Multinational Companies Should Monitor Patent Litigation in Chinese Courts

Navigating the Landscape of Patent Infringement Litigation in China: Opportunities and Challenges for Foreign Enterprises

In the global business landscape, China’s market continues to present substantial opportunities for foreign enterprises, particularly those from the United States. However, the evolving landscape of patent infringement litigation in Chinese courts necessitates a keen understanding and strategic approach from companies entering this marketplace.

The Chinese market’s vibrancy extends beyond trade to legal activity, with a significant increase in patent cases in recent years. Foreign entities have consistently made their presence felt in these proceedings. For instance, China’s Intellectual Property Tribunal of the Supreme Court has reported that foreign-related cases made up over 10% of its total caseload in 2020, 2021, and 2022, with an impressive annual growth rate of 45.6%. Of these, a substantial 57.4% pertained to patent infringement disputes, underscoring the importance for foreign businesses to familiarize themselves with the realm of patent litigation when entering the Chinese market.

While challenges and uncertainties may exist in China’s rapidly evolving patent litigation landscape, several reasons make Chinese proceedings an attractive option for resolving global patent disputes.

Firstly, in China, cessation of infringement is considered a cornerstone of patent rights, leading to a tendency for courts to readily grant injunctions upon a right holder’s request in cases of proven infringement. The comparative ease in obtaining an injunction in China provides a compelling reason for right holders to consider litigation within the country. The Supreme Court has clarified that only “national interests and public interests” can justify denying an injunction, providing clarity and appeal for global businesses.

Secondly, recent legislative changes signal a shift towards bolstering intellectual property rights in China. The 2020 amendment to Chinese patent law increased statutory damages’ minimum from 10,000 yuan ($1,369) to 30,000 yuan and the maximum from 1 million yuan to 5 million yuan. The amendment also introduced “punitive damages,” reaching up to five times the calculated damages. This proactive stance is evident in court outcomes, with Beijing courts averaging damage awards of 2.86 million yuan in technical-related cases in 2022.

Furthermore, Chinese courts hold strategic importance for multinational corporations for two key reasons. Firstly, the size of the Chinese market makes it indispensable for most industries, requiring effective use of China’s judicial resources to protect commercial interests. Secondly, engaging in litigation in Chinese courts can align well with litigation in other major jurisdictions, globally facilitating the resolution of disputes.

Through coordinated management with procedures in other major jurisdictions such as the US and Europe, Chinese proceedings may offer distinct and unique advantages and benefits. These include obtaining valuable information through court litigation proceeding and invalidity proceedings before CNIPA to bolster parallel patent litigations in other jurisdictions and build synergy in strategic planning.

Moreover, the generally expeditious nature of parallel Chinese proceedings can secure swift favorable outcomes, which may serve as negotiation leverage for global dispute resolution. For global businesses, adapting to and engaging with China’s patent litigation system is no longer optional—it’s a vital component of sustainable success in the region.

In conclusion, while the Chinese market presents substantial opportunities for foreign enterprises, it also necessitates a keen understanding and strategic approach to navigate the evolving landscape of patent infringement litigation. By leveraging the unique advantages offered by Chinese proceedings, foreign businesses can effectively protect their commercial interests and secure sustainable success in the region.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information: Ruixue Ran is managing partner of Covington’s Beijing office and a member of the firm’s patent litigation practice. Justin Wang and Xiaoliang Chen are advisers at Covington & Burling and admitted to the Chinese bar.

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