Supreme People's Court of the People's Republic of China

Civil Ruling

(2023) Zui Gao Fa Zhi Min Zhong No. 2221

Appellant (defendant at first instance): Shenzhen Mou 1 Technology Co., Ltd. Domicile: Bao'an District, Shenzhen, Guangdong Province.

Legal representative: Zhan Moufan, general manager of the company.

Authorized litigation agent: Shuai Jiali, lawyer of Guangdong Liji Law Firm.

Appellee (plaintiff at first instance): Shenzhen Mou 2 Technology Co., Ltd. Domicile: Bao'an District, Shenzhen, Guangdong Province.

Legal representative: Chen Mou, chairman of the board of the company.

Authorized litigation agent: Ma Shoutao, lawyer of Guangdong Junlong Law Firm.

In the case of a dispute over infringement of an invention patent right between the appellant Shenzhen Mou 1 Technology Co., Ltd. (hereinafter "Mou 1 Company") and the appellee Shenzhen Mou 2 Technology Co., Ltd. (hereinafter "Mou 2 Company"), Mou 1 Company, dissatisfied with civil judgment (2022) Yue 03 Min Chu No. 2632 rendered by the Intermediate People's Court of Shenzhen, Guangdong Province on 11 August 2023, appealed to this Court. After docketing the case on 25 October 2023, this Court formed a collegiate panel in accordance with the law and tried the case.

The court of first instance docketed and accepted the action of Mou 2 Company on 8 April 2022. Mou 2 Company requested the court to order that: 1. Mou 1 Company immediately cease manufacturing, selling and offering to sell products infringing the invention patent right of Mou 2 Company with patent number 201710184303.7 and entitled "Bone conduction loudspeaker" (hereinafter "the patent at issue"); 2. Mou 1 Company compensate Mou 2 Company for economic losses and reasonable enforcement expenses in the amount of RMB 300,000; 3. the litigation costs of this case be borne by Mou 1 Company.

The court of first instance held after trial that: in this case Mou 2 Company sought protection of amended claims 1, 2 and 6 of the patent at issue; the technical solution implemented by the accused infringing product fell within the scope of protection of claims 1 and 2 of the patent at issue, but did not fall within the scope of protection of claim 6 of the patent at issue. Mou 1 Company carried out acts of manufacturing, offering to sell and selling the accused infringing product, and should bear civil liability such as ceasing the infringement and compensating for losses in accordance with the law. The request of Mou 2 Company that Mou 1 Company cease the infringement had a legal basis and was supported. The prior-art technical solution did not disclose all the technical features accused of falling within the scope of protection of the patent right at issue, and therefore the prior-art defence of Mou 1 Company could not be sustained and was not supported by the court of first instance. The court of first instance rendered judgment: "1. The defendant Shenzhen Mou 1 Technology Co., Ltd. shall immediately cease manufacturing, offering to sell and selling products infringing the plaintiff's invention patent right with patent number 201710184303.7 and entitled 'Bone conduction loudspeaker'; 2. The defendant Shenzhen Mou 1 Technology Co., Ltd. shall, within ten days from the date on which this judgment takes effect, compensate the plaintiff Shenzhen Mou 2 Technology Co., Ltd. for economic losses and reasonable enforcement expenses in the total amount of RMB 100,000; 3. The other claims of the plaintiff Shenzhen Mou 2 Technology Co., Ltd. are dismissed. If the above obligor fails to perform the monetary payment obligation within the period specified in the judgment, it shall, in accordance with Article 260 of the Civil Procedure Law of the People's Republic of China, pay double the interest on the debt for the period of delayed performance. The case acceptance fee of RMB 5,800 and the appraisal fee of RMB 116,000 in this case shall both be borne by the defendant. The above acceptance fee has been prepaid by the plaintiff; of the appraisal fee, RMB 58,000 has been prepaid by the plaintiff and RMB 58,000 has been prepaid by the defendant. With the consent of the parties, the defendant shall pay the portion prepaid by the plaintiff directly to the plaintiff within ten days from the date on which the judgment takes effect."

Dissatisfied with the judgment of first instance, Mou 1 Company appealed to this Court, requesting the Court to rule that: 1. the judgment of first instance be revoked and all claims of Mou 2 Company be dismissed instead; 2. the litigation costs of the first and second instances of this case be borne by Mou 2 Company. The facts and grounds: (1) The judgment of first instance found that the infringing acts of Mou 1 Company continued beyond 1 June 2021 and thereby applied the Patent Law of the People's Republic of China as amended in 2020, which constitutes an error in the application of law. (2) An application for invalidation of the patent at issue has been filed by a third party, and the validity status of the patent right at issue is unstable. (3) The sales volume and profits of the accused infringing product were both low, and the amount of damages awarded at first instance was excessive.

Mou 2 Company did not submit a defence.

This Court ascertained after trial that: after the judgment of first instance in this case was rendered, the China National Intellectual Property Administration issued Invalidation Examination Decision No. 565826 on 8 February 2024, declaring the patent right at issue wholly invalid.

This Court holds that: pursuant to Article 2, paragraphs 1 and 2 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases (II), where the claims asserted by the right holder in a patent infringement action are declared invalid by the patent administration department under the State Council, the people's court trying the patent infringement dispute case may rule to dismiss the right holder's action based on those invalidated claims; where there is evidence proving that the decision declaring the above claims invalid has been revoked by an effective administrative judgment, the right holder may bring a separate action. In this case, all the claims on the basis of which Mou 2 Company asserted the patent right have been declared invalid by the China National Intellectual Property Administration, and the people's court may, pursuant to the above judicial interpretation, rule in the patent infringement action to dismiss the action of Mou 2 Company. If the administrative decision declaring the claims of the patent at issue invalid is revoked by an effective administrative judgment, that is, if the claims of the patent at issue are ultimately maintained as valid, Mou 2 Company may bring a separate patent infringement action.

