*AI-generated translation, for reference only.

Keywords: Civil, infringement of invention patent, method patent implemented by multiple entities, calculation of damages for infringement, burden of proof, patent technology contribution rate

Judgment Digest

If the alleged infringer, for production and business purposes, solidifies the substantive content of the patented method into the accused infringing product, and this act or the result of such act plays an irreplaceable and substantial role in the full coverage of the technical features of the patent claim, such that the end user can naturally reproduce the patented method process during normal use of the accused infringing product, then it should be determined that the alleged infringer has implemented the patented method and infringed upon the patentee's rights.

Where the patentee claims damages calculated based on the infringer's profits from infringement and has already completed the initial burden of proof regarding the scale of infringement, and the alleged infringer, without legitimate reason, refuses to provide corresponding evidence regarding the scale of infringement, resulting in the inability to determine the basic facts for calculating the profits from infringement, the people's court may not support the alleged infringer's defense that the contribution rate of the patent in question to its infringement profits should be considered.

Relevant Legal Provisions

Article 1, Article 11(1), Article 64(1) of the Patent Law of the People's Republic of China (as amended in 2020) (The provisions applicable to this case are Article 1, Article 11(1), and Article 59(1) of the Patent Law of the People's Republic of China as amended in 2008)

Basic Case Facts

The plaintiff, Shenzhen Dunjun Technology Co., Ltd. (hereinafter referred to as Dunjun Company), alleged that Shenzhen Jixiang Tengda Technology Co., Ltd. (hereinafter referred to as Tengda Company) manufactured, offered for sale, and sold without permission, and Jinan Lixia Hongkang Electronic Products Business Department (hereinafter referred to as Hongkang Business Department) and Jinan Lixia Haowei Electronic Products Business Department (hereinafter referred to as Haowei Business Department) sold without permission, multiple models of commercial wireless routers (hereinafter referred to as the accused infringing products) that fell within the protection scope of its invention patent entitled "A Method for Simple Access to Network Operator Portal Websites" (Patent No. ZL02123502.3, hereinafter referred to as the patent in question). It requested the court to order Tengda Company, Hongkang Business Department, and Haowei Business Department to cease infringement and compensate for losses and reasonable expenses incurred in stopping the infringement, totaling RMB 5,000,000.

The defendant, Tengda Company, argued in its defense: 1. The method of achieving redirection when accessing any website is different between the patent in question and the accused infringing products, and the access process is also not equivalent; therefore, Tengda Company did not infringe Dunjun Company's patent rights in question. Furthermore, the patent in question protects a network access authentication method; Tengda Company only manufactured the accused infringing products and did not use the technical solution protected by the patent in question. Therefore, its act of manufacturing and selling the accused infringing products does not constitute patent infringement; 2. The amount of damages claimed by Dunjun Company is excessively high and lacks factual and legal basis; in calculating the damages, the contribution rate of the patent technology and the existence of alternative solutions to the patented technology should be considered.

Hongkang Business Department and Haowei Business Department jointly argued in their defense: The accused infringing products they sold were legally purchased from an agent; they are not the manufacturers of the accused infringing products and should not bear liability.

The court ascertained through trial: Dunjun Company explicitly relied on Claims 1 and 2 of the patent in question to assert its rights, the content of which is: 1. A method for simple access to a network operator portal website, characterized by comprising the following processing steps: A. The underlying hardware of the access server directly submits the first upstream HTTP packet from the portal service user device before authentication to a "virtual Web server," the function of which is implemented by a "virtual Web server" module of the upper-layer software of the access server; B. The "virtual Web server" impersonates the website the user intends to visit to establish a TCP connection with the portal service user device, the "virtual Web server" returns a packet containing redirection information to the underlying hardware of the access server, and the underlying hardware then sends, according to the normal forwarding process, a packet redirecting to the real portal website, Portal_Server, to the portal service user device; C. The browser of the portal service user device, upon receiving the redirection packet, automatically initiates an access to the real portal website, Portal_Server. 2. The method for simple access to a network operator portal website according to claim 1, characterized in that: in said step A, the portal service user inputs any correct domain name, IP address, or any number into the browser to form an upstream IP packet; in said step B, the "virtual Web server" impersonates the website of the IP address of that IP packet.

