*AI-generated translation, for reference only.

[Keywords]

Civil; Liability for damages caused by intellectual property litigation of bad faith , Malicious litigation, Legal basis, Knowing, Damage compensation.

[Judgment Digest]

If one initiates a patent infringement lawsuit against another knowing that his claim is obviously lacking in a legal basis or factual grounds, thereby infringing upon the rights and interests of the other party, such conduct shall be regarded as a malicious litigation involving the abuse of litigation rights. Where the other party requests bad faith litigant to bear the tort liability, the people's court shall support such request in accordance with the law.

[Case Facts]

Quanzhou Ri [REDACTED] Flow Instrument & Meter Co., Ltd. (hereinafter referred to as "Ri Instrument Company") is the patentee of the utility model patent with the authorization date of November 1, 2000 and the title of "Built-in Digital Target Flowmeter" (hereinafter referred to as the "patent in dispute"). On March 1, 2006, the official website of China National Intellectual Property Administration published an announcement that the patent right in dispute had been terminated due to non-payment of annual fees. On May 23, 2006, Ri Instrument Company filed a lawsuit with the Intermediate People's Court of Quanzhou, Fujian (hereinafter referred to as the "first lawsuit"), claiming that it had discovered in 2005 that Fujian Heng [REDACTED] Technology Co., Ltd. (hereinafter referred to as "Heng Technology Company") was manufacturing and selling the "Intelligent Target Flowmeter", which infringed the involved patent, and requested that Heng Technology Company cease infringement, apologize, eliminate the negative impact, and compensate for economic losses of 200,000 yuan (RMB, the same below) and reasonable expenses for rights maintenance of 25,000 yuan. On November 7, 2006, the Intermediate People's Court of Quanzhou, Fujian, made the civil judgment (2006) Quan MC 230 , determining that the actions of Heng Technology Company did not infringe the involved patent, and dismissing all the litigation requests of Ri Instrument Company. Ri Instrument Company was dissatisfied and appealed. On March 20, 2008, the High People's Court of Fujian made the civil judgment (2007) Min MZ 23 , dismissing the appeal and upholding the original judgment. Ri Instrument Company was dissatisfied and applied to the Supreme People's Court for a retrial. On November 14, 2008, the Supreme People's Court made the civil ruling (2008) MS 504 , instructing the High People's Court of Fujian to retry the case. On December 20, 2014, the High People's Court of Fujian made the civil judgment (2009) MZ Final 4 , determining that the actions of Heng Technology Company constituted infringement of the involved patent, and thus revoked the first-instance judgment and ordered Heng Technology Company to cease infringement and compensate Ri Instrument Company 125,000 yuan.

On December 25, 2015, Ri Instrument Company filed a lawsuit again with the Intermediate People's Court of Quanzhou, Fujian (hereinafter referred to as the "Second Lawsuit"), claiming that Heng Technology Company had still been producing and selling products that infringed the patent rights involved in the case in large quantities from the time it was first sued in May 2006 to 2010, and requested that Heng Technology Company compensate it for economic losses of 3.5 million yuan. Heng Technology Company submitted evidence that the patent rights involved in the case had been announced to be terminated by China National Intellectual Property Administration on March 1, 2006. On May 23, 2016, Ri Instrument Company applied for withdrawal of the lawsuit. On May 25, 2016, the Intermediate People's Court of Quanzhou, Fujian made the Civil Ruling (2016) MC 17-1, allowing Ri Instrument Company withdraw the lawsuit.

On January 4, 2017, Ri Instrument Company filed an administrative lawsuit with the Beijing Intellectual Property Court due to dissatisfaction with the termination of the relevant patent rights by China National Intellectual Property Administration. On July 2, 2018, Ri Instrument Company requested to withdraw the lawsuit. On July 6, 2018, the Beijing Intellectual Property Court issued an administrative ruling (2017) Jing 73 XC 31 in the administrative case, granting Ri Instrument Company's request to withdraw the lawsuit.

On May 27, 2019, Ri Instrument company filed a lawsuit (hereinafter referred to as the third lawsuit) with the Intermediate People's Court of Fuzhou, Fujian against the alleged infringement in the second lawsuit, requesting that Heng Technology Company compensate for its economic losses of 4.5 million yuan. The Intermediate People's Court of Fuzhou, Fujian ruled to transfer the case to the Intermediate People's Court of Xiamen, Fujian for jurisdiction. On June 4, 2020, Ri Instrument Company requested to withdraw the lawsuit. The Intermediate People's Court of Xiamen, Fujian made a civil ruling (2020) Min 02 MC 346 on June 10, 2020, granting Ri Instrument company's request to withdraw the lawsuit.

