Uniwisdom & Shanghai Environmental Engineering Design and Research Institute v. Jiangsu Yonggang Group

China IP,[Patent]

 

Docket number of the case in the first instance: 00167, first instance (初), civil case (民), (2015) IP Court of Suzhou Intermediate People’s Court (苏中知)
Docket number of the case in the second instance: 863, second instance (终), civil case (民), (2018) Jiangsu High People's Court (苏)
 
[Prefatory Syllabus]
Regarding intentional tort for which the law doesn't provide for punitive damages when the patent infringement occurs, in the application of statutory damages, the amount of compensation can be determined according to the degree of subjective malice of the infringing party and the severity of infringement circumstances after considering the punitive factors.
 
[Basic Facts]
Appellant (Plaintiff in the case in the first instance): Jiangsu Uniwisdom Resources and Environment Technology Co. Ltd. (Hereinafter: Uniwisdom)
Appellant (Defendant in the case in the first instance): Shanghai Environmental Engineering Design and Research Institute Co., Ltd. (Hereinafter: Shanghai Environmental Engineering Design and Research Institute)
Appellee (Defendant in the case in the first instance): Jiangsu Yonggang Group Co. Ltd. (Hereinafter: Jiangsu Yonggang Group), Zhangjiagang Liantai Technology Co., Ltd. (Hereinafter: Zhangjiagang Liantai)
 
Uniwisdom has the exclusive right to own and implement the invention patent named “desulfurization process of fume or exhaust gas through external regeneration and circulation of magnesium sulfite” involved in the case. On January 15, 2012, to expand business, Uniwisdom signed a strategic cooperation agreement with Shanghai Environmental Engineering Design and Research Institute. Both sides agreed that, with the permission of Uniwisdom, Shanghai Environmental Engineering Design and Research Institute may undertake projects using the patent involved. The term of this Agreement was until January 14, 2015. In June 2012, Uniwisdom and Shanghai Environmental Engineering Design and Research Institute signed corresponding technical agreements with Delong Steel. In July 2012, Shanghai Environmental Engineering Design and Research Institute signed a General Contracting Project Business Contract on the 132㎡ sintering machine flue gas desulfurization system project for Delong Steel. Both sides agreed that, Shanghai Environmental Engineering Design and Research Institute could use the “magnesium sulfite clear liquid method” of Uniwisdom.
 
In November 2014, Shanghai Environmental Engineering Design and Research Institute respectively signed an agreement with Jiangsu Yonggang Group and its affiliate Zhangjiagang Liantai, agreeing that Shanghai Environmental Engineering Design and Research Institute shall supply, install and provide technical support for desulfurization equipment for the latter. On May 15, 2015, Uniwisdom sent a letter of notice to Jiangsu Yonggang Group regarding the above behavior of Shanghai Environmental Engineering Design and Research Institute.
 
Holding that Shanghai Environmental Engineering Design and Research Institute entered into a contract on the implementation of the patent technology involved with Zhangjiagang Liantai and Jiangsu Yonggang Group it affiliates to, which infringed on its invention patent right, Uniwisdom filed a lawsuit with the court, requesting Shanghai Environmental Engineering Design and Research Institute and Zhangjiagang Liantai to stop infringing on the patent rights involved, dismantle equipment, and pay a compensation for its economic loss of RMB 2.7 million and reasonable expenses for rights protection of RMB 125,800.
 
The Intermediate People's Court of Suzhou, Jiangsu Province ruled in first instance that, the desulfurization method used by Zhangjiagang Liantai fell within the protection scope of Uniwisdom’s claims for the patent involved. Although there is a precedent of cooperation between Uniwisdom and Shanghai Environmental Engineering Design and Research Institute in the desulfurization system project contracted by Delong Steel, it does not mean that Shanghai Environmental Engineering Design and Research Institute has obtained the license of course from the patentee on the implementation of the patent involved in the alleged infringing project. The Shanghai Environmental Engineering Design and Research Institute defended, the desulfurization process it provided to Jiangsu Yonggang Group and Zhangjiagang Liantai is based on open technology and its improvement. But no evidence was provided to support this. Shanghai Environmental Engineering Design and Research Institute, as the supplier of the desulfurization technology and device for the alleged infringing project, shall bear the civil liability of stopping infringement and compensating for loss. Uniwisdom provided no evidence to prove that Jiangsu Yonggang Group and Zhangjiagang Liantai was aware that the technology provided by Shanghai Environmental Engineering Design and Research Institute was suspected of patent infringement during the signing of relevant contracts, agreements and subsequent construction. Since Jiangsu Yonggang Group and Zhangjiagang Liantai clarified the legal source of their desulfurization methods, was not aware of the suspected infringement and offered a high consideration, Uniwisdom has no basis for its claim.
 