Dunjun Company purchased one "Tenda Router W15E" and one "Tenda Router W20E Enhanced" from Hongkang Business Department and Haowei Business Department through notarized purchase, and conducted a technical demonstration under the supervision of a notary public of the process of accessing a network operator portal website using the "Tenda Router W15E." The demonstration results showed that the process of using the "Tenda Router W15E" comprised method steps corresponding to Claims 1 and 2 of the patent in question.

The accused infringing products were sold on the official flagship stores of JD.com and Tmall.com (Tenda flagship store) in large quantities. The webpage of JD.com's official flagship store displayed information including images of the "Tenda (Tenda) W15E" router, JD price of RMB 199, cumulative reviews of 10,000+; "Tenda (Tenda) W20E" router, JD price of RMB 399, cumulative reviews of 10,000+; and "Tenda (Tenda) G1" router, JD price of RMB 359, cumulative reviews of 10,000+. The webpage of Tmall.com's Tenda flagship store displayed information including images of the "Tenda (Tenda) W15E" router, promotional price of RMB 179, monthly sales of 433, cumulative reviews of 4342, installation instructions, and technical support.

On December 13, 2018, the first-instance court lawfully issued a notice, the main content of which was: Tengda Company was ordered to submit to the first-instance court within 10 days complete materials and complete financial books regarding the production and sales of the "router" products in question since July 2, 2015. Failure to submit within the time limit would result in corresponding legal liability. However, up to the time the second-instance judgment was rendered, Tengda Company did not submit the relevant evidence.

Judgment Result

The Intermediate People's Court of Jinan, Shandong Province rendered the civil judgment (2018) Lu 01 Min Chu No. 1481 on May 6, 2019: 1. Tengda Company shall immediately cease manufacturing, offering for sale, and selling the router products in question; 2. Hongkang Business Department and Haowei Business Department shall immediately cease selling the router products in question; 3.Tengda Company shall compensate Dunjun Company for economic losses and reasonable expenses totaling RMB 5,000,000 within ten days from the effective date of the judgment; 4. Dunjun Company's other claims are dismissed. The acceptance fee for the first instance of RMB 46,800 shall be borne by Tengda Company. After the judgment was pronounced, Tengda Company appealed to the Supreme People's Court. The Supreme People's Court rendered the civil judgment (2019) SPC IP Civil Final No. 147 on December 6, 2019, dismissing the appeal and upholding the original judgment.

Judgment Reasons

The Supreme People's Court holds that: The issues in this case focus on three aspects:

I. Whether the usage process of the accused infringing products falls within the protection scope of the claims of the patent in question

First, the "first upstream HTTP packet" in Claim 1 of the patent in question should not be interpreted as the first packet during the TCP "three-way handshake" connection establishment process between the user device and the actual website it intends to visit, but should be interpreted as the first upstream HTTP packet sent by an unauthenticated user device to the access server. Second, according to the results of the notarized test conducted on the accused infringing products, the forced Portal process of the accused infringing products is the same as the steps and method defined in Claims 1 and 2 of the patent in question. The usage process of the three models of accused infringing products in the "Web authentication enabled" mode all fall within the protection scope of Claims 1 and 2 of the patent in question.

