For an in-depth analysis of the IP disputes between the Sichuan Baijia Food Co., Ltd. and Baixiang Food Co., Ltd., we interviewed Mr. Zhao Jiaxiang, former director of SIPO’s Design Patent Reconsideration Section, as he reviews an examination by the Patent Reexamination Board (PRB) of SIPO regarding a typical invalidation case involving two design patents belonging to the Baijia Company, and comments on the conflict between the two similarly named companies.

Two design patents involved in the case:

Patent No. 200630027018.7, a “food packaging bag (3)” (hereinafter Patent 1) held by the Baijia Company. The patent was filed on February 7, 2006 and issued November 29, 2006. On November 20, 2007, the Baixiang Company filed a petition to invalidate the patent, and the Patent Reexamination Board examined the request and rendered a decision on June 24, 2008 invalidating all the claims. Patent No. 00333252.7 also a “food packaging bag” (hereinafter Patent 2), issued to Chen Zhaohui (president of the Baijia Company), was filed on October 16, 2000 and issued on May 2, 2001. On November 20, 2007, the Henan Zhenglong Food Co., Ltd. (hereinafter Baixiang Company) petitioned to invalidate the patent, and the PRB decided on June 24, 2008 that the patent was valid.

China IP: What’s your comment on Patent 1?

Zhao: This case involves two patents. Patent 1 has a reference which is Patent 2. Patent 1 has a filing date of February 7, 2006. The reference, Patent 2, has a publication date of May 2, 2001. In other words, Baijia filed a later application when the prior application was published, which, in my opinion, caused the problem. It was concluded that, “Based on the proceeding, the present patent is similar to the design that has been publicly disclosed in a domestic publication on the date prior to the filing date of application of the present patent, and is therefore not in conformity with Article 23 of the Patent Law.” That was the reasoning for the later-filed patent being invalidated.

China IP: For Baijia, is the earlier patent (Patent 2) more suitable for the litigation? 

Zhao: It depends on the courts. Actually, different courts will issue different judgments. This is because the Supreme Court has not promulgated any specific rule for an infringement determination of a design patent. Also, local courts fashion their own rules, and the outcome can be very unpredictable.

In my opinion, it not enough that an enterprise understands that the Patent Law provides protection when dealing with an IP problem, but also how best to protect its patent interest. Obtaining patents without a purpose is useless, and the two similar patents, in the case at bar, will of course result in invalidation.

China IP: Do you think the decision can be reversed in litigation?

Zhao: The PRB’s determination that these two packaging bags were similar will very likely be upheld if the case were to proceed to litigation, for it was made either in terms of procedure or evidence. The two bags were very much alike. If Baijia decides to continue with the PRB in court, they will find it difficult.

In my opinion, from the ground up, there were elements not favorable in the corporate IP strategy. If they believed that Baixiang mimicked their design patent, litigation should be based on their earliest patent, rather than the later. Additionally, Baijia also has a problem with the use of trademark. Patents and trademarks are within the scope of IP protection, and there is no room for error.

China IP: Will the defect in trademark affect the issued patent?

Zhao: Yes, it will. A few years back, there was a trademark infringement case. The AIC (Administration for Industry and Commerce) detected an infringing trademark on a certain brand of window air conditioners. They simply cut it with a welding unit, thus, disallowing infringement. However, it inevitably destroyed the entire unit. So I think this kind of penalty is fairer.

This is a partial trademark infringement. So what about partial patent infringement? Let’s look at the Baijia and Baixiang case. If Baixiang sues Baijia over the packaging bag’s patent with its prior right, the PRB will consult with the Trademark Office, or defer to the decision of the court. If the court rules that Baijia’s patent is subject to the Baixiang trademark, the PRB will possibly defer to the court’s decision, and invalidate Baijia’s patent. Article 23 of the Patent Law bars any patent that conflicts with the prior right of other people. The packaging bag patent case is different from that of the case involving the air conditioner. We must consider the severe impact of the total invalidation of a patent right on the company. Thus, a possible solution is created:

The examiner asks the contending parties the following question: “Since your conflict lies primarily over trademarks, are you willing to accept this: remove the allegedly infringing trademark from the design drawing, so as to eliminate the conflict?” Of course this solution is based on the consent of the parties. If the patentee refuses because he did not believe he was infringing, or if the opposition objects because he means to invalidate the patent, there will be no settlement. Seldom, we have such “remove” cases.

