Patent Infringement Finding without Physical Samples

Patent Infringement Finding without Physical Samples – A New Approach on Patent Enforcement Involving Methods Applied in Industrial Equipment – Note on Siemens v. Inovance

The difficulties in evidence production have been a big challenge for right holders in enforcing patent in China, in particular for patents involving industrial equipment. Industrial equipment is characterized by its complexity, significant weight, huge volume, high cost and being sold through limited sales channel, therefore it is extremely difficult for a right holder of a patent involving such industrial equipment to manage to purchase a physical sample and further present the sample to the court. If the patent further claims a method implemented inside the equipment, the difficulties in evidence production for the patent right holder will be even increased.

A recent patent infringement case we handled for Siemens was the very case, in which a method patent used in large industrial equipment was involved. In this case, as it was very difficult to acquire a physical sample of the accused product, the plaintiff requested the court to conduct technical comparison based on written evidence which was published by the defendant on its own for introducing the accused product. Suzhou Intermediate People’s Court and the Supreme People’s Court ("the SPC") finally supported the allegations of the plaintiff and fully awarded the plaintiff’s damages claim. This case provides a new approach on evidence production for patent infringement cases, which may be a valuable reference in particular for a patent involving an industrial equipment, of which the physical sample may be too large to be submitted to the court. This case also shows the determinations of the Chinese courts in solving difficulties in evidence production for intellectual property right holders.

Siemens AG (Germany) (i.e. the plaintiff in this case), the client of our team, is a technology company focused on industry, infrastructure, transport, and healthcare. In its own AC drive products, Siemens makes use of the innovative technology called "neutral point shifting", which was protected by Siemens patents in many countries, including the patent asserted by the plaintiff in this case ("patent at issue"). This technology is applicable for a multiple-phase power supply in which a plurality of power cells are connected in series in each leg. When a cell fails, the technology of "neutral point shifting" may make a full use of the output capacity of each unfailed cells to maximize the line-to-line voltages of the power supply.

The defendant Suzhou Inovance Technology Co., Ltd. ("Inovance") was founded in 2008 and is one of the large domestic AC drive providers. In late 2017, the plaintiff found that the defendant promoted in articles of its official website and its product brochure that the accused medium-voltage drives adopted the neutral point shift technology (the defendant called it as "asymmetric bypass technology"), and emphasized corresponding technical advantages. The articles also used a figure which is totally the same as Figure 5a in the patent at issue to describe its "asymmetric bypass technology". The plaintiff therefore believed the "asymmetric bypass technology" was very likely to fall into the scope of the patent at issue. After the attempt of negotiation failed, Siemens filed a lawsuit to Suzhou Intermediate People's Court in March 2019.

The medium-voltage drives involved in this case is a typical industrial product, which is often used in high-end applications in industries such as iron and steel, electrical, coal mining and petrochemical. Such variable speed drives have a high price (from some hundred thousand to one million CNY per product), and are sold to specific customers. Thus, unlike low-voltage drives, they are not sold in large quantities, making it extremely difficult for the plaintiff to acquire a physical product and present it to the court as evidence. The plaintiff could only collect written evidence from public channels, including the product brochure of the accused product, the articles published by the defendant on its official website and journals, to prove that the accused product is of high likelihood to fall into the protection scope of the patent at issue, through the defendant's own descriptions on the accused product. Accordingly, in the absence of physical product, whether the infringement can be determined solely on the basis of written evidence became one of the main issues in this case.

