The number of patent infringement litigation cases increases continuously in China，attributing to the improvement of the intellectual property protection environment. According to "The Status of Intellectual Property Protection in Chinese Courts (2018)", there were 21,699 first-instance patent cases filed by local people's courts in 2018. As patents have become one of the core competitive tools for the innovative enterprises in China, how should patent holders effectively protect patent rights and what aspects should IP managers of the enterprises focus on? Enlightenment for these questions has been given by the patent right protection strategy of the Japanese company MTG.
The MTG company，which established in Japan in 1996 and has been devoted to the beauty and health industries, produces uniquely attractive beauty products. According to China Judgment Online and Opanlaw, nearly 20 lawsuits against design patent infringement have been filed and mostly won in China by MTG. In this paper, we investigated MTG’s patent right bases used in patent right protection, the selection of the accused infringers and the strategies adopted in litigation, etc., in order to provide useful references for the IP managers of the innovative enterprises.
MTG is highly active in infringement litigation in China. MTG's patents used for right protection were mostly filed in 2011-2014, and the related infringement litigations were filed in 2016, which implies that MTG's tolerance for infringement behavior is relatively low. The infringement litigations filed by MTG were mainly aimed at small commodity producers in Guangdong and Zhejiang Provinces and after the litigations, infringement behavior was effectively reduced.
MTG's litigation winning rate is particularly high. Among the nearly 20 design patent infringement lawsuits, MTG only lost in one case due to the defendant's prior art defense. MTG won all the rest litigation cases and were consistently supported by the second instance courts.
However, MTG usually received relatively small amount of compensation. MTG's compensation requests were often more than 1 million RMB, but in contrast, the first instance court's judgement for the compensation were normally less than 350,000. Only Beijing Intellectual Property Court made a high compensation judgement of 3.11 million.
Generally speaking, MTG is prone to file infringement lawsuits, even if the amount of compensation awarded by the court usually falls behind expectation.
The patents used to file infringement lawsuits must have high stability in order to ensure that the subsequent lawsuits can proceed successfully.
The types of the patents applied by MTG in China cover inventions, utility models and designs, but the infringement lawsuits of MTG is mostly based on designs. The design patents related to facial beauty rollers (such as CN201230103787.6, CN201130162283.7, CN201430203308.7, and CN201330568776.X) are used in most of the MTG's infringement lawsuits, and these patents are still in valid status. The representative drawings of these design patents are shown as below.
MTG developed the first-generation beauty roller ReFa as early as 2009, which began to sell in February 2009 in Japan. According to the search result in patent databases such as J-Platpat and CNIPR, very few companies or individuals applied for similar design patents within the same period except MTG. It implies the originality of the patent holder and the high stability of the patents used by MTG for right protection.
When MTG filed an infringement lawsuit, it would submit the "Design Patent Right Evaluation Report" made by China National Intellectual Property Administration(CNIPA) to the court, in which the conclusions uniformly showed that the design patents did not consist of any defects that compromised the patent validation. Voluntarily submitting the "Patent Right Evaluation Report" is necessary and recommended, because the report can counter the defendant's request to suspend the trial or the defendant's prior art defense.
However, if the conclusion of the "Patent Right Evaluation Report" is negative, it will adversely affect the subsequent infringement lawsuit. Therefore, it is recommended that the patent holders evaluate the possibilities of the conclusion of the "Patent Right Evaluation Report" in advance. Of course, if considering that the conclusion of the "Patent Right Evaluation Report" is incorrect, the patent holders can make a correction request, and the report will be reviewed by a review team in CNIPA. However, it is not the ideal situation that patent holders have to go through the reviewing procedure instead of prejudging the stability of the patent in advance.
How can patent holders monitor the infringers and infringing products in the market? As can be seen from the cases of MTG, it employed diverse methods and channels.
Ø E-commerce websites/APPs: Taobao, T-mall, JD.com, Suning.com, Pinduoduo, etc.
This type of e-commerce websites/APPs exhibits multitudinous products presenting to a large amount of population in China. These websites are mainly used for personal shopping or group buying and almost all these websites support image search, meaning that product photos can be uploaded to automatically find out similar products, which provides great convenience for monitoring infringing products. At the same time, the sale number or comment number of each product can be easily retrieved on the website as one of the calculation basis of the infringer’s profit.
MTG provided evidence obtained from e-commerce sources in the infringement lawsuits against Shenzhen Regis, Shenzhen Kakushang and Pingyang Meixuan. E-commerce websites/APPs are probable to be one of the channels for MTG to monitor infringing behavior.
