Tao CHEN

Chinese Patent Attorney
Chinese Attorney-at-Law
 

I. Introduction

On December 10, 2019, the Intellectual Property Court of the Supreme People’s Court pronounced judgment on the patent infringement dispute case (hereinafter referred to as “the present case”) of Shenzhen Jixiang Tenda Technology Co., Ltd. (hereinafter referred to as “Tenda Company”) (Appellant) v. Shenzhen Dunjun Technology Co., Ltd. (hereinafter referred to as “Dunjun Company”) (Appellee) and Jinan Lixia Hongkang Electronic Product Sales Department, Jinan Lixia Haowei Electronic Product Sales Department (Defendants in the first instance), ruling that Tenda Company’s act of making, offering to sell and selling the accused product infringed the patent right for invention of Dunjun Company, of which the title of the invention is “Method for Easy Access to Portal Website of Network Operator” and the Patent No. is “ZL02123502.3”¹. The present case was also selected for Annual Report of the Intellectual Property Court of the Supreme People’s Court (2019). The present case relates to a method patent involving multiple entities. Regarding this type of method patents, there are various approaches to protection in juridical practice, but there are no unified and reasonable infringement determination rules. In the present case, the Supreme People’s Court has established an adjudication rule of “an irreplaceable and substantial role”. Based on the facts of the present case, this paper tries to sort out different methods for determining infringement on method patents involving multiple entities, and deciphered the adjudication rule of “an irreplaceable and substantial role”.

II. Overview of the Case

In the present case, Dunjun Company claimed the rights of the patent at issue based on claims 1 and 2. Claim 1 reads as follows:

“1. A method for easy access to a portal website of network operator, comprising the following processing steps:

A. underlying hardware of an access server directly submits a first uplink HTTP packet of an unauthenticated user apparatus for a portal service to a “virtual Web server”, and the function of the “virtual Web server” is implemented by a “virtual Web server” module of high-level software of the access server;

B. the “virtual Web server” is virtualized as a website to be accessed by a user to establish TCP connection with the user apparatus for the portal service; the “virtual Web server” sends a packet containing redirection information back to the underlying hardware of the access server; and the underlying hardware of the access server sends a packet redirected to a real portal website Portal_Server to the user apparatus for the portal service according to a normal forwarding process; and

C. after receiving the redirected packet, a browser on the user apparatus for the portal service automatically initiates an access to the real portal website Portal_Server.”

The technical solution of claim 1 is a representative method implemented by multiple entities, in which steps A and B are executed by an access server (e.g., a router), and step C is executed by a user apparatus of an end user.
In the first instance, Dunjun Company requested to order Tenda Company, Hongkang Electronic Product Sales Department, and Haowei Electronic Product Sales Department to immediately stop making, selling and offering to sell the product infringing the rights of the patent at issue of Dunjun Company, and dispose the inventory and the production molds.

After investigation, the first-instance court found that all technical solutions of claim 1 of the patent at issue of Dunjun Company were reproduced when business users access to the website operator’s portal website via the accused router, and thus determined that the act of Tenda Company making, selling and offering to sell the accused router product, without the permission of the plaintiff, infringed the patent at issue, and should bear the liability for infringement and compensation for economic losses.

After trial, the second-instance court, the Intellectual Property Court of the Supreme People’s Court, found the follows: In determining patent infringement of methods in the field of network communications, characteristics of this field should be fully considered and the law of innovation and development in this field should be fully respected, so as to ensure substantive protection for the patentees’ legal rights and realize sustainable innovation and fair competition in the industry. If the act or the consequence of the act of the accused infringer incorporating a substantial part of the patented method into the accused product for commercial purposes plays an irreplaceable and substantial role in satisfying all elements of the patented claim, i.e., where the patented method is naturally reproduced by normal use of the accused product by an end user, it should be determined that the accused infringer implemented the patented method and infringed the rights of the patentee. As such, in the present case, it should be determined that the act of Tenda Company of making, offering to sell and selling the accused product infringed the patent and should bear the civil liability for desist from infringement and compensation for losses. The judgment of first instance which determined that infringement was constituted, and ordered Tenda Company to immediately stop making, offering to sell, and selling the router product involved in the present case intended to order Tenda Company to stop making, offering to sell, and selling the three models of router products in which the essential part of the method of the patent at issue was incorporated. The law was correctly applied and the determination of civil liability was appropriate.

III. Case Analysis

A patent right is a statutory right, and it occurs after fulfilling statutory examination procedures. The scope of the right is clearly defined by law. Therefore, the acts of patent infringement are generally believed to be limited only to those expressly prescribed in the Patent Law, namely, several acts exhaustively exemplified in Article 11 of the Patent Law. Specifically, in terms of rights of product patents, except where otherwise provided for in the Patent Law, no entity or individual may, without the authorization of the patentee, make, use, offer to sell, sell or import the patented product for a commercial purpose. In terms of rights of process patents, except where otherwise provided for in the Patent Law, no entity or individual may, without the authorization of the patentee, use its patented process, and use, offer to sell, sell or import the product directly obtained by the patented process.

