Anti-Suit Injunction
2021-04-22 Published by:Editor

Recognition and execution of a patent-infringement-related foreign judgment could be blocked in China by a counter-party based on a motion for anti-suit injunction. Article 101 of the PRC Civil Procedure Law entitles a right holder or an interested party, in an emergency situation, to seeking act preservation measure with a Chinese court at location of either preserved property, a domicile of the respondent to the petition or a court with jurisdiction over the case. The act preservation measure could be either a preliminary injunction, an injunction, a reverse injunction or an anti-suit injunction, which obliges the respondent to take an action or inaction. In practice, the court would grant a motion for act preservation measure only if the loss to the right holder meets the threshold of “irreparableness” under the law. However, the right holder or the interested party has the burden of proving its irreparable damage due to its failure to secure a motion for the preliminary preservation measure. According to Article 10 of the Provisions on Several Issues concerning Application of Law in Trial of Cases Involving Act Preservation in Intellectual Property Disputes issued by the Supreme People’s Court (“SPC”) on November 26, 2018, the “irreparable damage” arising from infringement in intellectual property and unfair competition disputes includes: (i) irreparable damage to the petitioner as to its rights of goodwill, publication or privacy or other personal rights, (ii) irreparable damage to petitioner which could be both unmanageable and significantly aggravated, (iii) irreparable damage to petitioner as to its significant loss of market share, or (iv) other irreparable damages to the petitioner.

Anti-suit injunction as an act preservation measure, in particular, could prevent a respondent from seeking execution of a foreign judgment in China. Such act preservation measure has foreign-related elements, involving recognition and execution of a foreign judgment in addition to preservation measure requiring the respondent not to take any action. With respect to the anti-suit injunction relief against enforcement of a foreign judgment, the SPC has addressed the issue in its judgments over three appeal cases (i.e. (2019) SPC Zhi Min Zhong No. 732, 733 and 734, Conversant Wireless Licensing S.à.r.l (the appellant) v. Huawei Technologies Co., Ltd., Huawei Device Co., Ltd. & Huawei Software Technology Co., Ltd. (the respondents)) on declaration of non-infringement in patent disputes over standard essential patent license matter. The Supreme Court reiterates that the courts at all levels should comprehensively evaluate multiple factors in trial of similar cases prior to judgment. The factors shall include but not limited to the following: (1) whether the respondent’s application for enforcing the foreign judgment would have substantive impact on the trial and adjudication of the parallel lawsuit in China. The court should evaluate the issues on whether the subjects involved in the foreign and Chinese lawsuits are basically the same, whether there is an overlap of trial objects, whether the effect of the respondent’s foreign litigation interrupts the corresponding lawsuit in China, etc.; (2) whether an act preservation measures is virtually necessary. In respect of necessity, the court should focus on whether failure to take act preservation measure would cause irreparable damage to the petitioner as to its legitimate rights and interests, or cause any difficulty in enforcing the ruling of the domestic case in China, or other damages. The damages include both tangible and intangible ones, including but not limited to the loss of commercial opportunities and market interests, include any damage as to both economic interests and interests in lawsuit, and include any other damage as to its interests in either China or overseas; (3) whether the damage to the petitioner without the act preservation measure exceeds the damage to the respondent with the act preservation measure; (4) whether act preservation measure would compromises public interests; (5) whether act preservation measure conforms to the principle of international comity. The international comity principle requires the court to evaluate the factors such as the time sequence of case acceptance, the proper excising of jurisdiction, and the impact on trial and adjudication held by the foreign court, etc.; and (6) other essential factors to be considered.

Additionally, a positive and reverse act preservation measure is applicable to all types of business models including e-commerce platforms for patent infringement matter provided that the threshold of “irreparable damage” is satisfied. Whether a preliminary injunction or an injunction motion satisfies the criteria of “irreparable damage” in patent infringement involving an e-commerce platform, the court would regard an unmeasurable but huge loss as “irreparable damage” and grant a motion for injunction. In the utility model patent infringement dispute case Yongkang Lianyue Industry and Trade Co., Ltd., Zhejiang Xinghao Plastics Co., Ltd. (the appellor) v. Cixi Bosheng Plastic Products Co., Ltd.(the appellee), Zhejiang Tmall Network Co., Ltd. and Xie Hui (the defendants of the original trial) (Case No.: (2020) SPC Zhi Min Zhong No. 993), the Supreme Court holds that, in a patent infringement dispute involving e-commerce platform, where the alleged infringer applies for act preservation, requesting the court to order the platform operator to take cease & desist measures such as deleting, shielding, disconnecting links and terminating deals and services, the court should review and grant the motion if proper. Upon determination of “irreparable damage,” the court should evaluate whether rejection of a motion for an act preservation measure would seriously damage the applicant’s reputation, good will and other rights, or cause significant damage to the applicant’s competitive edge in the market or great loss of its business opportunities. Even if pecuniary compensation is available for the relevant damage, the “irreparable damage” could still be established if the loss is huge and the compensation is unmeasurable. However, a mixed form of fixed and dynamic security deposit is required in order to cover any possible loss due to the wrongful act preservation. The dynamic security deposit could be calculated according to prospect profits gained after the above measure is estopped by the e-commerce platform. 

Act preservation is a mandatory measure taken by the court to protect procedural and substantive rights of the right holder. Any respondent’s failure to honor the court’s will be deemed as obstructing justice and subject to penalties as set forth in Article 111 of the Civil Procedure Law. Given the powerful characteristic of act preservation measures that prohibit the respondent from taking specific action, the SPC precisely holds in the above three appeal cases ((2019) SPC Zhi Min Zhong No. 732, 733 and 734), if the respondent refuses to observe its inaction obligation granted in the act preservation ruling and illegally makes change in the status quo, it would be viewed as intentionally continuous violation of the act preservation measure and furthering change in the status quo. Hence, the respondent would be subject to penalty upon finding its guilty for justice obstruction. The fines would be imposed on a daily basis according to the seriousness of the illegal act. The imposition of fines for dishonoring the court ruling could be applied to other types of violation in relation with the act preservation measures.

The Supreme Court’s Decisions as discussed above show the tendency of judicial practice in China, which would have impact on the patent-infringement-related matters in the coming years.

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