Beijing Wei Chixue Law Firm--The Practice of Producing Evidence for the Prior Use Right Defense in Patent Infringement Disputes

Shanji FANG
Attorney-at-law
Beijing Wei Chixue Law Firm

Foreword

As Chinese enterprises’ technological innovation level and their R&D capabilities has grown by leaps and bounds in recent years, it is not uncommon for them to defend based on prior use right in patent infringement disputes.

Protecting a company’s R&D technologies as trade secrets is akin to wielding a double-edged sword. Although trade secret protection shields the technology from public disclosure, it can leave the company in a vulnerable position if its trade secrets are disclosed or independently developed by a third party, who subsequently patents the technology. In these circumstances, the company that firstly developed the technology but refrained from patenting it often finds itself at the risk of being accused of infringement. At this juncture, the company can assert prior use right defense against infringement liability and ensure the continued implementation of the technology within the original scope.

The prior use right system aims to balance the interests of patentees and the public. It safeguards the rights of entities that had already completed substantial technological R&D, implemented relevant technologies, or made requisite preparations for implementation prior to the patent application date. Ensuring these entities’ prior use rights prevents them from facing undue restrictions due to subsequent patent grants, thus securing the continuous advancement of technological innovation and fostering fair competition in the market.

In judicial practice, however, a defense based on prior use rights does not have a high success record. The reason lies in the considerable difficulty in producing evidence for the prior implementation before the patent application date. Based on patent law and current judicial practice, this article intends to provide some advices on how companies should produce evidence for the prior implementation to successfully establish a defense based on prior use rights.

I. Conditions for Establishing a Defense Based on the Prior Use Right in Patents

The prior use right in patents refers to a defense right, where an entity who had already implemented an invention or had made requisite preparations for its implementation prior to the patent application date, can continue to implement the invention within the original scope after the patent application date, without being considered as an act of patent infringement.

Pursuant to Paragraph 2 of Article 75 of the Patent Law and Article 15 of the Interpretation of Several Issues on the Application of Law in the Trial of Patent Infringement Dispute Cases by the Supreme People’s Court, combined with judicial precedents, the conditions for establishing a prior use right defense are summarized as follows:

Firstly, the technical solution of the patent involved in the case is identical or equivalent to the prior technical solution implemented by the accused infringer, and the prior technical solution is identical or equivalent to the accused infringing technical solution.

Secondly, where prior use acts occurred before the filing date of the patent involved in the case, including having already manufactured the same product or used the same method, or having made the requisite preparations for manufacturing or use in China.

Thirdly, the manufacturing and use based on the prior use right is strictly confined to the original scope, which includes the production scale in existence prior to the patent application date, as well as the scale that is attainable through the use of existing production facilities or based on existing production preparations.

Fourthly, the technology that is firstly implemented by the prior user shall be either independently completed or legally acquired.

II. Burden of Proof for the Defense of Prior Use Rights in Patents

1. Standard of Proof

In practice, in the majority of patent infringement dispute cases, the accused infringer typically starts collecting evidence only after being accused by the patentee. Moreover, the evidence proving the implementation of prior technology solution before the patent application date is often self-made. The probative value of such self-made evidence is often easily being denied due to insufficient corroborative evidence to substantiate its authenticity.

Regarding the proof standards for prior use right defense in patent cases, the Supreme People’s Court (hereinafter referred to as “SPC”) clearly stated in its Judgment (2012) SPC Civil Retrial No. 196 that the defendant’s capability to provide evidence should be taken into account, and it is improper to impose excessively stringent standards. In this judgment, the SPC emphasized that in patent infringement lawsuits involving the prior use right defense, due consideration should be given to the actual circumstances of the defendant’s production, operation, and R&D activities, as well as the actual ability and level of the parties to preserve and produce relevant evidence. A comprehensive review and determination of the case facts should be made by considering all relevant evidence provided by the parties. Excessively stringent standards that contradict the actual situation should not be applied to the evidence submitted by the parties regarding the prior use right defense.

Moreover, the standard of proof in civil cases is “high probability.” Even if the evidence is self-made, it can still satisfy the high probability standard if it is corroborated by other evidence and supported by third-party evidence, thereby establishing a chain of evidence. For example, in the Judgment (2021) SPC IP Civil Final No.508, the first-instance court found that most of the evidence submitted by the defendant was self-made and thus did not recognize the defendant’s prior use right defense. However, the second-instance court held that the defendant had submitted 44 pieces of evidence to substantiate the prior use right defense and had also applied for a witness to testify. The court found it was reasonable for the defendant to submitted self-made evidence related to independently developing technology, making technical drawings or technical related files. Furthermore, the content and timing of such evidence could corroborate and naturally connect with each other. There was also email correspondence, mold factory return slips, chat records, and witness testimony to support the evidence. In the absence of contradictory evidence from the patentee, the evidence should be deemed credible.