It is generally accepted that only patents relating to manufacturing methods can be extended to product protection while operating methods and usage methods cannot. The method of the patent at issue is an operating method and protects an operating mode or an action process. Therefore, the patentee only has the right to stop other’s act of using the method without being licensed.

This paper will analyze the accused router product and judge whether an act of infringement is conducted at each stage throughout the process from design and development to outing into use based on the available infringement determination policy, so as to determine the infringement liability of the accused infringer -- Tenda Company.

The involved stages include: (1) design and development of the router; (2) production/manufacturing of the router; (3) offer to sale and sale of the router; and (4) use of the router by an end user to authenticate Internet access of a user apparatus.

1. Design and Development

At the design and development stage, generally performance of the product needs to be tested. Thus, the people’s court usually presumes that the accused infringer implements all steps of the patented method at this stage and determines that the accused infringer directly infringes the rights of the patented method. This is a common often taken by the people’s court now to protect method patents implemented by multiple entities.

In this regard, the patent infringement case^2,3 of IWNCOMM v. Sony China is representative. In this case, claim 1 is typically directed to a method implemented by multiple entities, and is a standard essential patent concerning the WAPI standard. The method of claim 1 is executed by three entities, including a mobile terminal, an access server and an authentication server. Each entity executes a plurality of steps, and each step is vital to the realization of the technical solution. The defendant Sony China manufactured a cellphone which is a mobile terminal, and sold the cellphone to users. When a user accesses wireless network by the WAPI function of the cellphone, the cellphone, the access server and the authentication server jointly implement all steps of the method of the patent at issue.

Both the first-instance court and the second-instance court concluded that the defendant Sony China fully implemented the technical solution of the patented method during the testing at the design and development stage, and constituted direct infringement.

In my opinion, however, determining direct infringement of method patents implemented by multiple entities merely based on the testing act conducted at the design and development stage is disadvantageous, in particular in the following aspects.

(a) The accused infringer may not necessarily test the patented method in China at the design and development stage. It is entirely possible that the accused infringer conducted the test outside China, or even entrusted a foreign company to do so. If the accused infringer were able to present evidence proving his/her failure to test the patented method in China, he/she would not have been deemed to infringe the patent as a result of the testing act, and thus could evade exercise of rights of relevant patents.

(b) If it were determined that only the testing act constitutes direct infringement, the damages should be calculated based on the benefit obtained by the infringer from the testing act or the losses sustained by the patentee as a result of the testing act. The final sales volume of the accused product does not have a direct causal relationship with the testing act, and is thus not suitable as a basis for calculating the compensations for damages. Under this circumstance, the reasonable amount of compensation obtained is too limited to offset the losses sustained by the patentee as a result of the manufacturing and selling activities of the accused infringer. In the patent infringement case of IWNCOMM v. Sony China, the second-instance court only determined the testing act conducted by Sony China at the development stage as an infringing behavior, but acknowledged the the amount of compensation determined in the first-instance judgment based on the sales volume of cellphones, which obviously lacks a legal basis.

Therefore, determining the establishment of patent infringement from the testing act will sacrifice the substance for the shadow. Just as the Supreme People’s Court ruled in the present case, the accused infringer’s practice of the patented method when testing the accused product constitutes infringement, but this finding alone is not enough to protect the interests of the patentee. This is because neither is the testing act a root or immediate cause of the accused infringer’s illegal profit, nor is it possible to prevent larger infringement of the patented method by desisting from the testing act.

2. Production/Manufacturing

When manufacturing routers, Tenda Company incorporated a substantial part of the patented method into its products, but it did not implement the exact steps of the patented method. In judicial practice, the use of a patented method refers to that each step of the technical solution of the patented process stated in the claim is carried out⁴. There is also a view that the so-called “use” means to execute a series of steps of the process patent, so as to complete the action procedure and achieve a desired action effect⁵. Incorporation of the substantial part of the patented method into the accused product just imparts the accused product with a function of carrying out the patented method, so each step of the patented product is not actually implemented in this process. Therefore, as per the above view in practice, Tenda Company did not use the method of the patent at issue when manufacturing the Routers.
For example, in the patent infringement case of IWNCOMM v. Sony China, the first-instance court presumed that Sony China tested the WAPI function during the production/manufacturing, delivery inspection, etc., and thus used the patented method, but this finding was overturned by the second-instance court, holding that the available evidence could not prove that Sony China used the patented method at the stages of production/manufacturing and delivery inspection.