Ø Sale-by-bulk websites/APPs: Alibaba (1688), HC Network, etc.
Such sale-by-bulk websites are mainly used by small and medium-sized enterprises to publish product information, and meanwhile can also be used by individual consumers. If the infringer releases product information on such websites, it can be used as evidence of sales or promised sales.
MTG provided evidence obtained from sale-by-bulk websites in the infringement lawsuits against Shenzhen Regis, Shenzhen Kakushang, Guangzhou Shengjiemei, Nanhai Jinyimei, Xiangqin Plastics and Pingyang Meixuan. These sale-by-bulk websites are also very likely to be the channels by which MTG monitors infringement.
Ø Search engines
The search engines can be another channel in order to monitor the manufacturing and sale information of related products posted on the network.
In the infringement lawsuit against Shenzhen Kakushang, MTG provided the notarial certificate which recorded the infringement fact retrieved from the search engines. Therefore, it is possible of MTG obtaining clues of infringement by search engines.
Ø Manufacturers/sellers’ official websites, WeChat public accounts, Weibo accounts, etc.
Manufacturers/sellers tend to promote their product information on their official websites, WeChat public accounts, Weibo accounts or other online media, by which the infringing products may be exposed. These information can be used as evidence of sales or promised sales.
MTG provided evidence obtained from the official websites, WeChat public accounts and Weibo accounts in the infringement lawsuits against Shenzhen Regis, Shenzhen Kakushang, Guangzhou Shengjiemei, Nanhai Jinyimei and Xiangqin Plastics. Therefore the official websites, WeChat public accounts and Weibo accounts may also be the channels by which MTG monitors infringement behaviors.
Ø Sales market, such as supermarkets, wholesale places
In the physical sales market of related products, it is conducive to collect evidence of selling infringing products directly.
MTG provided evidence obtained from the sales market in the infringement lawsuits against Nanhai Jinyimei, Meiyi Electrical Appliances and Xiangqin Plastics. The physical sales market must be one of the channels for MTG to monitor infringement.
As an important chance to display products and technologies, promoting sales and disseminating brands, most companies attach great importance to participating in exhibitions, and meanwhile provide a favorable channel for monitoring infringers and infringing products. Infringing products and promotional materials can be retrieved directly at the exhibition.
MTG provided evidence obtained from exhibition channels in the infringement lawsuits against Shenzhen Kakushang and Nanhai Jinyimei. Exhibitions must be one of the main channels for MTG to monitor infringement.
Other monitoring channels include websites and promotional materials launched by industry associations concerning related products, such as issued journals and pushed emails.
a) Accused infringers
Chinese companies litigated by MTG include Shenzhen Regis, Guangzhou Shengjiemei, Pingyang Meixuan, Kakushang, etc. The business information and litigation information of these enterprises are shown in the table below.Most of these companies have relatively small amount of registered capital, very few employees, one of which is even an individual industrial and commercial household. But in publicity, these companies are often using the terms of “large amount of sales”, “high output”, and “widely sold”.
It implies that MTG mainly considers whether there is the infringement behavior, rather than the scales volume when choosing which infringer to ligate.
In MTG's lawsuits against companies including Shenzhen Regis, Guangzhou Shengjiemei and Pingyang Meixuan, MTG can only sue these manufacturers because their products are produced and sold all by themselves.
In MTG ’s lawsuits against Shenzhen Kakushang, since Junhong Shangpin is an authorized online distributor of Kakushang, MTG prosecuted the distributor and manufacturer as the joint defendants, asserting that the distributor and manufacturer have joint infringements and should bear joint responsibility of compensation. The advantages of prosecuting distributors and producers as co-defendants are: ① Evidence of infringing products on sale is easier to collect than evidence still in production; ② Patent holders can freely choose the court of jurisdiction to obtain the best judgment result; ③ If the distributor and the manufacturer can be probed to have common intentional infringement behavior, the patent holders can claim that they bear joint liability for compensation.
c) Court of jurisdiction
According to the law, the court of jurisdiction for patent infringement cases is the place of the defendant ’s domicile or the place of infringement.
In MTG's lawsuits against manufacturing companies including Shenzhen Regis, Guangzhou Shengjiemei, Foshan Nanhai Meiyi Electrical Appliances and Xiangqin Plastics, all of which are registered in Guangdong Province, the courts of jurisdiction can only be Shenzhen Intermediate People's Court or Guangzhou Intellectual Property Court. Guangzhou Intellectual Property Court has jurisdiction over the first instance of intellectual property litigation in Guangdong Province outside Shenzhen.
