Judicial determination of priority right defense in patent dispute case – comments on the case of Shengji Company v. Starbucks et al in respect of design patent right infringement

July 26, 2017 China Intellectual Property News Release 09: Rights Protection. Weekly

Li Shulan/Liu Junhua/Chen Yaoyao

[Case No.]

(2015) HZMCZ No. 504

[Rule of Law]

Those who have produced the same products before the patent application date shall enjoy the priority right. If the production is subject to the original scope, it shall not be deemed as patent infringement. Subsequent sales of the products produced by those with priority right shall not constitute an infringement either.

[Case Introduction]

The Plaintiff Shengji Company is the patentee of the design of “drinking cup (0506-2)”, the patent application date of which is May 26, 2014, and the date of authorization proclamation falls on October 1, 2014. On June 29, 2015, the Plaintiff purchased by notarization the 12oz orange stainless steel tumbler (article number: 435180) produced by the Plaintiff Zenghao Company and sold by the Plaintiff Starbucks. The design is similar to the patent above-said. The Plaintiff held that the products above fell into the protection scope of its patent claim, thus, filing a lawsuit to the court, requesting for ordering the two Defendants to stop the infringement act and compensate for its losses.

From November 2013 to February 2014, the email correspondences among Starbucks, WOODMAX and Zenghao Company referred to design, mould unloading, problems existed in delivered samples of a Starbucks cup, etc., and the design drawing of the cup attached to the email was almost identical to appearance of the product purchased by notarization as afore-said. On February 24, 2014, Starbucks Coffee sent an order to WOODMAX by email for purchasing 10,600 12oz green DIAMAND PHINNY tumblers and more than 10,000 12oz red DIAMAND PHINNY tumblers. On the next day, WOODMAX sent an order (with the order number, article number, color, etc. same as the order afore-said) to Zenghao Company by email, in which the picture of cup was almost identical to appearance of the actual product afore-said, only different in color. Zenghao Company completed encasement and customs clearance of the ordered product afore-said on June 14, 2014. On February 2, 2015, Starbucks ordered 1248 12oz orange stainless steel tumblers from Walmax Trading International Corporation. On February 7, 2015, Walmax Trading International Corporation ordered 1248 orange stainless steel tumblers from Zenghao Company, and the picture of cup attached to the order was almost identical to appearance of the actual product afore-said. The ordered product afore-said was delivered on April 9, 2015. On June 9, 2015, it was stated on the VAT invoice issued by Walmax Trading International Corporation to Starbucks that a total of 1260 “435180 12oz orange stainless steel tumblers” were ordered in two batches.

After the trial, Shanghai Intellectual Property Court concluded that, as the design applied to the product charged with infringement was similar to that of the involved design patent, the product charged with infringement fell into the protection scope of the involved design patent claim. However, according to the evidences on record, it can be determined that Zenghao Company has produced the same product before the date of involved patent application, only continued to produce the product within the original scope and enjoyed the priority right. Thus, the priority right defense made by Zenghao Company should be established. The owner of priority right shall not be deemed to conduct infringement if the owner of priority right continues to produce the same product within the original scope, and subsequent sales of the same product produced by it shall not constitute an infringement either. Starbucks was the distributor of the product charged with infringement. It provided evidences to prove that the product sold by it were from Zenghao Company which enjoyed the priority right. Therefore, its product sale shall not constitute an infringement either. In witness thereof, the court rejected the appeal of the Plaintiff. All the Parties do not file any further appeal, thus, this Judgment has taken into force.

[Comment by judge]

I. Legal nature of priority right

In general, priority right shall mean the right of any person (including entity and individual) who has produced the same product, use the same method or made necessary preparations for producing and using the same product and method as that covered by the patent application filed by the applicant for an invention before such filing, to continue to produce or use such invention within the original scope even after such invention is granted with patent. However, to a certain degree, the system of priority right encourages the inventors to protect their inventions with non-patent method, which is unfavorable to the publicity and transmission of inventions, thus, it is necessary to restrict the priority right. The system of priority right is constituted based on obtainment and restriction of priority right, aimed at realize the balance among prior user, patentee and the public, and the optimal system protection to inventions.

In terms of priority right, first, it is different from independent civil rights. It is not stated in the patent law. From the perspective of institutional connotation, the owner of priority right has no right to commercially transfer the rights owned by it, request others to take an action or not to take an action, or enjoy the remedy for being infringed or subsequent remedies; second, priority right is also different from the right of defense. Although the existence of priority right is relative to certain patent rights, the generation of priority right is independent, which is based on the acts of prior user, having no relation to whether or not it is the right exercise by the patentee is improper. And the exercise of priority right can confront with infringement accusation, but the institutional value of priority right lies on protecting the economic interests of the owner of priority right. In conclusion, priority right is more like legal interest, with economic value, and such economic value is recognized and protected by the patent law.

