China’s Supreme Court Published New Guiding Cases in IP – Part I: Liability of E-Commerce Platform in Patent Infringement

By: Han-Mei Tso and Jude Yi

In March 2017, the Supreme People’s Court of China (the Supreme Court) published its 16th set of guiding cases, including 10 intellectual property (IP) cases. It is worth noting that since the first set of guiding cases published in 2012, there were only five IP guiding cases until March 2017. This time, the Supreme Court published 10 IP related cases in March 2017, which is twice as many as the number published in the past five years.

Among the 10 IP guiding cases, two relate to unfair competition, two relate to copyright infringement, two relate to trademark infringement, one involves infringement of new variety of plants, and three relate to patent infringement, including one design patent. Here we will discuss the three patent-related guiding cases in three separate articles and closely observe the trends of the Chinese courts with respect to patent litigation.

Guiding Case No. 83: Weihai Jia Yi Kao Household Electronics Appliances Co., Ltd. v. Zhejiang Tmall Network Co., Ltd. et al.

Weihai Jia Yi Kao Household Electronics Appliances Co., Ltd. (Jia Yi Kao) is the patentee of Chinese Invention Patent No. ZL200980000002.8, titled “Infrared Heating Cooking Device,” which was issued on November 5, 2014 (the patent-in-suit). In 2015, Jia Yi Kao found that Yongkang Jinshide Industry and Trade Co., Ltd. (Jinshide) sold infrared cookers that infringed the patent-in-suit on Tmall, a business-to-consumer retail platform of the Alibaba group, which was spun off from Taobao. Jia Yi Kao submitted a complaint of infringement, including a patent infringement analysis report and a technical feature comparison chart to the Taobao IPR Protection Platform. However, Tmall rejected Jia Yi Kao’s infringement complaint because the IPR protection platform determined that Jia Yi Kao’s complaint lacked a detailed infringement analysis. Subsequently, Jia Yi Kao filed a lawsuit against Jinshide for patent infringement. In the same litigation, Jia Yi Kao sued Tmall for failing to take effective measures after Jia Yi Kao complained of patent infringement, claiming that as the co-infringer, Tmall should bear the liability for the infringement jointly and severally with Jinshide.

In the first trial, the Jinhua Intermediate People’s Court (the Court) found that Jinshide infringed on Jia Yi Kao’s patent. However, the main point of dispute in this case was whether Tmall should bear joint liability as the e-commerce platform and the internet service provider. Tmall argued that since it was neither the manufacturer nor the seller of the infringing products but merely an online shopping platform, it should not be held liable for the infringement.

According to Article 36 (2) of Chinese Tort Liability Law, after being notified by the right holder of being infringed, an internet service provider must take necessary measures, such as deleting, blocking, or disconnecting the infringing links, to cease the infringement in a timely manner. If the internet service provider fails to take such necessary measures, it should be held jointly and severally liable for any extended damage resulting from that failure.

Before filing the lawsuit, Jia Yi Kao filed a complaint with Tmall; however, Tmall claimed that the complaint was not valid because it lacked a detailed claim comparison chart; thus, Tmall did not notify the seller of the complaint. The Court opined that a valid notice could be either oral or in writing. As long as the notice includes information relating to the identity of the right holder, proof of ownership of the rights, the website address of the alleged infringer, and preliminary evidence of the infringement, it is a valid notice. Moreover, a notice is valid as long as it satisfies the prescribed standard even if it does not comply with the rule set by the e-commerce platform or the internet service provider.

In this case, Tmall chose not to process Jia Yi Kao’s complaint and requested that Jia Yi Kao submit a detailed description of how the accused product was covered by the technical feature of the specific claim in the patent in issue. Tmall also suggested that Jia Yi Kao provide a detailed description along with drawings and explain each infringing technical feature. The Court ruled that since the complaint submitted by Jia Yi Kao included the required information addressed above, Jia Yi Kao’s complaint was a valid notice to Tmall. The detailed claim chart requested by Tmall was not a requirement for the valid notice, although Jia Yi Kao did provide a five-page infringement analysis along with drawings in its complaint.

Once the e-commerce platform receives a valid notice from the right holder, it must take the necessary measures. The Court held that for the purpose of Article 36 (2) of the Tort Liability Law, “necessary measures” are not limited to deleting, blocking, or disconnecting the infringing links. An e-commerce platform should consider the nature of the infringement, the circumstances of the infringement, and available techniques to decide whether a measure is “necessary.” The e-commerce platform needs not necessarily delete every link to an alleged infringing product when it receives a notice of infringement. Rather, it should reasonably and carefully evaluate the notice before deleting and blocking a link.

In this case, the Court ruled that Tmall was not necessarily required to delete or block the infringing link immediately after it received the valid notice from the right holder. Considering the right and interest of the seller on the platform, it is important for the internet service provider to take the necessary measures to handle the accused product carefully and reasonably. However, forwarding the valid notice and complaint materials to the seller and informing the seller to reply to the complaint in a timely fashion was one of the necessary measures Tmall should have taken. Otherwise, the complaint of the right holder would not have any meaning, and enforcement of the patent right on the IPR protection platform would never be fulfilled. As a result, the Court awarded Jia Yi Kao a remedy of RMB150,000 (about US$22,060). Tmall was held jointly liable for RMB50,000 (about US$7,352) of the total damages due to the extended harm caused by its failure to take necessary measures to cease infringement of Jia Yi Kao’s patent right. The Higher People’s Court of Zhejiang Province upheld the decision.

From Guiding Case No. 83, we learn that Chinese courts certainly understand the controlling power of information an internet provider or e-commerce platform has. Although an e-commerce platform may want to maintain operational stability and its users’ interest, it is also important to eliminate infringing conducts and facilitate enforcement of IP right holders. When receiving a valid notice/complaint in connection with patent infringement, the internet service provider or e-commerce platform may want to take necessary measures to process such notices and complaints timely to avoid the risk of bearing joint liability with the potential infringer.

The bottom line is that an internet service provider or e-commerce provider should guarantee that the valid complaint can be transmitted effectively and smoothly to the retailers on the platform. The internet platform should not be the “black hole” into which the complaint disappears. The rule and mechanism set by the online IPR protection system designed by the internet service provider should not become an obstacle or impose an unreasonable burden for patent holders to enforce their rights. Since the final decisions of whether a patent is valid and whether a product infringes on a patent is not based on the authority of e-commerce platforms and the business decision of whether to continue or suspend sales of accused products is sometimes made by the seller, it will be appropriate and meaningful for an internet service provider to promote communication between the patent holder and the potential infringer. Thus, various patent disputes may be resolved at the private level before they are elevated to the court, which is sometimes unnecessary.