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Administrative Litigation Case Between Guangdong Midea And Patent Reexamination Board
date: 2013-10-21

Background

    Zhuhai Gree Electric Appliances Inc. ("Gree") has lodged a suit at the Guangdong Zhuhai Intermediate People's Court against Guangdong Midea Refrigeration Equipment Co., Ltd ("Midea") and Zhuhai Taifeng Electric Appliances Co., Ltd ("Taifeng") on the ground that the "Midea split air conditioner" manufactured by Midea and distributed by Taifeng violated its patent for an invention called "a method for controlling the air conditioner operating under customized patterns", requesting that the two defendants stop the violation and compensate for its economic losses and reasonable expenses paid for investigating and curbing this violation. The court of first instance found that four types of air conditioner products including the KFR-26 GW/DY-V2(E2)fall under the scope of protection of the patent for invention involved in the case in respect of the technical solution for operation under the "Good Sleep Mode 3". As to the amount of compensation, Midea provided only data related to the KFR-26GW/DY-V2(E2)air conditioner product documenting that profit made from this type of product was RMB477,000. However, Midea refused to provide any data related to the other three types of air conditioner products after the court explained relevant legal consequences to it. Therefore the court presumed that Midea made a profit of no less than RMB477,000 from each type of the air conditioner products according to the provisions of Article 75 of the "Provisions of the Supreme People's Court on Evidence in Civil Proceedings", which means Midea's total profit exceeded the statutory maximum limit for compensation. The court of first instance ordered Midea to compensate Gree for its economic loss of RMB2 million  determined based on the facts and evidence of the case. Midea appealed.

    The Guangdong Higher People's Court found in the second instance that parameters were saved in nonvolatile memory chips in the patent for invention involved in the case, which was different from the allegedly violating "Good Sleep Mode 3" in which parameters were saved in the RAM of volatile controller chips. However, in general, batteries would not be taken out in the use of the remote control of air conditioners, that is, the effect of these two different methods was basically the same in actual use of the remote control. General technicians in the same field were able to think of replacing memory chips with RAM of controller chips without any creative work. Therefore, these two methods had equivalent technical features and the allegedly violating technical solution fell under the protective scope of and constituted violation of the patent for invention in the case. Moreover, the Installation Instructions contained the functions of "Good Sleep Mode 3" of the KFR-26GW/DY-V2(E2)air conditioner and indicated that Installation Instructions should apply to the other three types of air conditioners, thus it could be inferred that the other three types of air conditioners also had the same "Good Sleep Mode 3". The four types of air conditions involved in the case fell within the same series with same functions but different powers, which was in line with the industrial common practice. In the absence of evidence to the contrary, it could be inferred through current evidence that the other three types of air conditioners had the same "Good Sleep Mode 3", thus falling under the protective scope of and constituting violation of the patent for invention in the case. As to the specific amount of losses incurred from or profits gained from the violation which were difficult to determine but there was evidence indicating such amount exceeded the statutory maximum amount of compensation, the amount of compensation should be reasonably determined above the statutory maximum amount of compensation based on the facts and evidence of the case. The court of first instance had considered such factors as the type of patent involved in the case, market value, the subjective fault of the violating parties, violation situations, profits being referred to, cost in protecting rights and the amount of compensation were reasonable and appropriate with lawfully recognized evidence. Therefore, the court of second instance rejected the appeal and upheld the original judgment.

 


Process 

    In April 2010, Midea rejected the decision No.13911 made by the Patent Reexamination Board and lodged an administrative litigation to the Beijing No.1 Intermediate People's Court. Gree took part in the litigation as the third party and we proactively responded to the litigation and worked out replies as Gree's agent.

    During the litigation, the main cause of action proposed by Midea included: (1) The composition of Claim 1 was inconsistent with the provisions of Paragraph 1 of Article 20 of the "Implementing Rules for the Patent Law" and the definition of the protective scope of Claim 1 and Claim 2 was indefinite; (2) Claims 1-7 failed to fall under the protection of patent for invention, which was inconsistent with the provisions of Paragraph 1 of Article 2 of the "Implementing Rules for the Patent Law"; (3) Claims 1-7 were inconsistent with the provisions concerning novelty and creativity in Paragraphs 2 and 3 of Article 22 of the Patent Law.


    Bases on Midea's requests, we discussed with Gree's engineers and collected archives related to the application for the patent. We found that the application for the patent was fully consistent with relevant provisions of the Patent Law and its Implementing Rules. First, the first expression of "its features lie in..." in Claim 1 was to define the operating steps included in this method as a whole, and the further expression of "its features lie in..." was to further define the steps for setting up the "customized sleeping pattern" in the operating steps of this method. It indicated that the above two expressions of "its features lie in..." did not lead to the indefinite definition of the protection scope of Claim 1.


    Second, patent examiners found that Claims failed to comply with the requirements on novelty and creativity during the application process and the patent right holder made modifications within the scope of the original Claims to have it comply with the provisions of the Patent Law and was granted the patent right finally. It was unreasonable for Midea to propose the examination opinions as a cause of its action.


    Finally, the patent right holder cited attached materials to prove that Claims of the patent have novelty and creativity and comply with the provisions concerning novelty and creativity in the Patent Law, thus proving the accuracy and validity of the decision made by the Patent Reexamination Board on upholding the validity of the patent.

Results
After joint efforts with Gree, the court of first instance upheld the decision made by the Patent Reexamination Board, and Gree won the administrative litigation.

Comments
    In this case, the court appropriately applied the provisions of related laws and judicial interpretations, rules concerning burden of proof and concerning presumption of fact, and deeply analyzed such difficult legal issues as the recognition of equivalent technical features, determination of the amount of compensation and relation between the actual amount of compensation and the statutory maximum amount of compensation with sufficient and incisive reasoning on the basis of accurately finding the case facts. This case can be a significant reference for courts in the trial of cases of the same kind.

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