Regarding the amount of compensation to be borne by Shanghai Environmental Engineering Design and Research Institute, the court held that, in the case that the loss incurred to Uniwisdom by infringement and the profit made by Shanghai Environmental Engineering Design and Research Institute from the infringing patent are difficult to directly calculate, the amount of compensation to be paid by Shanghai Environmental Engineering Design and Research Institute shall be determined according to law after considering the type of the patent involved, infringement circumstances, contract price involved and other factors. To be specific, the patent involved is a method invention patent often used for supporting environmental protection facilities of major chemical projects. The contract and agreement of the infringing project included two parts: desulfurization equipment supply and corresponding technical support. The total contract price is RMB 10.35 million, of which Zhangjiagang Liantai has actually paid RMB 6,205,000. Meanwhile, given that, in the context of multiple cooperation between Shanghai Environmental Engineering Design and Research Institute and Uniwisdom, Shanghai Environmental Engineering Design and Research Institute privately signed an agreement with Jiangsu Yonggang Group and Zhangjiagang Liantai concerning the implementation of the patent involved in the desulfurization project, and Shanghai Environmental Engineering Design and Research Institute also mentioned the infringement issues in the emails, Shanghai Environmental Engineering Design and Research Institute has a clear intention to infringe. Moreover, when the court conducted on-site inspection, the desulfurization device involved was out of operation, with relevant interfaces closed, and as a result it lacked conditions for direct comparison of some technical features. However, Shanghai Environmental Engineering Design and Research Institute refused to provide technical information it had about the desulfurization device involved. To sum up, there are good grounds to believe that Shanghai Environmental Engineering Design and Research Institute made high profits from the infringement and committed serious intentional infringement. Therefore, Shanghai Environmental Engineering Design and Research Institute shall pay an economic compensation no less than the maximum statutory damages of RMB 1 million according to law. In addition, the legal fees of RMB 125,800 paid by Uniwisdom in the first instance relating to infringement matters involved have been verified. In view of the nature, difficulty, agency workload and other factors of this case, these expenses shall also be borne by Shanghai Environmental Engineering Design and Research Institute. Based on the above grounds, the court ruled in the first instance: Shanghai Environmental Engineering Design and Research Institute shall immediately stop its infringement upon Uniwisdom's invention patent, and compensate Uniwisdom for its economic loss of RMB 1 million and reasonable expenses for rights protection of RMB 125,800.
 
Uniwisdom and Shanghai Environmental Engineering Design and Research Institute refused to accept the verdict of first instance, and appealed to the High People's Court of Jiangsu Province. The High People's Court of Jiangsu Province ruled in the second instance to: Dismiss the appeal and uphold the original judgement.
 
[Typical Significance]
This case involves the infringement upon the production process patent used for supporting environmental protection facilities of major chemical projects. When the tort is committed, the original Patent Law doesn’t provide for punitive damages. When determining the amount of statutory damages, the court increased the amount of compensation for patent infringement, determined the amount of compensation according to the maximum statutory damages of RMB 1 million stipulated in the Patent Law at that time and fully supported the plaintiff's claim for legal fees of more than RMB 120,000, in consideration of the facts that the infringing party signed a contract with others without authorization, implemented the patented technology involved during its cooperation with the obligee, interfered with the provision of evidence and committed serious subjective malice and infringement as well as related punitive factors.
 
In the judgment of this case, punitive damages apply, and serious intentional torts are severely cracked down on, fully reflecting the value orientation of strengthening protection of patent technology with a high degree of scientific and technological innovation and the strictest protection of intellectual property rights.
 
This case was selected as one of the “Top10 Typical Judicial Protection Cases of Intellectual Property Rights Tried by Jiangsu Courts in 2020".

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