Thus, it is advantageous for companies to secure evidence of implementing a prior technical solution through notarization or timestamps prior to the patent application date. However, the absence of such secured evidence prior to the application date does not necessarily preclude a successful prior use right defense. It merely increases the burden of proof on the accused infringer. It is advisable to collect and submit third-party evidence (such as contracts and invoices bearing third-party seals) or official evidence (like materials submitted with government authorities) in addition to the evidence made within the companies. This evidence must substantiate the fact that the prior technical solution was implemented prior to the application date, corroborate each other, form a complete chain of evidence, and satisfy the standard of high probability.

2. How to produce evidence for prior use right defense

Based on the aforementioned conditions for the establishment of a prior use right defense, the author advice to organize evidence required for such defense from the following aspects.

a. The prior technical solution implemented before the application date

Where the accused infringer asserts prior use right defense, they shall prove the specific technical solution they implemented before the patent application date, and the said technical solution is identical or equivalent to both the accused infringing product and the patent involved in the case. If the accused infringer made technical upgrades to the prior technical solution after the patent application date, the prior use right defense still establishes as long as the prior technical solution can be proved to be identical or equivalent to the involved patent and the upgrades are within the scope of the claim that the accused infringing product constitutes an infringement of the involved patent.

As per the author’s investigation, there are more cases in which the court has not recognized the accused infringer's prior use right defense due to their inability to effectively prove the specific technical solution that had been implemented prior to the filing date of the involved patent.

Regarding proof for the prior technical solution, the accused infringer can prove it through technical drawings, technology files, or products that were manufactured prior to the patent application date. Nevertheless, the evidence must fully reflect the implemented prior technical solution and prove that it predates the patent application. For instance, in the Judgment (2021) SPC IP Civil Final No.1524, in order to prove that the prior technical solution had been implemented before the application date of the involved patent, the accused infringer submitted the physical sample of the accused infringing product, which was sold before the patent application date. They also provided contracts, payment records, and the production date marked on the product to corroborate the product’s completion time. Despite the submitted physical sample exhibiting signs of use, the nameplate bearing the product name, model, and the infringer’s company name were consistent with the contract information. The contract signing date coincided with the time of payment as shown in the bank transfer vouchers and account transaction details. Furthermore, the product was identical to the technical solution of the patent involved in the case. If the accused infringer had merely submitted a physical product with a production date without additional corroborative evidence, the authenticity of the production date might be questioned. Another noteworthy point is that, even if evidence proves that the product was manufactured prior to the patent application date, the accused infringer must also prove or reasonably explain that the product’s technical solution was not modified after the patent application date. This means that no repairs or part replacements that would change the technical solution were made. Otherwise, it would be challenging to prove that the technical solution demonstrated in the product was exact the one implemented prior to the patent application date.

b. Prior implementation act

For prior implementation act, the accused infringer needs to prove that before the filing date of the patent application in question, they had already manufactured the same product, used the same method, or had made the requisite preparations for manufacturing or use. It is important to note that the aforementioned manufacturing, use, or requisite preparations should have been carried out in China. Manufacturing abroad and then importing into China does not constitute the prior implementation act required for the prior use right defense.

For the proof for the production of identical products or the use of the same methods prior to the application date, it would be ideal if the accused infringer has preserved evidence of the process and results of product manufacturing , or use method through notarization or other means prior to the application date. However, such “foresight” is rare in practice. More commonly, after an infringement dispute arises, the accused infringer collects evidence related to past product manufacturing and use method, where much of the evidence has already been lost, and its authenticity is easily questioned. A relatively common proof method, as in the aforementioned Judgment (2021) SPC IP Civil Final No.1524, involves presenting physical products sold and transaction documents generated prior to the application date of the involved patent as evidence.

When evidence of physical products manufactured prior to the application date is difficult to obtain, in many cases, the accused infringer chooses to assert prior use defense by providing evidence of “having made requisite preparations for manufacturing and use.”

