Summary

Retailers are neither competent nor obligated to conduct patent searches on products they market. If they lack the subjective knowledge that the goods being sold are infringing products, and they were purchased through acceptable customary channels, their conduct should not constitute patent infringement.

Whether an accused product infringes a patent should be judged by the scope of the patent claims, with an element-by-element analysis in light of product design, function, effect, method or structure, for identical features, to determine whether and how the accused product involves infringement.
 
Case analysis

Civil Judgment of the Yichang Intermediate People’s Court Yichang, Hubei, No. 00007 YiZhongMinSanChuZi (2007).

Facts

Plaintiff: Jinpeng Industrial Co., Ltd. of Guangzhou

Defendant: Ma Yi’an, owner of Wangsen Yihe Decorative Building Materials Store, Xiling District, Yichang City

Plaintiff owns a patent, No. ZL 97116088.0 for a “Self-connecting Light Steel Keel,” issued by the State Intellectual Property Office (SIPO) on October 30, which makes claims on four elements: 1. a self-connecting light steel keel comprising a main keel, a false keel and a suspender; 2. where, the cross section of the joint connection end of the main keel is leading-angle-shaped; 3. the end faces of the two side of the joint connection end of the main keel are installed with clip hooks that bulges outwards and are inclined stressed unilaterally and; 4. the two sides of the other end of the main keel each have clips holes that closely match the clip hooks.

On March 25, 2005, the defendant began to retail the self-connecting light steel keels in his decorative building materials store that he purchased on the market. They were neither produced nor licensed by the patentee, and contained the above technical features in the claims of the patent. On January 9, 2007, having applied for notarization, the plaintiff bought from the defendant two clip-type main keels, two false keels and one suspender, which cost the plaintiff 26.70 Yuan. For this, the Notarization Office of Yichang issued the notarized deed (2007) Yi Zheng Zi No. 68. The main keel products contained structural features that were basically equivalent to the first three features in the claims of the patent. In addition, it was found, that the annual charge for exclusive exploitation of the patent of the plaintiff was 350,000 Yuan.

The plaintiff contended that it had incurred huge financial losses due to the defendant’s sales and exploitation of the patented product. On February 2, 2007, it brought an action, requesting that the people’s court order the defendant to stop the infringement, destroy the infringing goods, pay damages for infringement in the amount of 60,000 Yuan, bear the notarization charge, travel expenses and other relevant expenses of the plaintiff in an amount of 1,500 Yuan, and bear the cost of the action.

The defendant argued that his acts did not constitute infringement because he was not the manufacturer of the goods sold, all products being sold included production inspection reports and qualification certificates, and he was unaware that the plaintiff held a patent.

After the trial, the Yichang Intermediate People’s Court held:

1. Article 11 of the Patent Law provides that after the grant of the patent right for an invention or utility model, except as otherwise provided in the law, no entity or individual may, without the authorization of the patentee, exploit the patent, that is, make, use, offer to sell, sell or import the patented product; or use the patented process or use, offer to sell, sell or import the product directly obtained by the patented process, for production or business purposes. After the grant of the patent right for a design, no entity or individual may, without the authorization of the patentee, exploit the design, that is, make, sell or import the product incorporating its or his patented design, for production or business purposes. The invention patent, numbered ZL97116088.0, which the plaintiff obtained legally for the self-connecting light steel keel in October 2002, shall be protected.

2. Article 56 of the Patent Law provides that the extent of protection of the patent right for invention or utility model shall be determined by the terms of the claims, and the specification and appended drawings may be used to interpret the claims. The comparison between the good being sold by the defendant and the claims of the patent of the plaintiff shows that: In terms of structural feature of the main keel, Features 1 and 2 of the good being sold are equivalent to Claims 1 and 2 of the patent; and although the square hole in Feature 3 of the good being sold is a structure under the clip hole in Claim 3 of the patent, it is intended to clip with the corresponding clip hooks of another keel when two keels are being connected, as the clip hole in Claim 3 of the patent is, and therefore, is equivalent with the clip hole in Claim 3 of the patent. The main keel structure of the good being sold employs the methods, realizes the functions and achieves the effects, which are basically equivalent to those in the claims of the patent under protection. These structural technical features can be realized by a common person skilled in the art without creative work. Therefore, the good being sold has infringed the patent by means of equivalent infringement. This court supports the plaintiff’s contention that the good being sold by the defendant infringed on the patent right of the plaintiff.

