*AI-generated translation, for reference only.

Recently, the Intellectual Property Tribunal of the Supreme People's Court rendered a final judgment in a dispute over infringement of an invention patent right, clarifying that where the patent holder adduces evidence or provides a reasonable explanation establishing, on the balance of probabilities, that the manufacturer of the infringing products possesses or controls molds dedicated to the manufacture of such infringing products, and the infringing manufacturer fails to submit sufficient rebuttal evidence, the people's court may grant the patent holder's claim for destruction of the molds.

Yuan [REDACTED] Tao is the patentee of an invention patent titled "Joint Movement Support Brace" (hereinafter referred to as the "Patent at Issue"). He filed suit alleging that [REDACTED] Company A, without authorization, manufactured, sold, and offered to sell products falling within the scope of protection of the Patent at Issue (hereinafter referred to as the "Accused Infringing Products"), thereby constituting infringement. He further alleged that after he sent a cease-and-desist letter, [REDACTED] Company A continued to sell the Accused Infringing Products, causing him substantial economic losses. He requested the court to order [REDACTED] Company A to immediately cease all infringing acts, including the manufacture, sale, and offering for sale of joint brace products infringing the Patent at Issue; to remove the sales listings of the Accused Infringing Products; to destroy the inventory of the Accused Infringing Products and the production molds; and to pay economic damages and reasonable costs of rights protection totaling RMB 800,000. [REDACTED] Company A argued in its defense that the Accused Infringing Products did not fall within the scope of protection of the Patent at Issue.

The court of first instance held that the Accused Infringing Products fell within the scope of protection of the Patent at Issue and constituted infringement. It ruled that [REDACTED] Company A shall cease the infringement and pay damages of RMB 80,000 (inclusive of reasonable costs of rights protection). However, the court found that the evidence submitted by Yuan [REDACTED] Tao was insufficient to establish that [REDACTED] Company A held inventory of the Accused Infringing Products and production molds, and therefore did not uphold Yuan [REDACTED] Tao's claims for destruction of the inventory and production molds. Yuan [REDACTED] Tao, dissatisfied with the judgment, filed an appeal, arguing that [REDACTED] Company A had engaged in willful infringement and that the damages awarded at first instance were too low, requesting that the judgment be modified to order [REDACTED] Company A to pay RMB 400,000 in damages and to destroy the molds used for manufacturing the Accused Infringing Products. [REDACTED] Company A also filed an appeal, arguing that the Accused Infringing Products did not fall within the scope of protection of the Patent at Issue and that the damages awarded at first instance were excessive, requesting reversal of the first-instance judgment and dismissal of all of Yuan [REDACTED] Tao's claims.

During the second-instance proceedings, Yuan [REDACTED] Tao submitted new evidence demonstrating that a customer service representative of [REDACTED] Company A had admitted that production molds existed for the Accused Infringing Products. [REDACTED] Company A argued in its defense that the Accused Infringing Products were manufactured by a third party under a contract manufacturing arrangement, and that the molds were held at the contract manufacturer's facility, not possessed or controlled by [REDACTED] Company A. After the court provided clarification and direction, [REDACTED] Company A failed to substantiate its assertions.

The Supreme People's Court, in its second-instance judgment, found that the accused infringing technical solution fell within the scope of protection of the Patent at Issue and constituted infringement. The Court affirmed the first-instance ruling ordering cessation of the infringement, modified the judgment to order [REDACTED] Company A to destroy the dedicated molds used for manufacturing the Accused Infringing Products, and awarded Yuan [REDACTED] Tao economic damages and reasonable costs of rights protection totaling RMB 300,000.

The Court held in the second instance as follows: First, on the question of whether to order the destruction of the production molds for the Accused Infringing Products. Based on the nature and characteristics of the Accused Infringing Products, the business scope and online store promotional information of [REDACTED] Company A, the new evidence submitted by Yuan [REDACTED] Tao during the second instance, and the admissions made by [REDACTED] Company A, the Court found it established on the balance of probabilities that dedicated production molds for the Accused Infringing Products existed. [REDACTED] Company A's assertion that the molds were held and controlled by a third party placed the burden of proof on [REDACTED] Company A, and its failure to discharge that burden warranted adverse consequences. After the Court provided clarification and direction, [REDACTED] Company A failed to adduce evidence; accordingly, it should be determined that the dedicated molds for the Accused Infringing Products were possessed and controlled by [REDACTED] Company A. To prevent the realistic possibility of continued infringement and expansion of the harm caused, and to comprehensively and effectively restrain the infringing acts of [REDACTED] Company A, the Court upheld Yuan [REDACTED] Tao's appeal requesting the destruction of the dedicated molds used for manufacturing the Accused Infringing Products. Second, on the issue of enforcement of the order to destroy the molds. In this case, upon receiving the cease-and-desist letter issued by the right holder, [REDACTED] Company A failed to respond actively and continued to carry out the accused infringing acts. In particular, even after the Court's clarification and direction during the second-instance proceedings, [REDACTED] Company A still failed to actively fulfill its litigation obligations, refusing to disclose and provide evidence regarding specific information about the dedicated molds used for manufacturing the Accused Infringing Products. Therefore, there existed a realistic possibility that [REDACTED] Company A would continue to commit, or through third parties continue to commit, infringing acts after the Court's judgment. In order to effectively and specifically prevent the continuation of infringement and the expansion of harm, to urge [REDACTED] Company A to assume the infringement liability established in this judgment in accordance with law, and to effectively prevent the recurrence of infringing acts, it was necessary to impose a penalty for delayed performance in connection with [REDACTED] Company A's obligation to destroy the molds.

The second-instance judgment in this case further clarified the adjudicative approach to the question of whether to order the destruction of dedicated molds used to manufacture accused infringing products in patent infringement litigation. By additionally imposing a penalty for delayed performance, the judgment urges the accused infringer to actively comply with the effective judgment and effectively prevents the continuation of infringing acts and the expansion of the resulting harm, reflecting a clear orientation toward "robust protection" of intellectual property rights and achieving a unity of legal effect and social effect.

Written by: ZUO Huiling, WU Hongjing