Another representative case is Gree Electric Appliances v. Midea Company⁶. In this case, the patent at issue relates to a method for controlling an air conditioner to operate according to a custom curve, wherein the custom curve is set by a user in the actual use of the air conditioner. The first-instance court determined after investigation that the technical solution concerning “Good Sleep Mode 3” in the air conditioner product of the relevant model manufactured by Midea Company contains all technical features of claim 2 of the patent at issue, and ruled that Midea Company, who, without the permission of Gree Electric Appliances, used the patented method in the production of the air conditioner products of the relevant model for commercial purposes, should immediately stop using the patented method and stop selling and offering to sell the air conditioner products. Midea Company appealed that there were only two acts of infringement upon method patents: (i) use of the patented method, and (ii) use, offer to sale, sale or import of the product directly obtained by the patented method. To be specific, the patent at issue related to a method for using an air conditioner, rather than a method for manufacturing an air conditioner, that is, a product could not be directly obtained, so this patent right could not be extended to the product; therefore, Midea Company did not exploit the patented method, nor did it directly use, offer to sell, sell or import the product directly obtained by the patented method; only air-conditioner users would use the patent at issue, but Midea Company was not a user.

Guangdong High People’s Court stated, as the second-instance court, the opinions below. The act of manufacturing an air conditioner with the function of “Good Sleep Mode 3’ includes the act of using the accused method. “Good Sleep Mode 3” involves a method for controlling an air conditioner to operate according to a custom curve. To achieve this function, the air conditioner manufactured by Midea Company should satisfy the conditions for operation according to a custom curve by corresponding setting and configuration steps. It is thus inevitable to use the method for controlling an air conditioner to operate according to a custom curve. Therefore, Midea Company is indeed a user. The first-instance court’s ruling of ordering Midea Company to stop using the method patent of Gree Electric Appliances includes an injunction against the act of manufacturing air conditioners with the function of “Good Sleep Mode 3”.

However, the fact that the air conditioner satisfies the conditions for operation according to a custom curve by corresponding setting and configuration steps merely means that the air conditioner has a function of operating according to a custom curve and is able to implement the patented method. But it is doubtful whether this function surely worked during production/manufacturing and achieved the desired effect. It is the user, instead of the accused infringer, who executes the corresponding function of the air conditioner and has it worked. It is inadequate and unconvincing to presume that the accused infringer must have used the patented method in the production/manufacturing process only based on the fact that the accused infringer configured the accused product to be capable of implementing the patented method.

3. Offer for Sale and Sale

“An offer for sale” refers to the expression of a will to sell the product, which is made by means of advertisement, display on the shopping window, exhibition at a trade fair, etc.. ⁷ Evidently, it is impossible to implement the patented method in an act of offering for sale. Therefore, it cannot be determined that Tenda Company has infringed the rights of the patented method based on an act of offering to sell the routers.

“Sale” refers to a transaction between a buyer and a seller, that is, the seller transfers the ownership of an object to the buyer, and the buyer pays the seller for the object⁸. In the present case, the act of selling the Router, does not lead to the actual implementation of the patented method. Therefore, it cannot be determined that Tenda Company has infringed the rights of the patented method based on an act of selling the routers.

Nevertheless, the act of selling a router to a user may be determined as indirect patent infringement. Protecting method patents involving multiple entities by the indirect patent infringement system is also one of the trials in judicial practice.

Regarding indirect patent infringement, there are no special provisions in the Chinese Patent Law. The Interpretation (II) of the Supreme People’s Court on Some Issues Concerning the Application of Law to the Trial of Patent Infringement Disputes stipulates the following two forms of indirect patent infringement:

“Where, with clear knowledge that certain products are materials, equipment, parts or intermediaries specifically used to exploit a patent, and without the authorization of the patentee, a party provides such products, for production or business purpose, to another party to carry out patent infringement activities, the People’s Court shall allow the patentee’s claim that the provider’s conduct constitutes providing assistance for infringement as provided in Article 9 of the Tort Law.

Where, with clear knowledge that certain products and methods have been granted patent, and without the authorization of the patentee, a party actively induces another party to carry out patent infringement activity, for production or business purpose, the People’s Court shall allow the patentee’s claim that the provider’s conduct constitutes inducing infringement as provided in Article 9 of the Tort Law.”

Compared to direct patent infringement, the actors in the above two acts of infringement do not fully implement the patented technical solution, but they also cause serious infringement upon the patentee. In academia, the above two acts of infringement set out in the aforesaid judicial interpretation are called indirect patent infringement. It is noteworthy that in the aforesaid judicial interpretation, the two acts of indirect patent infringement are put in the scope of the contributory infringement and the inducing infringement prescribed in Article 9 of the Tort Liability Law, to distinguish them from the act of jointly committing a tort prescribed in Article 8 of the Tort Liability Law.

According to the above judicial interpretation, the establishment of the contributory infringement includes the following requirements: “a party supplies a certain product to another party with clear knowledge that it is a special product”, and “another party uses the special product to carry out patent infringement activities”; the establishment of the inducing infringement includes the following requirements: “a party clearly knows the existence of the patent right”, and “a party actively induces another party to carry out patent infringement activities”. