(By You Yunting) Malicious litigation refers to instituting a lawsuit through fictional facts and falsified evidences for the purpose of receiving unlawful benefits. In today’s post, we will introduce some provisions about malicious litigation in intellectual property laws and civil procedure law in China.
I. Provisions on wrongful litigation injunction can be applied into malicious litigation.
In litigations concerning patent, trademark and copyright, the right holder always applies for such litigation injunctions as termination of infringement, evidence preservation and property preservation. Where the court approved the application, if the litigation is proved to be malicious, the respondent may require the applicant to compensate for such losses. Article 13 of the Several Provisions of the Supreme People’s Court on the Issues Concerning the Application of Law to Terminating Infringement upon Patent Prior to Litigation stipulates that:
In the event of any losses incurred to the party against which the request is filed due to the applicant’s failure to prosecute or any mistakes in the request, the party against which the request is filed can appeal to the People’s Court having jurisdiction over this matter requiring the applicant to compensate for such losses, or alternatively the People’s Court shall handle the compensation of such losses along with handle a request for compensation of damages lodged by the patentee or the interested party.
Scope of application:
False acts including ceasing infringement, evidence preservation and property preservation can be filed in the intellectual property cases concerning patent, trademark and copyright. Even though Article 13 is a specific provision about Terminating Infringement upon Patent Prior to Litigation, in practice, if the injunction is proved to be incorrect, the parties may quote Article 13 to request the court determining the party who filed the request to compensate for such losses.
Method of application:
In the event of malicious litigation, the party against which the litigation is filed can make a counterclaim in the same case, or another lawsuit separately.
Scope of compensation:
The compensation which the respondent required contains the costs of litigation and the other losses. The costs of litigation include attorney fees, lawsuit settlement and cost of obtaining evidences whilst the other losses consist of the direct property loss resulting from the preservation. However, as for the indirect losses, such as losing trading opportunities, by our experience, China courts always keeps conservative in the judgment, who are less likely to support indirect losses.
II. Provisions in the Civil Procedure Law can be quoted in a malicious litigation.
Except for specific provisions in intellectual property legislation, the Civil Procedure Law also has some sanctions and remedies in the following:
Article 112 stipulates that, “where more than two parties to a case maliciously collaborate among themselves for the purpose of infringing the legitimate rights and interests of any other party by making use of initiating lawsuits or mediation, the people’s court shall reject the claims of such parties and order a fine or detention against such parties depending on the circumstances; where the violation on the part of the parties is suspected to constitute a crime, such parties shall be subject to criminal prosecution in accordance with the law.”
Article 113 stipulates that, “where the party subject to enforcement maliciously collaborates with any other party to evade any of its legal obligations specified in the legal documents by way of lawsuit, arbitration or mediation, the people’s court shall order a fine or detention against such parties depending on the circumstances; where the violation of the parties is suspected of constituting a crime, such parties shall be subject to criminal prosecution in accordance with the law”
Both Article 112 and Article 113, respectively used into different stage of the litigation, i.e., the proceeding of the litigation and the execution of the judgment, are aimed to punish the parties who make use of maliciously a case among themselves for the purpose of infringing the legitimate rights and interests of any other party. Virtually, most malicious litigations are incurred under the conditions that the parties who collaborate with each other to evade repayment of debts or fail its necessarily obligations. For example, the couple filed a divorce litigation attempting to verdict all the property to be owned by one party, for the purpose of evading the repayments of debts owing by the other party.
The party against which the interests are damaged may also rely on other provisions, such as Article 56, to protect his or her interests. Article 56 stipulates that:
If a third party considers that it has an independent claim against the object of an action of two parties, the third party shall have the right to institute an action.
If a third party has no independent claim against the object of an action of two parties but the outcome of the case will affect his or her legal interests, he or she may apply to join in the action, or the people’s court shall notify him or her requesting his or her participation. If the people’s court judges that a third party shall bear civil liability, such third party shall have the same procedural rights and obligations as those of a party to the case.
Where a third party stipulated in the preceding two paragraphs fails to participate in the lawsuit due to cause(s) other than such third party, but nonetheless has evidence providing that a legally effective judgment, ruling or mediation statement is partially or wholly incorrect in its contents and hence damages the civil rights and interests of the third party, such third party may, within six months after becoming aware or is reasonably assumed to have become aware of such damage to his or her civil rights and interests, institute legal proceedings at the people’s court that issues the judgment, ruling or mediation statement. If the people’s court finds that the claims are tenable, it shall alter or revoke such judgment, ruling or mediation statement; if the claims of the third party are untenable, the people’s court shall reject the claims of the third party.
On the grounds of Article 56, any other party whose legitimate interests are damaged in a malicious litigation may apply to join into the action, or apply to revoke the judgment, rulings or mediation statements within six months after becoming aware or is reasonably assumed to have become aware of such damage to his or her civil rights and interests.