In this case, the defendant argued that the articles and product brochure submitted by the plaintiff were only for the defendant's commercial promotions, which could not reflect the true or complete technical solution actually adopted by the accused product, and therefore they could not be used as the basis for infringement comparison. The first-instance court Suzhou Intermediate People’s Court held that the current law does not explicitly requires that the infringement comparison must be made on the basis of a physical sample of the accused product. Even without a physical product, as long as the existing evidence materials can objectively and truly reflect the method actually adopted by the accused product, they can be used for the determination of infringement. The defendant's descriptions on the accused product and its technical solution, which were published on its official website and public media, shall be presumed to truly reflect the specific technical solution adopted in relevant products. Accordingly, Suzhou Court conducted the technical comparison between the accused product and the claims asserted by the plaintiff based on the product brochure and the online articles published by the defendant. In particular, as the defendant used a figure which was completely the same with Figure 5a of the patent at issue in describing the technical solution adopted in the accused product, Suzhou Court concluded that the accused product fell within the protection scope of the patent at issue, and fully supported the claimed damages of the plaintiff. Inovance appealed the first-instance judgment. The IP Court of the SPC issued a final judgment[1] in the end of 2021, rejecting Inovance’s appeals and upholding the first-instance judgment.

In a typical patent infringement civil case, as the plaintiff, the right holder needs to submit a physical sample of the accused product to the court, so as to present to the court that the technical solution adopted by the accused product have all technical features corresponding to those defined in the patent claims asserted by the plaintiff. In the judicial practice in China, the most typical way of acquiring a physical sample of the accused product is notarized purchase, which may be used as evidence before the court. In the circumstances where it is difficult to acquire a physical sample, there may be some alternatives for preserving the evidence relevant to physical samples. The first alternative is taking photos or recording videos of the accused product through a notarization. For example, in LI Zhaoju v. Shandong Shangyi Machinery Co., Ltd[2]. involving a dispute on utility model patent infringement, the court made technical comparisons and concluded the infringement based on the photos and videos of the accused plate collection machine taken by the plaintiff at the defendant’s factory through the App called "Notarization Cloud" [3]. The second alternative is that the plaintiff may petition the court to conduct evidence preservation or on-site inspection if the plaintiff may collect relatively accurate information such as the location of a physical sample of the accused product. For example, in Guangdong Yueshan New Material Technology Co., Ltd. v. Foshan Lianxin High & New Material Inc[4].  involving a dispute on invention patent infringement, upon the petition of the plaintiff, the first-instance court presided an on-site inspection of the accused production devices at the defendant’s factory, based on which the court made technical comparison and found the infringement. In practice, some patent right holders also tried collecting evidence through administrative enforcement actions.

In this case, the SPC further directly pointed out that the evidence relevant to physical product is not necessarily a must for patent infringement case: inspection of physical product or equipment is only one of the effective methods for identifying the technical facts of the accused solution and for conducting infringement comparison, which implies that the comparison based on physical product is not the sole method for infringement determination. Even without a physical product, as long as the existing evidence materials can objectively and truly reflect the method actually adopted by the accused product, they can be used for the determination of infringement. Unless overturned by sufficient rebuttal evidence, the contents published by the accused infringer in written materials including its product brochure and official website may be used as a basis for technical comparison.

With respect to the damages, the plaintiff reasonably inferred the infringement profit of the defendant from the number of the products having the accused infringing function, which was as promoted by the defendant in an online article published in its official website. As the defendant only made negative defenses without submitting any financial evidence, the first-instance court fully supported the claimed damages of the plaintiff based on the philosophy of the strictest judicial protection for intellectual property. The SPC upheld the damages awarded by the first-instance court after denying the defenses raised by the defendant.

The conclusion of infringement and the awarded damages in this case both reflect the long-term pursuing philosophy of the Chinese courts in solving the difficulties in evidence production for IP right holders. China has been making significant and effective efforts for solving the afore-stated problem for IP right holders for years. The financial evidence submission order rule improved from Article 27 of Interpretation (II) of the SPC on Several Issues concerning the Application of Law in the Trial of Patent Infringement Dispute Cases promulgated in 2016 to Article 71.4 of the Patent Law amended in 2020, and the evidence submission order rule provided in Several Provisions of the SPC on Evidence in Civil Procedures Involving IP Rights promulgated in 2020 and improved from the written evidence submission order rule introduced in Interpretation of the SPC on the Application of the Civil Procedure Law promulgated in 2015, both reflect the efforts of China in designing appropriate evidence production rules and systems from the legislative aspects, for mitigating the evidence production burden of IP right holders. In the judicial practice, the Chinese courts also apply the evidence rules more and more actively and flexibly, making inference more favorable to IP right holders.