After the 2000 Patent Law amendment, no modification of patent documents or drawings would be allowed. It is my personal view that, “remove” is the best and most practical means for enterprises.

Consequently, Baijia is in for a big headache if its trademark is found to be infringing.

China IP: Will Patent 1 still be invalidated according to the new Patent Law?

Zhao: The Patent Law, as amended, has a new rule for similar designs. For two or more similar product designs in the same classification, the Law permits them to be filed on the same day by a single applicant for patent protection, so that they will not invalidate each other as prior art. Once again, it is important to stress it: they must be filed on the same day by a single applicant. In the present case, the two patents were not filed on the same day, and the earlier published patent constituted prior art for the later. Therefore, I don’t think Baijia can get away from the similar design rules.

China IP: Can you explain again the examination decision of Patent 2? 

Zhao: Decision is to uphold the patent. The Petitioner has raised the argument for the invalidation request that the design involves two Chinese characters “白家” (Bai Jia) that are quite similar to Baixiang’s earlier filed trademark “白象” (Bai Xiang) with regard to the font and shape. The trademark “白象” has already been known to the public. In Patent 2, the two Chinese characters are put in a most conspicuous place, and is prone to mislead consumers. Therefore, Patent 2 has infringed on Baixiang’s prior right in violation of Article 23 of the Patent Law.

For this patent, Baixiang Company found the basis on trademark infringement. The primary evidence used were the duplicated papers of civil judgment (1998) Mi-Jin-Chu-Zi No. 429-2 and the economic judgment (1998) Mi-Jin-Chu-Zi No. 439-1 by the Xinmi People’s Court of Henan Province on December 20, 2007. The background of the evidence was that the Xinxiang Branch of Beijing Yatai Food Company, by illicit competition, imitated the plaintiff’s design of the packing box and the packaging bag of the “Baixiang” spicy hot instant beef noodle. The collegiate bench considered the evidence, and determined that although the two judgments involved the trademark “Baixiang”, they were not directly related to the packaging bag in this case. Later, the Baixiang Company submitted a copy of the civil judgment (2008) Zheng-Min-San-Chu-Zi No. 46 by the Zhengzhou Intermediate People’s Court as new evidence, but was rejected because of the failure to toll the statute of limitations.

The PRB might have considered the evidence from the Zhengzhou court decision had it not been for the statute of limitations.
 
China IP: What can enterprises learn from this case while preparing their IP protection strategies?

Zhao: Take Baijia as an example. They should have first consulted a professional on the use of trademark, and checked for defects in the right to avert conflicts with the prior rights of others. I think Baijia failed on this point.

Although Baijia contended that Baixiang’s packaging bag was a copy of its product, it should have first verified the validity of its own patents before litigating the trademark issues.

Consequently, it is very important to get professional help in IP protection to ensure the use of all patents. Too many junk patents will hurt more than help.

Although Baijia used intellectual property rights to protect itself, the result is not altogether satisfactory, I think.

China IP: What is your opinion about Baixiang’s IP protection strategy?

Zhao: We should say that Baixiang employed a well planned legal arsenal to protect its own rights and grabbed the upper hand in the case. However we must also admit that in an earlier time, the packaging bag of Baixiang did look similar to Baijia’s. The lawsuit consumed massive amounts of time, money, and energy from both parties. I think neither side won.

To avoid such all encompassing lawsuits in the future, I think enterprises should have a correct and comprehensive understanding of IPR. Each enterprise creates and manufactures products that should not interfere with those belonging to others. The conflict between Baijia and Baixiang “takes advantage of each other”: you use my trademark, and I use your design. I believe that this is not a good way. It is important that enterprises use their own products to supply the market, and maintain their legitimate rights and interests.

(Translated by Hu Xiaoying)