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Brief Introduction on Declaratory Judgement Actions for Non-infringement of Intellectual Property

Linda Liu & Partners
  
Generally, declaratory judgement actions for non-infringement of intellectual property are brought in cases that one party is threatened to infringe the patent right of another party although not yet filed a lawsuit, or that one of the parties concerned seriously worry about the infringement of the patent right, or that one of the parties wish to avoid possible future litigation by another party, or one party wants the court to confirm that his manner of practice do not infringe the patent right.
 
The declaratory judgement action for non-infringement is a new type of intellectual property civil suit that the courts have received recently. Since the Supreme People’s Court confirms that the people’s courts can accept the declaratory judgement actions for non-infringement in accordance with relevant provisions of Civil Procedure Law in July, 2002, this type of suits has been focused on widely and got the special attention of many lawyers and judges. For example, there are such famous cases that Nanjing Intermediate People’s Court accepted the declaratory judgement action for non-infringement brought by Suzhou Longbao Bioengineering Industry Co., Ltd. against Suzhou Langlifu Health Food Co., Ltd. in 2001, and that Shijiazhuang Intermediate People’s Court accepted the declaratory judgement action for non-infringement brought by Shijiazhuang Shuanghuan Automobile Co., Ltd. against Honda Motor Co., Ltd. in October, 2003.
 
In this article, several issues of the declaratory judgement actions for non-infringement including practical significance, requirements for acceptance, court of jurisdiction, burden of proof and result of the litigation will be mainly analyzed and discussed hereinafter.
 
I. Practical significance of declaratory judgement actions for non-infringement

With the development of intellectual property in China, the number of disputes relating to intellectual property infringement has been rapidly increasing. It is said that the following example may be quite common among the disputes. One party may send the attorney opinion or cease and desist letter to the other party, claiming that the recipient has infringed his IP right. However, the right holder has no intention of neither solving the dispute through negotiation with the other party, nor filing the lawsuit. The sole purpose of the right holder is to exclude a competitor from the market.
 
In such circumstance, the alleged infringer will be in a passive situation. That is, if he ceases the act of using or manufacturing the allegedly infringing products, it may be regarded as if he concedes that his acts constitute infringement. On the other hand, if the right holder does not intend to bring an infringement lawsuit against the other party, the alleged infringer would be forced to continue to operate his business with the cloud of a lawsuit over his head. It may be fair that the declaratory judgement action for non-infringement allows the alleged infringer to proactively file a litigation to resolve the situation and eliminate the cloud of uncertainty looming overhead. Thus, the declaratory judgement actions for non-infringement have become an effective means against malicious litigations and abuse of litigious right, and also play an important role in practice.
 
II. Requirements for the acceptance of the declaratory judgement actions for non-infringement

“The Reply on the Case of the declaratory judgement action for non-infringement Brought by Suzhou Longbao Bioengineering Industry Co., Ltd. against Suzhou Langlifu Health Food Co., Ltd.” which was issued by the Supreme People’s Court on July 12, 2002 is considered as the principal conditions for accepting the declaratory judgement actions for non-infringement of intellectual property by the courts. The Reply refers to: “According to the provisions of Article 108 and Article 111 of the Civil Procedural Law of P.R.C., the People’s Courts shall accept the cases that meet the conditions.” Based on this Reply as well as other relating provisions including Civil Procedural Law of P.R.C., the plaintiff shall also meet the following requirements in addition to the general conditions stipulated by Civil Procedural Law of P.R.C., when filing the declaratory judgement suits:
 
1. The right owner of the intellectual property has sent the infringement warning to the plaintiff or the interested parties.

In practice, the party can take several ways to enforce his rights, which include the way to send the cease and desist letter to the “possible suspected infringer” directly, to hold a press conference to inform the public of certain infringers and to announce officially that he is about to take actions to protect his rights without any further substantial actions eventually. Further, there are including additional ways to allege a complaint to administrative competent authority, or to file the lawsuit before the court and afterward withdraw voluntarily the suit. The first two ways define the “direct warning” category and can prove the existence of “facts of dispute”. However, in actual judicial practice, the last two ways are objectionable on whether they can constitute the cause of action for the declaratory judgement actions. The opinion of the author is that the warning shall be construed in a wider sense. This is because the latter two ways constitute the threat of infringement warning, since the means taken by the right owner apparently influences the plaintiff’s production and operation and makes the plaintiff’s act uncertain and unstable in terms of the infringement, even if the right owner gives up to take further remedy voluntarily after initiating the legal procedure for the remedy.
 
2. The act of infringement warning may cause damage to the warned person or his interested parties.

Improper enforcement of legal rights may bring discredit on the commercial reputation of others. It is difficult to quantify the losses of such commercial reputation in a short period. Once the intangible losses become tangible, it will be irreparable damages. Thus, we cannot make up quantitative standard for such losses and shall only investigate the possibility of the occurrence of such losses. Generally speaking, such actions that the right owner sends the warning letter or announces statement to the plaintiff and his clients not only put the plaintiff in a state of uneasiness, danger or threat, but also cause damage to his legal commercial interests and threaten his competitive position. When considering this condition, it is only required to prove that the right owner’s warning act has put the plaintiff in a state of uneasiness, danger and threat and in an unclear status of infringement, and thereby the plaintiff’s interests may be damaged. It is not necessary to prove that the plaintiff’s interest has been damaged as a matter of fact.
 