For the defense of “having made requisite preparations for manufacturing and use,” Article 15 of the Supreme People's Court's Interpretation on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases stipulates that the court will not support a prior use right defense based on technology or design obtained illegally by the accused infringer. If any of the following circumstances occurs, the court shall recognize that the conditions for having made requisite preparations for manufacturing and use, as stipulated in Article 69 (2) of the Patent Law, have been met: (1) The essential technical drawings or technology files required for the implementation of the invention and creation have been completed; (2) The essential main equipment or raw materials required for the implementation of the invention and creation have been manufactured or purchased.

From the above provisions, the accused infringer may prepare the evidence including technical drawings, technology files, the main equipment or raw materials required for the implementation of the prior technical solution to prove that it has made the “requisite preparations”. However, it should be noted that the technical drawings requisite for the implementation of the prior technical solution should refer to complete, detailed technical drawings or technology files that can be immediately implemented, rather than sketches, sketch drawings, schematic drawings and other technology files that still require further refinement. For instance, in Judgment (2019) SPC IP Civil Final No.458, the accused infringer, in order to prove that the requisite preparations were made prior to the application date of the involved patent, submitted evidence such as emails it sent to its customers and diagrams of the model of the allegedly infringing cart. However, the court held that the pictures attached to the emails and the drawings of the model were only photographs, not technical drawings or technology files, and could not be promptly and directly implemented. Therefore, it could not fulfill its purpose of proof.

In addition, the main equipment or molds should refer to the special equipment or molds required for the implementation of the invention and creation, rather than the general equipment for general processing or production. In Judgment (2022) SPC IP Civil Final No.1024 of which the case was represented by the author, the accused infringer, in order to prove that the requisite preparations were made for the manufacture of the accused infringing product prior to the filing date of the patent application, submitted the evidence related to the machine and equipment for the manufacture of zippers purchased prior to the filing date of the patent application. In this regard, the Court recognized the fact that the equipment was purchased prior to the filing date of the patent application, but concluded that the equipment was not specialized for manufacturing the infringing products, and thus could not prove that the requisite preparations were made for the manufacturing of the infringing products.

In summary, when companies are gathering evidence for “requisite preparation,” they should take into ;account that not only the completion timing of drawings or equipment procurement but also the fact that whether the technical drawings or technology files are ready for immediate implementation of the prior technical solution. Furthermore, these technical drawings or technology files should comprehensively and specifically detail the implementation steps or content of the prior art, as well as how it is achieved on the primary equipment.

c. Original scope

For the original scope, whether the accused infringer should actively produce evidence and how to do so has always been a concern in practice. The author also notices that in judicial practice, the standards for the court's recognition of evidence for the “original scope” are not entirely consistent. For instance, in Judgment (2021) Yue Civil Final No. 2855, the court held that the evidence submitted by the accused infringer could prove that they had made the requisite preparations for manufacturing the accused infringing product prior to the patent application date. However, no evidence was provided to prove the production scale they possessed before the patent application date, or the production scale that could be achieved with the existing production equipment or based on the existing production preparations. There was also no evidence submitted to prove that their current production scale falls within the “original scope.” Therefore, the court did not support the prior use right defense. In the judgment (2017) SPC Civil Retrial No. 972, the SPC held that the accused infringer claimed to have begun large-scale production of the accused infringing product before the patent application date. However, the accused infringer did not submit evidence to prove their existing production scale, nor did they submit evidence to prove the existing production equipment and the production scale they intended to achieve with such equipment. Moreover, the accused infringer did not submit evidence to prove that they continued to manufacture and sell the accused infringing product only within the aforementioned production scale after the patent application date. Therefore, the prior use right defense was not supported. It can be seen that in these cases, the courts request the accused infringer to produce evidence of the original scope in a proactive and comprehensive manner.

However, in the judgment (2021) SPC Civil Final No. 508, the court's requirement for evidence regarding the original scope was that the defendant only needed to provide preliminary evidence. If the patentee did not submit sufficient counter-evidence to refute this, it was generally accepted that the accused infringer was operating within the original scope. Furthermore, in another case ruled by SPC, the judgment (2021) SPC Civil Final No. 1524, the same standard was applied. In this case, the court opined that when the production entity's place of residence, registered capital, business scope, and senior management have not changed, the possibility of an expansion in manufacturing scale is relatively small. After reviewing the “Public Disclosure Report on Corporate Credit Information” submitted by the accused infringer, it was found that from the company’s establishment on September 9, 2016, to the first-instance filing date of this case on July 4, 2019, there were no changes in registered capital, place of residence, business scope, or senior management. The patentee also did not provide evidence showing that the actual production scale of the accused infringer exceeded the original scope. Therefore, it could be determined that the accused infringer was still manufacturing the relevant products within the original scope as of the first-instance filing date of this case.