II. Whether the accused infringing acts of Tengda Company constitute infringement

In determining patent infringement for methods in the field of network communications, full consideration shall be given to the characteristics of this field, and the innovation and development rules of this field shall be fully respected, to ensure the substantive protection of the legitimate rights of the patentee and achieve sustainable innovation and fair competition in this industry. If the alleged infringer, for production and business purposes, solidifies the substantive content of the patented method into the accused infringing product,and this act or the result of such act plays an irreplaceable and substantial role in the full coverage of the technical features of the patent claim, meaning that the end user can naturally reproduce the patented method process during normal use of the accused infringing product, then it should be determined that the alleged infringer has implemented the patented method and infringed upon the patentee's rights. In this case: 1. Although Tengda Company did not implement the patented method in question,it manufactured, offered for sale, and sold the accused infringing products for production and business purposes, which possess the function of directly implementing the patented method, and played an irreplaceable and substantial role in the process by which end network users completely reproduced the patented method in question using the accused infringing products. 2. The improper benefits obtained by Tengda Company from the acts of manufacturing, offering for sale, and selling the accused infringing products are closely related to the patent in question. 3. Since the act of an end network user implementing the patented method in question using the accused infringing product does not constitute infringement in the legal sense, the patentee's innovation investment cannot obtain due returns from the end network user who directly implements the patented method. If the patentee's interests cannot be compensated, it will inevitably lead to the unsustainability of R&D and innovation activities.On the other hand, as mentioned above, Tengda Company, however, obtained benefits originally belonging to the patentee due to the patent in question, resulting in a serious imbalance in the distribution of benefits, which is unfair. Considering the above factors, under the circumstances of this case, it should be determined that Tengda Company's acts of manufacturing, offering for sale, and selling the accused infringing products are infringing in nature and it shall bear the civil liability for cessation of infringement and compensation for losses.

III. Whether the amount of damages determined in the first-instance judgment is appropriate

Where a patentee claims damages determined based on the infringer's profits from infringement, the scale of infringement constitutes the basic fact for calculating the damages. The patentee bears the initial burden of proof for this basic fact. Where the patentee has already completed the initial burden of proof, and the alleged infringer, without legitimate reason, refuses to provide corresponding evidence regarding the basic fact of the scale of infringement, defenses raised by the alleged infringer, such as that the contribution rate of the patent in question to its infringement profits should be considered, may not be taken into account. Specifically in this case: 1. Dunjun Company claimed damages calculated based on the infringer's profits from infringement, and submitted in the first instance evidence of the quantity and sales price of the accused infringing products sold on the official flagship stores of JD.com and Tmall.com by Tengda Company. Given that the sales quantity and price originated from Tengda Company's own official flagship stores on legitimate e-commerce platforms, the data is relatively credible. Although Tengda Company pointed out the possibility of duplicate counting and false reporting by using cumulative reviews as sales volume, it did not submit concrete evidence. Considering Dunjun Company's ability to provide evidence for this fact, it should be determined that Dunjun Company had completed its initial burden of proof regarding the basic fact of the scale of infringement. 2. In the first instance, based on the preliminary evidence of the scale of infringement it had submitted, Dunjun Company applied for Tengda Company to submit financial books, materials, etc., related to the accused infringing products. The first-instance court also, based on the actual circumstances of the case, lawfully ordered Tengda Company to submit evidence such as complete financial book materials reflecting the production and sales of the accused infringing products, but Tengda Company did not do so. Even after the first-instance court fully supported Dunjun Company's high damage claim of RMB 5,000,000 by applying relevant judicial interpretations, and Tengda Company raised an objection to this in the second instance, Tengda Company still did not submit the relevant financial books and materials. Since there is no objective obstacle preventing Tengda Company from submitting the evidence regarding the scale of infringement in its possession, it should be determined that Tengda Company did not complete the ultimate burden of proof regarding the basic fact of the scale of infringement. 3. Based on the existing evidence, there is reasonable ground to believe that the actual sales quantity of the accused infringing products far exceeds the quantity claimed by Dunjun Company.

In conclusion, when the facts of infringement are relatively clear and the existing evidence shows that Tengda Company's actual scale of infringement far exceeds the scope of damages claimed by Dunjun Company, if Tengda Company objects to the full amount of damages determined by the first-instance court, it must first make a substantive defense on whether the basic facts relied upon by Dunjun Company for calculating the damages are objective and accurate. It cannot avoid discussing the basic fact of the scale of infringement and separately assert other defenses such as the patent technology contribution rate. Accordingly, all of Tengda Company's defense arguments in the second instance that the amount of damages determined in the first instance is excessively high are not entertained.