The above infringement case handled by us was actually also a reflection of the flexible application of evidence rule by the court as it did not insist that the technical comparison should be conducted based on the inspection of a physical sample of the accused product. During the proceeding in this case, the first-instance court inquired the defendant several times whether it could submit relevant evidence with respect to the technical solution adopted in the accused product, but the defendant only adopted a strategy of negative defenses without submitting any evidence. Such a strategy was also a reason forcing the court to find the facts merely based on the evidence submitted by the plaintiff according to the preponderance of evidence standard.

Another significance of this case is that the SPC explicitly applied the "irreplaceable substantive role" rule for a patented method implemented in an industrial equipment, which was established in the invention patent infringement case involving routers[5]  ("Router case"). In Router case, the defendant is the producer of the accused infringing routers, while the patent asserted is a method implemented in the accused product. Thus, the implementer of the accused infringing method was actually the end user (i.e. normally a consumer) of the accused router, whose implementation of the accused method would not constitute the infringing act in the sense of the Patent Law because a consumer does not have the "purpose of production and business". In order to balance the interests between the accused infringer and the patentee and to realize the legislative purpose of the Patent Law in stimulating innovations, the SPC established the "irreplaceable substantive role" rule for finding the producer as constituting infringement. According to this rule, provided that the accused infringer, for the purpose of production and business, solidifies the substantial content of the patented method in the accused product, and such solidification or its result plays an irreplaceable substantial role in reproducing all elements of the patent claims so that an end user may naturally reproduce the patented method or process when normally using the accused product, the accused infringer shall be held as having implemented the patented method and constituting the infringement upon the patent.

The technical solution protected by the patent at issue in this case was a method that would be implemented when a cell in a leg of the multi-phase power supply failed. Therefore, the actual implementer of the accused method was the end user of the accused product, i.e. the companies in the industries such as iron and steel, electrical, coal mining and petrochemical as mentioned above. These end users undoubtedly had the "purpose of production and business" as provided in the Patent Law and their conducts of using the accused product would constitute the infringement in the sense of the Patent Law. The defendant alleged so during the litigation, that is, the defendant was only the producer, while it was the end users rather than the defendant that implemented that patented method which is an infringing act prohibited by the Patent Law. The SPC held that the defendant solidified the substantial content of the patented method into the accused product and its solidification or result of such solidification played an irreparable substantial role in reproducing all elements in the patent claims, and therefore the defendant should be held constituting infringement. The afore-mentioned opinion of the SPC indicates that the "irreplaceable substantive role" rule established in the Router case can be also applied for a method patent implemented in industrial equipment. This is particularly favorable to a patentee of a method patent relating to industrial equipment and will facilitate the enforcement against the origin of infringement upon a method patent used in an industrial equipment.

In summary, this case provides a new approach on patent enforcement, in particular for the patentee of a patent involving a method used in industrial equipment. The patentee may rely on the "irreplaceable substantive role" rule to request the manufacturer of the equipment to assume infringement liabilities to prevent infringement from the origin and to obtain sufficient compensation. Meanwhile, the patentee would not have to enforce the patent against a number of end users respectively which is time consuming and costly, or become worried about offending these potential customers. This case also provides a guideline for a new approach on evidence production for the right holder of a patent involving large industrial equipment. That is, when it is not available to acquire a physical sample of the accused product, the patentee may first try its best to collect written evidence to prove that the accused product has a high likelihood of infringement, and then request the court to make an inference against the accused infringer based on the rules of shift of the proof burden. For the accused infringer, it should adopt a more positive strategy on evidence production, instead of persisting in the outdated prejudice that the plaintiff shall assume all burden of proof, when the plaintiff has proven the high likelihood of infringement.