As regards the expenditure of the appraisal fees in this case, Mou 2 Company filed an appraisal application with the court of first instance and prepaid an appraisal fee of RMB 58,000; the court of first instance granted the appraisal application of Mou 2 Company, the subject of the appraisal being whether the accused infringing product fell within the scope of protection of claims 1, 2 and 6 of the patent at issue. The appraisal conclusion was that the compared object contained all the technical features recited in amended claims 1 and 2 of the patent at issue, but lacked all the technical features recited in amended claim 6. Mou 1 Company argued at first instance that the accused infringing technical solution implemented the prior art, and also filed an appraisal application with the court of first instance and prepaid an appraisal fee of RMB 58,000; the court of first instance granted the appraisal application of Mou 1 Company, the subject of the appraisal being whether the AfterShokz BLUEZ 2 AS500 model bone conduction headphones submitted by Mou 1 Company disclosed the technical features of the technical solution by which the accused infringing product fell within amended claims 1, 2 and 6 of the patent at issue. The appraisal conclusion was that the compared object lacked the relevant technical features of the accused infringing product. On the basis of the appraisal opinion, the court of first instance found that the prior-art defence of Mou 1 Company could not be sustained.

As regards the bearing of the appraisal fees, Article 12, paragraph 1 of the Measures for the Payment of Litigation Costs, which came into force on 1 April 2007, provides: "For expenses incurred in the course of litigation on account of appraisal, public announcement, inspection, translation, valuation, auction, sale, warehousing, custody, transport, vessel supervision and the like which under the law should be borne by the parties, the people's court shall, in accordance with the principle that whoever makes the assertion bears the cost, decide that the parties pay them directly to the relevant institution or entity, and the people's court shall not collect or pay them on their behalf." Article 29, paragraph 1 provides: "Litigation costs shall be borne by the losing party, unless the winning party voluntarily assumes them." Article 30 provides: "Where a people's court of second instance changes a judgment or ruling rendered by a people's court of first instance, it shall correspondingly alter the decision of the people's court of first instance on the bearing of litigation costs." Pursuant to the above provisions, appraisal fees fall within the category of litigation costs and, in accordance with the Measures for the Payment of Litigation Costs, should be borne by the losing party. In a patent infringement action, where the people's court first rules to dismiss the plaintiff's action because the patent right has been declared wholly invalid, this is based on the fact that the basis of the right for which the plaintiff seeks protection is in an unstable state; the plaintiff should bear the legal consequences of losing the case, and all appraisal fees arising in the course of the litigation should be borne by the plaintiff. If the decision declaring the patent right invalid is subsequently revoked by an effective administrative judgment, the plaintiff may separately assert the appraisal fees of the earlier litigation as a basis for compensation in a future patent infringement action. In this case, first, because the patent right at issue has been declared wholly invalid by the China National Intellectual Property Administration, it should be ruled in accordance with the law that the judgment of first instance be revoked and the action of Mou 2 Company be dismissed. Second, given that the present litigation was brought by Mou 2 Company and that the basis of the right on which Mou 2 Company brought this action has been declared wholly invalid by the China National Intellectual Property Administration, the fault lies with Mou 2 Company, which should bear the unfavourable litigation outcome and responsibility in this regard. Third, the appraisal fee of RMB 58,000 prepaid by Mou 2 Company should be borne by Mou 2 Company itself; the appraisal fee of RMB 58,000 prepaid by Mou 1 Company should be borne by Mou 2 Company. Finally, if the patent right at issue is subsequently maintained as valid through patent administrative litigation, the appraisal fees incurred by Mou 2 Company in this case may be separately asserted as a factor for compensation in a future patent infringement action brought by it against Mou 1 Company.

This case was changed on appeal because the claims of the patent at issue were declared invalid during the second-instance proceedings; the judgment of first instance does not constitute an erroneous adjudication.

In sum, pursuant to Article 157, paragraph 1, item 3 of the Civil Procedure Law of the People's Republic of China and Article 2 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases (II), it is ruled as follows:

1. Civil judgment (2022) Yue 03 Min Chu No. 2632 of the Intermediate People's Court of Shenzhen, Guangdong Province is revoked;

2. The action of Shenzhen Mou 2 Technology Co., Ltd. is dismissed.

The first-instance case acceptance fee of RMB 5,800 shall be refunded to Shenzhen Mou 2 Technology Co., Ltd.; the second-instance case acceptance fee of RMB 2,300 prepaid by the appellant Shenzhen Mou 1 Technology Co., Ltd. shall be refunded. The appraisal fee of RMB 58,000 prepaid by Shenzhen Mou 2 Technology Co., Ltd. shall be borne by itself; the appraisal fee of RMB 58,000 prepaid by Shenzhen Mou 1 Technology Co., Ltd. shall be borne by Shenzhen Mou 2 Technology Co., Ltd., which shall pay it directly to Shenzhen Mou 1 Technology Co., Ltd. within ten days from the date on which this ruling takes effect.

This ruling is final.

Presiding Judge: Yuan Xiaoshuang

Judge: Wu Hongquan

Judge: Ma Qinghua

16 April 2024

Judge's Assistant: Gao Rui

Clerk: Liu Yuechen

Source: Intellectual Property Court of the Supreme People's Court, 7 August 2026. Original: https://ipc.court.gov.cn/zh-cn/news/view-5989.html