Thursday, February 15, 2007

Forum Shoppers: Do Not Forget to Forget to Send a Cease and Desist Letter

I found 'Forum Shopping Comes to China' one of the clearest articles of China IP Focus 2006 of Managing Intellectual Property. It is written by Benjamin Bai, Tony Chen, Xiang Wang, Peter Wang and research of Lisheng Hao. All, except for Xiang Wang who tranferred to Orrick, see here, work for Jones Day.

The people's courts of big cities are generally perceived as rather fair and having expertise in the field of IP, instead of some of the courts in smaller cities that may be prone to local protectionism and have a much lower level of expertise in the field of IP.

The Civil Procedure Law gives the infringed party the choice to file a lawsuit against the infringer at the location of the infringer's residence or at the place where the infringing act took place:

Article 29 Civil Procedure Law: an action initiated for an infringing act shall be under the jurisdiction of the people's court in the place where the infringing act took place or where the defendant has his or her domicile.

Unless the infringer has residence in a big city where a reputable people's court is located, the infringed party is trying to find one of his infringed goods for sale in a big city so he can file the lawsuit there.

Now the added value of the above-mentioned article kicks in. Before filing a lawsuit at the people's court of your choice you should not first send a cease and desist letter.

If you do, the infringer can ask for a declaration of non-infringement at the people's court of his choice. This will probably be the people's court of his residence, where he might be able to influence the people's court. Now, if a party has asked for a declaration of non-infringement, the underlying facts and issues are basically the same as for a determination of infringement. That is why the people's court that hears the case first will get the jurisdiction over the case, in order to avoid inconsistent rulings.

Suzhou Longbao Bioengineering Industrial Corp. versus Suzhou Langlifu Health Products Co (Supreme People's Court, July 20, 2002). An opinion of the Supreme People's Court was asked by the lower court. As a result of this case the Supreme People's Court recognised declaration of non-infringement as a proper cause of action.

Since this case there have been non-infringement suits in China involving patents, trademarks and copyright.

As a result of Eli Lilly versus Changzhou Huasheng Pharmaceutical Co. Ltd in Qingdao, Shangdong (2003), the Supreme People's Court laid down the rule that the first court who accepts a case can keep the case.

Honda Technology Research Co. versus Shijiazhuang Double-Circle Motor Co. Ltd., et al. (Supreme People's Court, June 24, 2004) confirmed this first-to-accept rule.

Bai, Chen, Wang and Wang write that in these three cases the Supreme People's Court unequivocally established declaration of non-infringement actions, it has yet to provide jurisdictional guidelines for such suits. These could clarify whether a public statement accusing infringement in a general way is sufficient ground for a declaration of non-infringement.

Article 62 draft Rules on Several Issues Relating to Trial of Patent Infringement Cases (Judicial interpretation of Supreme People's Court, October 2003) probably gives the direction the Supreme People's Court wants to go with declarations of non-infringement: the party that wants to ask for a declaration of non-infringement at the people's court has to ask the patent holder first for a declaration of non-infringement, providing the necessary technical information. Only if the patent holder refuses to give a declaration of non-infringement, the requesting party can ask the people's court.

Bai, Chen, Wang and Wang wrote that a letter soliciting negotiation or a license is unlikely to trigger a declaration of non-infringement. If this does not work, one should, however, directly file a lawsuit, skipping any cease and desist letter.

Read the MIP article here (subscription may be needed)

Read Rouse & Co. International's publication 'Requests for declaration of non-infringement of a trademark in China here.

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