3. Article 118 of the General Principles of the Civil Law of the People’s Republic of  China provides that if the rights of authorship (copyrights), patent rights, rights to exclusive use of trademarks, rights of discovery, rights of invention or rights for scientific and technological research achievements of citizens or legal persons are infringed upon by such means as plagiarism, alteration or imitation, they shall have the right to demand that the infringement be stopped, its ill effects be eliminated and the damages be compensated.

4. The amount of loss suffered by the plaintiff or the profit gained by the defendant, as a result of this infringement, cannot be found out. Article 60 of the Patent Law provides that the amount of damages for infringing a patent right shall be calculated according to the losses suffered by the patentee or the profits gained by the infringer out of the infringement. If it is too difficult to determine the damages based on such losses of the patentee or the profits of the infringer, the appropriate times of the royalties for licenses for the said patent may be applied mutatis mutandis. This court employs this rated-compensation method and determines the amount of damages to be 35,000 Yuan. Therefore, this court decides that Ma Yi’an shall stop selling any self-connecting light steel keel products equivalent or similar to the invention patent numbered ZL97116088.0; and Ma Yi’an shall compensate Guangzhou Jinpeng Industrial Co., Ltd. in an amount of 35,000 Yuan.

Legal analysis

To correctly adjudicate this infringement dispute between invention patent and goods being sold, the following three legal issues need clarification:

I. Should one be liable for compensation responsibility if he sells products with patented features, without knowledge of the existence of the patent?

To infringe by selling the patented product means to sell the patented product without authorization from the patentee. The patented product, as in the case at bar, is not a patented product in this very meaning, but a product manufactured without patent license and containing patented technical features. If this product was manufactured by the patentee or with its authorization that the end seller just sells the product without authorization would not constitute infringement under the exhaustion doctrine. This raises an additional new issue, whether the constitution of patent infringement is premised on the subjective intent of the actor. Article 11 of the Patent Law says that exploiting a patent includes making, using, offering to sell, selling or importing the patented product. It does not limit “selling” with “knowingly”. Does it mean that any act of selling would be sufficient for patent infringement? The judgment above does not answer this question clearly, but only cites Article 11 of the Patent Law as grounds for the decision. We should say that the decision is OK in and of itself. However, in the opinion of this author, the constitution of a legal liability cannot be without subjective intent. In criminal offenses, the crime of selling stolen property for example, that the actor knew it is a constitutive requirement. In an intellectual property infringement dispute, the infringement liability, like common civil liabilities, in principle, should be established by four constitutive requirements, namely infringing act, subjective intent, harmful consequence and causal relation between infringing act and harmful consequence. Although a scholar suggests that the doctrine of no-fault liability should be applied in direct infringement in the area of intellectual property, it has not yet been confirmed by law. No-fault liability cannot be applied unless expressly provided for in law.

For the case at hand, the plaintiff demanded that the defendant bear the infringement liability by stopping the infringing act and by compensating for the damage. This determines that subjective fault, as a constitutive requirement, must exist in terms of the way to bear the liability. If the end seller does not subjectively know that the product he sells is an infringing product, he should not be held liable for infringement, as no blame attaches to an unknowing wrongdoer. Infringement compensation does not occur unless the end seller knows, such as, after being told by the patentee,he and continues to sell the infringing product.

As a circumstance deemed as non-infringement, Article 63.4.2 of the Patent Law says that “any person who, for production and business purposes, uses or sells a patented product without knowing that it was made and sold without the authorization of the patentee, shall not be responsible for the damages caused so long as he proves that he obtains the product from legitimate channels of distribution”.

This provision is the direct legal basis for exemption of unknowing sellers. In adjudicatory practice, it is inappropriate to think that patent infringement is about only the infringing act and does not need the premise of knowledge on the part of the seller. Although compensation may not occur, it does not mean that no infringement occurs and eliminates “infringement stop” and other civil responsibilities. Also, the elimination not only needs subjective “lack of knowledge”, but also needs objective “proving of the product’s legal source”. In the trial of the case at hand, the court should first determine whether the defendant knew the infringement. Under the rule of evidence, the burden of proof rests with the plaintiff, that is, the plaintiff should prove that the defendant knowingly sold the patented product. If the plaintiff fails to prove so, the court cannot decide that the defendant infringed the patent of the plaintiff. The judgment should state this factual circumstance, that is, the court has found that the defendant knowingly sold the infringing product, or that the defendant failed to prove that he obtained the product from “legitimate channels of distribution”. Otherwise, patent infringement cannot be determined simply on the grounds of the selling act. As this author has learned, the defendant failed to cease sales of the infringing product until the judgment was rendered. For this reason, the judgment was correct in substance. However, it is a pity that this substantive correctness is not obvious in the facts and analysis of the judgment. It leaves a space for people to pose questions and doubts.