrative procedures have more reasons to conduct the review in specific cases, but to reduce the number of administrative patent invalidation disputes that become lawsuits and its overlapping with civil infringement procedures. In this way, patent protection system can be fundamentally improved and the "dual system" problem solved. Judging from the more mature legislative cases and supporting systems in foreign countries, the procedural guidance at different stages can reduce the number of administrative litigation and will not significantly increase the courts' trial burden. Second, there are 32 higher courts and 43 intermediate courts in China that have jurisdiction over patent infringement cases. With 75 institutions dealing with patent invalidation defense, compared with all the cases handled by an exclusive court, the burden relief is obvious. If these 75 institutions can carry out their work with the Intellectual Property Court of Supreme People's Court as the second instance court, their professionalism and law enforcement uniformity can also be greatly improved.

 

In conclusion, to optimize the litigation procedure of patent invalidation by revising Patent Law is necessary on the macro level and urgent at the realistic level. It can overcome the limitations of existing solutions and is feasible. In the specific system design, we also need recommendations and collaboration from IP practitioners to make our patent protection system better.

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