II. Priority right defense and prior art (design) defense

Priority right defense and prior art (design) defense are both common non-infringement defenses against accusations of patent infringement. In practice, if the production of same product and use of same method by prior user before the date of patent application are not made public, such use shall only claim for priority right defense; if the same product or method has been made public before the date of patent application due to use or sale, such product or method shall constitute prior art (design), thus, the priority right defense and prior art (design) defense can be claimed simultaneously.

There are four major differences between priority right defense and prior art (design) defense: first, priority right defense is the cause of statutory restriction for rights exercise, except when the infringement accusation is not true, without prejudice to the effectiveness of patent; and prior art (design) defense is actually denial of the effectiveness of patent. Second, the constitution is different. Priority right defense involves the following aspects: whether or not the prior user has produced relevant products (use relevant methods) or made necessary preparations for such production (use) before the date of patent application, whether or not relevant products are the same products, whether or not prior art is obtained legally and whether or not the production is subject to the original scope; prior art (design) defense involves whether or not the comparison technology forms prior art (design) and the product charged with infringement applies prior art (design). Third, the rules for comparison are different. Establishment of infringement is the prerequisite for application of priority right defense, therefore, in case of priority right defense, the product charged with infringement and the patented art shall be first compared, and then the product charged with infringement and prior product shall be compared after it is concluded that the product charged with infringement and the patented art are same or identical; prior art (design) defense is not necessarily based on establishment of infringement. Prior art (design) defense can be established by direct comparison of the product charged with infringement and prior art (design). Fourth, the consequences of application are different. After establishment of priority right defense, production by the prior user beyond the original scope is still likely to constitute an infringement; after establishment of prior art (design) defense, the allegation of the patentee that subsequent production behavior of the same defendant constitutes an infringement is not established.

III. Determination of the essential elements for establishing priority right defense

On one hand, identify the original scope. It is specified in the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Dispute Cases that, the original scope defined in Article 69 (II) of the patent law include the production scale already existing or the production scale which can be achieved by using existing production equipment or based on existing production preparations before the date of patent application. It indicates that, in the judicial practice of our country, the original scope is defined based on production scale, the nature of which is more like a quantitative restriction of the original scope. The defense proposer shall provide evidence for the original scope. Production equipment and production orders can serve as evidences of the production scale.

In this Case, the Defendant did not provide evidence to prove the accurate production scale of Zenghao Company before the date of patent application, but the evidences provided by it could prove that, Zenghao Company delivered over 20,600 products in June 2014 according to the order of February 2014, i.e. the order before the date of patent application. The product charged with infringement was purchased on June 29, 2015, and it can be seen from the VAT invoice of June 9, 2015 that Zenghao Company only delivered 1,260 products to Starbucks. According to the number, 1,260 fell into the scope of 20,600, and the real manufacturer was Zenghao Company, without change in the subject of implementation, so it was determined that the evidence was inadequate to prove the production of Zenghao Company exceeded the original scope.

On the other hand, identify the same product. The same product is not further defined in the patent law and judicial interpretation. If interpretation of the same product is too broad or narrow, the implementation effect will be impaired, as well as the interests balance between the prior user and the patentee. The same product shall involve identification of product technology plan, having no relation to the product name and model. It means that, the product charged with infringement is the same patented product as relevant product produced before the date of patent application, including the circumstance s that the two products are the same product, or even though they are not the same product, they are substantially same as corresponding part of the involved patent, i.e. relevant technical features are the same or have no substantial difference.

In this Case, the product charged with infringement is almost the same as the design drawings attached to emails sent between November 2013 and February 2014, and the appearance showed on the pictures of cup attached to the order placed on February 25, 2014, i.e. basically same as the appearance of the ordered product produced by Zenghao Company before the date of patent application. The color of product is not within the protection scope of the involved patent, which does not affect the identification that the two products and the relevant design part of the involved patent are identical. Therefore, the product charged with infringement is same as the relevant product produced by Zenghao Company prior to the date of patent application.

Besides, the product was produced before the date of patent application and the technology is legally acquired. Prior user shall have produced the same product, used the same method, or have made necessary preparations for such production and use. Production records and sale orders of the product can serve as the evidence. In addition, technical source shall be legal. The defense shall not be claimed based on technologies illegally acquired.

In this Case, by taking comprehensive consideration of the email correspondences, orders, packing lists, submission lists, etc. among Starbucks, WOODMAX and Zenghao Company, it can be determined that Starbucks, WOODMAX and Zenghao Company work together to design and produce relevant ordered products. And Zenghao Company completed the production, encasement and customs clearance of all the ordered products on June 14, 2014, therefore, it can be determined that Zenghao Company had made preparations for producing relevant products and produced relevant products before the date of patent application, and the technical source was legal.

(Written by: Shanghai Intellectual Property Court)