Necessity and Feasibility of Optimizing Patent Invalidation Procedure (I)

SPC IP Court Judge Cui Ning: Necessity and Feasibility of Optimizing Patent Invalidation Procedure (I)

The necessity of optimizing the litigation procedure of patent right invalidation

Today 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.

I. On the basis of national condition and global vision

What kind of situation are we facing? Domestically, innovation has been a more powerful driving force for China’s economic and social development, thus raising requirements on its protection; globally, many countries are trying to simplify their litigation procedures to improve “legal attraction”, which has become a common topic in international discussion nowadays. Lately I’ve just 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 civil 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 an 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. 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 United States after 2012 reflect the strengthening of the administrative procedures for invalidation review. We should first notice that the United States 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, America is aware that if there are problems like untimely rulings, too-long trials, and unclear rights in the administrative or judicial procedures, the development of new technologies will be hindered. Even America who has advanced patent system is seeking for improvement. This is what we should learn from them. Besides, America’s changes are also 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 ours, so we cannot conclude from America’s past changes that we should intensify our administrative procedures.

The European Unified Patent Court in preparation has very flexible jurisdiction on invalidation cases. But one thing is clear that if the infringement case occurs first, the invalidation case corresponding to the it must be accepted first by the court accepting 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 countries in the world are seeking for improvements and changes against the backdrop of global innovative competition. It’s surely right for us to base our changes on national situations. But what are the national situations? Domestically, it is to promote innovation, and globally, it is to create good business environment. To do this, we need better patent protection system, especially better litigation procedures for patent invalidation. This is why it’s necessary for us to optimize the patent invalidation procedure.

II. 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. The reasons are the problems we found in the system’s operation, which I’ve also experienced myself and concluded as the following four:

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 to test the validity and ownership of the rights of the right holder who initiates an infringement lawsuit. 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, and in other words, more than 85% of administrative decisions are correct. However, is this 15% really low? For those 15% of the right holders, the probability of them being affected is 100%. Of course, 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 the 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 the inventiveness 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, makes revocation and orders it to rework, this 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 our 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 the four years. That is to say, as a general court for patent cases, Beijing Intellectual Property Court has more than enough capability. Can we draw a conclusion from this that one of the main reasons for the vicious circle is the more than two-thirds of the administrative cases? Since it’s the parties’ civil rights to initiate civil cases, and the number is hard to control, 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 and 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.