China’s Supreme People’s Court on August 19, 2021 overturned a lower court ruling in favor of Shenzhen Saiyuan Electronics Co., Ltd. (深圳市赛源电子有限公司) in a patent infringement lawsuit filed by it against Dongguan Loyfun Industrial Co., Ltd. (东莞乐放实业有限公司) and Guangzhou Jingdong Trading Co., Ltd. (广州晶东贸易有限公司). The top court found the accused infringer Loyfun entitled to the prior user rights defense when it produced clear and convincing evidence to prove that its implementation of the allegedly infringed patent was “within the original scope”.
In 1999, US Congress passed the so-called “prior user rights defense,” codified as 35 U.S.C. § 273. President Obama signed into law the American Invents Act (AIA) on September 16, 2011. This has been touted as the most substantial overhaul of U.S. patent law in generations. In an apparent effort to enhance protection available for non-patented inventions and trade secrets, the AIA expanded the prior user rights defense. Generally, the “new” prior user rights defense is a defense to infringement based on one’s prior use of the claimed invention before the patent holder filed for patent protection.
This case is typical for its exemplary identification of the standard to prove “original scope”, which verifies that if the alleged infringer has made every effort to prove his prior use is within the reasonable “original scope” that can be preliminary testified, unless it’s disproved by the patent owner with sufficient evidence, his prior use defense gains affirmation, providing reference and guideline to other similar cases.
Plaintiff Saiyuan filed a lawsuit with the Guangzhou Intellectual Property Court against Loyfun in 2020 for infringing its sound bars patent ZL201920113995.0. Saiyuan filed an application for the patent on January 23, 2019, which was granted on August 23, 2019. Another company Jingdong was listed as the second defendant for selling allegedly infringing products.
However, Loyfun denied the infringement with prior use defense, claiming that its production of the allegedly infringing products is legitimate, for it has used relevant patented technology since 2018, much earlier than the grant date of the allegedly infringed patent, and the subsequent manufacture fell within the original scope. Defendant Jingdong has claimed fair use defense to exempt from liability and evidence was submitted to prove that the infringing products were directly purchased from another company.
The trial court found for the plaintiff and disapproved Loyfun’s prior user rights defense for lacking of sufficient evidence——the authenticity of evidence submitted by Loyfun was questioned. Consequently, Loyfun was ordered to pay Saiyuan 50,000 yuan in damages and reasonable costs for maintaining rights. Another defendant Jingdong’s fair use defense was approved but was still ordered to pay 10,000 yuan in reasonable costs.
Later, Loyfun appealed to a higher court.
At trial, Loyfun submitted another four pieces of evidence, including the mold of the disputed sound bars and its Wechat and QQ record with a mold factory about the molding, etc.
The appellate court overturned the lower court decision holding that according to the newly-submitted evidence, Loyfun had already made sufficient preparations for manufacture, and its unaltered scale and range of production could adequately prove that Loyfun’s production scale had remained within the original scope and never went beyond it. Therefore, the court sustained the establishment of Loyfun’s prior user rights defense.
The case docket no. is （2021）最高法知民终508号, whose English transliteration is 508, second instance (终), intellectual property (知), (2021) Supreme People’s Court （2021）最高法).