3. The right owner fails to voluntarily resolve the dispute through legal means within a reasonable period.

The acceptance of the declaratory judgement actions for non-infringement is basically subject to the condition that the interested parties receive the infringement warning while the right owner fails to file suitable procedure of requesting the competent authority to solve the dispute according to law in a reasonable period. As a legal procedure for the resolution of the disputes, there are including a filing of the lawsuit before the court, or the request to the administrative authority to seek to resolve the matters, or the notification of the intellectual property crime to the public security branch, etc. If the defendant fails to file the lawsuit over long period of time, it will be uncertain whether or not the plaintiff may infringe the right of the defendant. It is generally said that the reasonable period varies depending on each case but is usually no less than three months. Apparently the determination of reasonable period must be beneficial not only to the protection of the right owner, but also to the protection of the warned person.
 
However, there is a possibility that the requirements will be amended in the near future. According to the draft of judicial interpretation concerning patent dispute cases, it is regulated that the plaintiff should reply to the defendant in writing to explain the fact of non-infringement and ask the defendant to withdraw the C&D letter or file an infringing lawsuit before filing the declaratory judgement actions for non-infringement. Only when the defendant fails to withdraw the C&D letter or file the infringement lawsuit, the plaintiff can file the declaratory judgement actions for non-infringement. Though the requirement of filing the declaratory judgment suits seems to be becomes strict on a superficial level, but in fact, the declaratory judgement actions for non-infringement would be more easily accepted by court, if the plaintiff could submit a written reply which the plaintiff has sent to the defendant as evidence, because it is not difficult to adopt such evidence.
 
III. Court of jurisdiction for the declaratory judgement actions for non-infringement

According to “Notice on the Designated Jurisdiction of Patent Dispute Case between Honda Motor Co., Ltd.and Shijiazhuang Shuanghuan Automobile Co., Ltd. as well as Beijing Xuyang Hengxing Trading Co.,Ltd.”, namely (2004) Civil Other No.4 Judicial Interpretation, the Supreme People’s Court wrote that:

“1. The declaratory judgement action for non-infringement belongs to infringement litigation, and therefore the territorial jurisdiction shall be determined in accordance with the provision of Article 29 of the Civil Procedural Law. The declaratory judgement actions for non-infringement of patent right and the patent infringement lawsuits which relate to the same fact should be regarded as independent suits, as the both suits are brought by each of the both parties in different timeframe to protect their own interests in accordance with the Civil Procedural Law. However, in order to avoid to repeatedly try the cases relating to the same fact and the same interested parties by different courts, people’s courts shall transfer the jurisdiction for consolidating the both trials.”
 
It should be noted that this judicial interpretation stipulates the jurisdiction principle of the declaratory judgement actions for non-infringement, and the declaratory judgement actions for non-infringement belong to infringement litigation from a viewpoint of legal nature and the territorial jurisdiction shall be determined in accordance with the provision of Article 29 of the Civil Procedural Law. Thus, this type of cases shall be under the jurisdiction of the People’s Court of the place where the infringement act occurs or where the defendant has his domicile. Although any law and judicial interpretation makes no explicit explanation on the occurrence place of the infringement act with respect to the declaratory judgement actions for non-infringement, the plaintiff is simultaneously the party who files the lawsuit and infringes the right which the defendant claims during the declaratory judgement action for non-infringement. Thus, the occurrence place of the infringement act shall be regarded as the place where the plaintiff manufactures or sells its products.
 
IV. Burden of proof of the declaratory judgement actions for non-infringement

The plaintiff who will file the declaratory judgement action for non-infringement has the burden of proof to prove the non-infringement of the intellectual property right, in addition to proving the fact that the threat of the infringement exists as a matter of fact. In case of the declaratory judgement action for patent non-infringement, the burden of proof by the plaintiff shall at least include: burden to compare the differences between the patents and the product in issue, burden of proof for the prior art defense, burden of proof for the right of prior use or burden of proof for other exemption conditions. Further, in case of the declaratory judgement action for trademark non-infringement, it shall include the burden to prove the fact that the trademarks are different or dissimilar, or the fact that the products are different or dissimilar or not confusable. In case of the declaratory judgement action for the copyright non-infringement, there are including the burden to prove the fact of independent creation, the fact of non-plagiary of other’s works, or the fact of proper quotation, etc.
 
V. Outcome of hearing of the declaratory judgement actions for non-infringement

With respect to the trial on the declaratory judgement action for non-infringement brought by the plaintiff, if the conclusion of infringement is tenable, the court should reject the litigation brought by the plaintiff. On the other hand, if the conclusion of infringement is untenable, the court should support the action brought by the plaintiff and hold that the plaintiff’s act does not infringe the defendant’ rights. However, the court must reject such as claim to request the damages due to the defendant’s act of sending cease and desist letters. Moreover, it is noted that the declaratory judgement action for non-infringement is lacking of enforceability and a finding of non-infringement will not result in any award of damages to any party.
 
In conclusion, the declaratory judgement actions for non-infringement can be regarded as a fundamental way of remedy for protecting the own interest of the accused infringer by effectively preventing the abuse of rights by the right owner and actively eliminating the uncertain state of infringement dispute. Meanwhile, this system shall be reviewed continuously so as not to constitute a limiting factor for the exercise of right by the intellectual property proprietor, or become the too-strong weapon used by the possible infringer to threat the right owner. Thus, for the right owner, he must be very careful to send the warning letter of infringement to the possible infringer, and he should avoid unnecessary litigation owing to the abuse of his rights. The possible infringer who receives the warning letter should be aware that the court will accept the declaratory judgement action for non-infringement only after it meets certain requirements.
 
(2009)
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