Claiming costs to defend a parallel patent invalidation case? China’s Supreme People’s Court rules ‘no’

Xiaoxia Zhang examines the outcome of a long-running IP dispute between electrical companies relating to a claim for legal costs. The Supreme People’s Court of the People’s Republic of China (SPC) has ruled out including the legal costs of defending a patent invalidation petition as part of the “reasonable expenses” of a patentee.

After a dispute running for several years, the Supreme People’s Court of the People’s Republic of China (SPC) has given a clear “no” in response to a patentee’s claim for legal costs. Specifically, the patentee had claimed that their legal costs of defending a patent invalidation petition were part of the “reasonable expenses” in their later patent infringement case.

Jinnuo Co., Ltd makes electrical machineries and equipment. Jinli Co., Ltd makes tapping switches for transformers. 

In July 2019, Jinli filed an invalidation petition before the China National Intellectual Property Administration (CNIPA) relating to a patent for a tapping switch for a triangular transformer (Chinese CN201611245881.9). After examination, the CNIPA confirmed the patent was valid.

In March 2021, Jinnuo sued Jinli and others for infringement of the asserted patent before the Suzhou Intermediate People’s Court of Jiangsu Province (the first-instance court). Jinnuo claimed that its reasonable expenses included the attorney fees incurred in the earlier patent invalidation proceeding.

In December 2021, the first-instance court supported Jinnuo’s claim, considering the close relationship between the patent invalidation proceeding and the patent infringement case.

In June 2022, Jinli appealed to the SPC.

The SPC overturned the ruling, holding (in (2022) Zuigaofa Zhiminzhong No. 1165):

1. After a patent is granted, according to the Patent Law of People’s Republic of China, any entity or individual can file a petition to the CNIPA to declare a patent invalid (a patent invalidation petition). The accused infringer in the patent infringement case is among entities or individuals eligible to file a petition.
2. The annual fees paid by the patentee following the provisions of the Patent Law and the attorney fees incurred in the invalidation proceeding of the patent are all necessary expenses to maintain the existence and validity of the patent.
3. The reasonable expenses are those expenses incurred to stop the illegal infringing acts. Filing a patent invalidation petition is within the petitioner’s legitimate rights, which does not belong to an illegal act that causes the patentee to incur expenses for patent rights enforcement.

Therefore, the expenses incurred in the patent invalidation proceeding – regardless of whether the petitioner is the accused infringer or not – do not belong in the reasonable expenses of the patentee in a patent infringement case.