From the aforementioned cases ruled by the SPC, the court’s requirements regarding the burden of proof for the original scope have undergone some changes. In cases over the past few years, the court has not been excessively stringent with the accused infringers. If the accused infringer can provide preliminary evidence of their original scope, it is then up to the patentee to provide counter-evidence to prove that the scale of the accused infringer’s actions exceeds their original scope. However, this relaxation of the burden of proof to a certain extent does not imply that companies can passively produce evidence or refrain from doing so altogether, as it is still necessary to consider the possibility of the patentee submitting counter-evidence or reasonably refuting the original scope in specific cases. Therefore, the accused infringer should strive to produce evidence of their “original scope,” such as the purchase of molds or equipment prior to the application date, production capacity of the equipment, etc. They can also reasonably explain that there have been no changes in their registered business information, such as their registered address, registered capital, and business scope, to further substantiate their position.

d. Legal sources of prior technical solution

Under Article 15 of the Interpretations of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases, “If the defendant in a lawsuit claims the defense of prior use rights based on technology or design that was illegally obtained, the people’s court shall not support it.”

The aforementioned regulations pertain to scenarios where the accused infringer utilizes technology or design obtained through means that infringe upon the legitimate rights of others as evidence of prior use. If the technology or design claimed in the prior use right defense originates from unlawful acquisition or unauthorized use of others’ trade secrets or unpublished works, the act of obtaining or utilizing such technology or design is inherently unlawful, and thus cannot serve as the basis for a prior use right defense. This provision does not expressly mandate that the accused infringer must use their independently developed or designed technology as the basis of prior use evidence. The technology or design asserted by the accused infringer is entitled to serve as the basis for a prior use defense, as long as it does not violate upon the legitimate rights and interests of others.

In practice, generally, if the source of technology can be ascertained from the evidence provided by the accused infringer to support the prior use defense, the accused infringer does not need to further substantiate the specific origin of their prior technical solution. For instance, if the accused infringer has submitted research documents or technical drawings of the prior technical solution bearing the company’s name, or provided products manufactured by them sold before the filing date, courts typically would be of the opinion that the prior technical solution was developed by the accused infringer. If the patentee has objections to the legitimate source of the prior technical solution, the burden of proof shifts to the patentee, who shall provide counter-evidence, such as a breach of contract or infringement of trade secrets by the accused infringer.

Therefore, when the accused infringer claims the prior use defense, they need to first confirm that the prior technical solution implemented was either self-developed or had a legitimate source. Secondly, it is necessary to confirm that the evidence supporting the prior use defense demonstrates a connection to the accused infringer, such as whether technical drawings and technology files contain relevant information of the accused infringer, whether the contacts email between the accused infringer and the person not involved in the case, as well as the entrusted processing contract can reflect that the accused infringer is the legal owner of the prior technical solution, and whether there is information that the accused infringer is the manufacturer of the products produced before the application date.

III. Suggestions for enterprises

Regarding the prior use right defense, while the SPC has clarified in certain cases that the evidentiary standard for such defense should not be excessively stringent, deviating from objective reality, civil cases are still dominated by the principle that the party who claims bears the burden of proof. Therefore, companies, as the main player in market activities, should enhance their awareness of prior use right defense. For technological solutions protected as trade secrets, in addition to taking measures to protect trade secrets, companies should also promptly preserve evidence of the implementation of these trade secrets through notarization or time stamping methods, so as to effectively reduce the risk of infringement and ensure continuous implementation of the trade secret. The author has assisted a dozen of multinational enterprises in notarizing evidence related to prior use rights on multiple occasions. This preservation measure, conducted through notarization before others apply for patents, is objective and strong in terms of authenticity and has a high evidentiary value. Should the company face patent infringement disputes in the future and need to assert prior use rights, they will not be troubled by issues related to the evidentiary value.

In the case where a company fails to notarize and preserve relevant evidence before others apply for a patent, it is still possible for the self-made evidence within the company to be acknowledged. In such instances, the company should strive to provide evidence that is as comprehensive as possible, establishing a credible chain of evidence, in order to prevent its prior use defense from being rejected due to a lack of sufficient evidence.