(By Albert Chen) Past essays on this websites have introduced the design patent dispute between Honda Motor Co., Ltd. (“Hongda”), Hebei Xin Kai Auto Manufacturing Co., Ltd. (“Hebei Xin Kai”) and Shuanghuan Auto Co., Ltd. In another utility model patent dispute involving Hongda and Xin Kai, the Supreme People’s Court has rendered a decision on jurisdiction in design patent disputes. This dispute deserves attention and concentration and will be introduced in today’s post.

Case summary:

In 2005, Hongda and Dongfeng Hongda Auto Manufacturing (Wuhan) Co., Ltd. (“Dong Feng”) filed a lawsuit in the Beijing Higher People’s Court (the “Beijing Higher Court”), claiming that Hebei Xin Kai, Gaobeidian Xin Kai Auto Manufacturing Co., Ltd. (“Gaobeidian Xin Kai”), and Beijing Xin Sheng Bai Li Auto Trading Co., Ltd. (“Beijing Xin Sheng”) infringed their design patent. The Beijing Higher Court accepted the case.

After that, Hebei Xin Kai and Gaobeidian filed an objection to the Beijing Higher Court’s jurisdiction, claiming that its acceptance of the case violated regulations on grade jurisdiction and territorial jurisdiction. Also, both companies sought to have the court suspend the lawsuit because the patent invalidity application was still under consideration. But, the Beijing Higher Court refused the companies’ application. Dissatisfied with the Beijing Higher Court’s decision, Hebei Xin Kai and Gaobeidian Xin Kai appealed to the Supreme People’s Court on the following grounds:

1) The appellant (the defendant in the patent dispute) is a company registered in Hebei Province. Moreover, Honda and Dong Feng (the plaintiffs in the dispute and the appellee in the objection to jurisdiction) have not submitted any evidence of  sales of the infringing product by Beijing Sheng Xin. For this reason, Hebei courts should have jurisdiction over this case.

2) Even though the case was heard in the Beijing, the Beijing No.1 Intermediate People’s Court (the “Beijing Intermediate Court”) should have heard the case, and the rules the Higher Court used to hear the dispute were a local judicial interpretation that it itself issued, which were in conflict with the interpretation promulgated by the Supreme People’s Court. Additionally, the Beijing Higher Court did not reply to the objection that the appellant filed against exercise of jurisdiction by that level of court.

3) The appellant already made an application to invalidate the patent, so the second instance court hearing the jurisdiction objection must also consider whether or not to suspend hearing of the lawsuit.

The Supreme Court accepted Hebei Xin Kai and Gaobeidian Xin Kai’s appeal and sustained the Beijing Higher Court’s decision and its determination that the first instance court had jurisdiction over the dispute. The main reasons are as follows:

1) In terms of territorial jurisdiction, Honda and Dong Feng submitted evidence of the sales of infringing product by Beijing Xin Sheng in the first instance, which was also been sent to the appellant. As regulated in Article 6 of Several Regulations on Law Application in the Hearing of Patent Dispute by the Supreme People’s Court:

“When the manufacturer and the seller are taken as the joint defendants in a lawsuit, the court in the place of sale has jurisdiction over the dispute”,

Based on this reasoning, the Beijing court had the right to hear the dispute.

On the other hand, although the original court did not organize an examination of the evidence of Beijing Xin Sheng’s domicile, the appellant filed the objection to jurisdiction objection based primarily on their registration in Hebei, but not based on the evidence about Beijing Xin Sheng’s domicile.

2) As to whether the dispute is settled in the Beijing Intermediate Court or the Beijing Higher Court, although the Patent Law provides that patent disputes are normally heard in the intermediate court, this does not exclude the first instance hearing of patent disputes in higher courts. Additionally, the Supreme People’s Court also determined that the Beijing Higher Court did not violate laws, rules, or the Supreme Court’s interpretation when it stated that: “in intellectual property disputes with disputed amounts exceeding RMB 100 million (including those invovling foreign element) higher courts have jurisdiction.”

3) In closing, the decision on jurisdiction is a precondition for the settlement of any other procedural or substantive problems, and the court must decide on whether to suspend the hearing and on other procedural problems only after the jurisdiction problem is settled. Because the appeal concerns the jurisdiction dispute, suspension of the lawsuit does not belong within the consideration in this case. For this reason, the Supreme Court will not rule on it.

Lawyer Analysis:

A study of the above decision made by the Supreme Court shows that the following points were explained and stressed for deciding jurisdiction in design patent design disputes:

1) Design patent disputes may be heard either in the court in the place where the manufacturer is registered,or in the court of the place where the domicile of the infringing seller is registered. At the same time, when a party files an objection to the court’s territorial jurisdiction, it must prove its domicile and also disprove the place of jurisdiction advocated by the other party.

2) As to the level of court to hold jurisdiction, although the law regulates that the first instance of patent disputes are normally heard in the intermediate court, it does not exclude higher courts from the first instance. In fact, the Civil Procedure Law stipulates that any dispute with major influence in the area of the jurisdiction may be heard directly by the higher court. The Beijing Higher Court’s ruling on “disputed amounts exceeding RMB 100 million” or “involving foreign elements” is actually targeted at this “major influence” element.

3) Settlement of jurisdiction is a precondition for the decision on suspension of the lawsuit. In the procedure of jurisdiction objection and appeal, the appellant (or the applicant’s) application for suspension must be settled after settlement of jurisdiction.

Lawyer Contacts

You Yunting：86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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