On July 8, 2020, Ri Instrument Company filed a lawsuit with the Intermediate People's Court of Xiamen, Fujian with the same requests and reasons as in the previous lawsuit (hereinafter referred to as the "Fourth lawsuit"). The Intermediate People's Court of Xiamen, Fujian made the civil judgment (2020) Min 02 MC 963 on February 8, 2021, dismissing all the litigation requests of Ri Instrument Company. Ri Instrument Company was dissatisfied and appealed to the Supreme People's Court， but failed to pay the case filing fee in accordance with the law and applied to withdraw the appeal. The Supreme People's Court made the civil ruling (2021) IP Civil Final 921 on June 9, 2021， determining that this case would be deemed as automatic withdrawal of appeal.

In January 2022，Heng Technology Company filed this lawsuit with the Intermediate People's Court of Xiamen, Fujian, claiming that Ri Instrument Company maliciously filed the third and fourth lawsuits despite knowing that the patent rights involved had been terminated，thereby damaging the legitimate rights and interests of Heng Technology Company, and requested that Ri Instrument Company apologize to Heng Technology Company, compensate for economic losses and reasonable expenses for right maintenance totaling 500,000 yuan.

[Judgment]

On July 8, 2022, the Intermediate People's Court of Xiamen, Fujian, issued civil judgment (2022) Min 02 MC 151, ruling that Ri Instrument Company should compensate Heng Technology Company for economic losses and reasonable expenses for rights maintenance amounting to 60,000 yuan. The judgment also rejected Heng Technology Company's other litigation requests. After the judgment was announced, Ri Instrument Company appealed to the Supreme People's Court. On October 30, 2023, the Supreme People's Court issued (2022) SPC IP Civil Final 1861: The appeal was rejected and the original judgment was upheld.

[Judge's Opinion]

The main point in this case is whether the claim made by Heng Technology Company that Ri Instrument Company filed the third and fourth intellectual property lawsuits with the intention of maliciously pursuing litigation is valid, and if so, what liabilities should be borne.

In this case, the key to examining whether the third and fourth lawsuits filed by Ri Instrument Company constitute malicious litigation lies in determining whether they knew that the lawsuit lacked a legal basis and factual grounds but still filed patent infringement lawsuits, and whether there was malice in causing the damage consequences.

Firstly, the patent rights involved were officially terminated on March 1, 2006, and the termination status has been confirmed. The third and fourth lawsuits clearly lack a legal basis. The Ri Instrument Company failed to pay the patent annual fees as required, and the patent rights were announced to be terminated by the China National Intellectual Property Administration on March 1, 2006. Although the Ri Instrument Company was dissatisfied with the decision of the China National Intellectual Property Administration to terminate the patent rights and filed an administrative lawsuit on January 4, 2017, it withdrew the lawsuit in July 2018. The state of the patent rights not being protected by law has already been determined.

Secondly, the Ri Instrument Company was aware that its filing of the third and fourth lawsuits lacked a legal basis. The Ri Instrument Company admitted that it knew about the termination of the patent rights (during the second lawsuit in May 2016) and thus withdrew the lawsuit. Its third and fourth lawsuits were all against the actions of Heng Technology Company after the termination of the patent rights. Its lawsuits clearly lacked a legal basis. At the same time, the Ri Instrument Company entrusted lawyers to represent it in the third and fourth lawsuits. The Ri Instrument Company should have had a clear understanding of the lack of legal basis for its lawsuits. In this situation, it still filed patent infringement lawsuits, which can be regarded as its intended or was indifferent to Heng Technology Company to suffer damages due to the lawsuits.

Thirdly, the third and fourth lawsuits filed by Ri Instrument Company have caused losses to others. As the third and fourth lawsuits initiated by Ri Instrument Company required Heng Technology Company to bear expenses such as legal fees for responding to the lawsuits; in the fourth lawsuit, due to the application by Ri Instrument Company, property preservation were taken against Heng Technology Company, which also caused losses to Heng Technology Company; in addition, Heng Technology Company has provided evidence that in several bidding activities it planned to participate, the tendering parties required the absence of intellectual property disputes. Heng Technology Company lost the bidding opportunities due to the lawsuit filed by Ri Instrument Company. All these losses were caused by the third and fourth lawsuits filed by Ri Instrument Company, and they should be regarded as tort damage.

In conclusion, Ri Instrument Company, knowing that its lawsuit lacked a solid legal basis, still filed the third and fourth lawsuits, which is an act of abusing litigation rights to harm the legitimate rights and interests of others. It should be determined as malicious litigation. Heng Technology Company has suffered losses including the loss of business opportunities, payment of litigation fees, and inability to use the property that was subject to preservation. Ri Instrument Company should bear corresponding tort liability according to law. Since Heng Technology Company did not file an appeal, that is, it does not dispute the amount of damages in the first instance judgment, the second instance will not be adjusted.

[Legal Provision]

Article 120, Article 1165, and Article 1184 of the Civil Code of the People's Republic of China