In MTG's lawsuit against Shenzhen Kakushang and Beijing Junhong Shangpin, Kakushang is the manufacturer and Junhong Shangpin is the distributor. Since Junhong Shangpin ’s place of registration (the defendant ’s residence) is located in Beijing, MTG chose Beijing Intellectual Property Court as the jurisdictional court and finally received 3.11 million compensation in this case. By taking producers and distributors as co-defendants and litigating in the court where the distributor is located, local protectionism where the producer is located can be avoided to some extent. Choosing the appropriate jurisdictional court helps to obtain a judgment in favor of the patent holder.
d) Warning letter
Will MTG send a warning letter to the infringer if the infringement is discovered? In the lawsuit between MTG and Foshan Nanhai Meiyi Electrical Appliance Factory, Meiyi Electrical Appliance Factory argued that “If MTG sent a written or oral patent right protection notice to Meiyi Electrical Appliance Factory before the litigation, Meiyi Electrical Appliance Factory would handle the incident more carefully”. It implies that MTG didn’t send a warning letter in most cases.
e) Evidence collection
The evidence provided by the plaintiff in these design patent infringement lawsuits mainly includes subject qualification evidence, infringement fact evidence and damage compensation evidence, among which the infringement fact evidence is the most important evidence. Similar to the channels for monitoring infringers and infringing products, the channels for collecting evidence of infringement fact also include Internet and e-commerce evidence collection, sales site evidence collection, and exhibition evidence collection.
For example, the evidence submitted by MTG in the lawsuit against Foshan Nanhai Jinyimei includes: the defendant's online store in Alibaba, pictures and introduction of the involved product, the defendant's introduction and the corresponding notarial certificates; the notarized product purchased at the sales location; the corporate and product information published on the Internet and the corresponding notarial certificates; the photos taken at the exhibitions, involving infringing products and packaging; the corporate brochures containing pictures and introduction of the infringing products, contact information of the defendant.
Generally speaking, the purchase of infringing products under notarization, which can directly prove that the infringer has committed the act of promising to sell or selling the patented design products, has a high proving power. Notarizing the defendant's official website, Weibo account, WeChat public account and e-commerce introduction, etc., can prove that the defendant has manufactured or promised to sell the design patent products. In order to further improve the proving power, it is also favorable to provide evidence of the administrative investigation and the complaints sent to the e-commerce platform.
f) Litigation requests
MTG’s litigation requests usually include:
Stopping infringements such as manufacturing, selling and promised selling of the patented products;
Destroying infringing molds and existing infringing products;
Retrieving and destroying unsold infringing products from distributers;
Compensating for economic losses and reasonable expenses due to the litigation;
Destroying promotional materials and deleting the online promotional content.
The above-mentioned reasonable expenses include intellectual property service fees, notary fees, translation fees and the cost of purchasing infringing products. It is worth noticing that it is necessary to prove the relevance between the expenses and the litigation, that is, to indicate the case information on the invoice, otherwise it’s difficult to be supported by the court.
g) Cross-examination and debate
During the cross-examination procedure, MTG would challenge the authenticity and openness of some evidence.
In the debate procedure, the focus was mainly concentrated on whether the involved product belongs to the prior art, or whether the involved product falls into the protection scope of the involved patent. Since MTG's products in the lawsuits are all facial beauty rollers, the designs of which are relatively simple, the determination whether it is an infringement is usually of no doubt. Therefore, the debate of the prior art becomes one of the key points during the debate procedure. On the other hand, there were no debate about the support of technical experts and the application of laws.
h) Court’s judgment
MTG's litigation strategy is generally aiming to stop infringement. After winning the lawsuit, the court usually supported the litigation requests of stopping infringement, destroying infringing products, destroying promotional materials and deleting online promotional content. However, in response to MTG’s request for destruction of the specific production equipment and the production molds, the court ruled that MTG did not provide sufficient evidence to prove that the alleged infringer had the specific manufacturing molds and equipment and such requests were not supported.
Regarding the request for compensation, Article 65 of the Patent Law stipulates the calculation order of the compensation amount: ①The actual loss of the patent holder due to the infringement; ②The benefit of the infringer obtained from the infringement; ③The reasonable multiple of the patent licensing fee; ④The court decides at its discretion. In the majority of the MTG’s litigation cases, sufficient evidence to prove the loss of the patent holder or the profit of the infringer is rarely provided, and the judgment of the compensation amount is mostly established at the discretion of the court.
i) Case closing
Most of the infringement lawsuits filed by MTG were settled by judgment. Only one of the existing lawsuits was ended in mediation in the second instance.
Since MTG is mostly the winning party in the first instance, it rarely appeals. However, when MTG refuses to accept the judgment of the first or second instance, it will also file an appeal or even apply for a retrial in the Supreme Court.
After the judgment comes into effect, if the defendant failed to perform in time, MTG will usually apply to the court for enforcement.
In the infringement case of MTG v. Kakushang & Beijing Junhong Shangpin, MTG filed a request to Beijing Intellectual Property Court for the two defendants to jointly compensate 3 million yuan for the economic losses and reasonable expenses, which is supported by the court. It is the most compensation amount achieved so far.
Representative views of the involved product KB-188 and the corresponding patent CN201130162283.7 are shown below.
The main characteristics of this case are
In this case, MTG prosecuted the Internet distributer Beijing Junhong Shangpin Technology Co., Ltd. and the manufacturer Shenzhen Kakushang Technology Co., Ltd. as the joint infringers to Beijing Intellectual Property Court, instead of the court where the manufacturer Kakushang is located, willing to avoid the local influence of Kakushang.
MTG provided sufficient evidence including: ①Notarized purchase of infringing products on Taobao.com; ②Notarized purchase of infringing products on Tmall.com; ③Notarized sales amount and price on Alibaba.com ; ④Notarized Kakushang's official Weibo account; ⑤Notarized purchase of infringing products at the exhibition and photos of the exhibition site.
In this case, although MTG did not prove its actual losses, it provided as much evidence as possible about the profit of the infringers to obtain the court's support. The evidence provided by MTG includes: ①The infringement period as long as 48 months; ②The monthly sales volume on e-commerce platform such as Alibaba and Tmall is about 600 units; ③The difference between the retail price and the wholesale price is equivalent to the profit of each product; ④The defendants declared that a large number of the infringing products were exported to Japan and South Korea, which produce a huge profit which is difficult to estimate.
Considering the defendants’ long-time infringement behavior, the large sales volume, the high sales profit, the efforts of MTG to collect infringement evidence and the defendants’ refusal to provide relevant financial data, the court fully supported the 3 million yuan economic loss claimed by MTG, although the detailed calculation method of MTG was not recognized.
As can be concluded from the MTG litigation cases, the following aspects are recommended to consider if the patent holders tend to protect patent rights actively and successfully:
Ø Clarify the patent right protection goal and persist
Patent holders are recommended to resolutely protect patent rights and fight against patent right infringement. If the goal is merely stopping the infringement behavior, the efficient methods is to complain to the e-commence platform, send warning letters, apply for investigation by the intellectual property bureau or market supervision bureau where the infringer is located ,or file a lawsuit. If acquiring compensation is also a purpose, further evidence collection is required, especially evidence of sales volume.
Ø Establish stable patent right bases
The patent right bases used to file an infringement lawsuit should be stemmed from original or unique technology to avoid patent invalidation or the defendant ’s prior art defense.
Ø Monitor infringement through multi-channels
The infringement can be timely identified by monitoring infringers and infringing products through multiple channels, such as e-commerce platforms, information published on the Internet, the industry association’s information and the relative exhibitions.
Ø Collect evidence comprehensively
Both the evidence proving the infringement behavior and the evidence supporting the compensation amount are critical for different litigation purposes. Evidence collection channels for infringement behavior include notarized purchase of infringing products, notarized information on the Internet and the exhibitions. The main channels for evidence supporting compensation amount include the sales volume of online stores and other commercial information disclosed by the infringers. Normally, if the patent holder provides the evidence and the calculation method of the profit of the infringers, the request for compensation is probably supported by the court.
Ø Choose litigation strategy thoughtfully
The thoughtful selection of appropriate defendants and the jurisdictional court when filing a lawsuit ensure a high winning rate and a relatively ideal amount of compensation.
Ø Appeal consistently if the judgment result fails to meet expectation
If the patent holder has sufficient evidence to prove the existence of the infringement and the infringement has caused significant losses but the court's judgment fails to meet the expectations, it is worth the effort to appeal to a higher court. More requests can still be satisfied through litigation procedure.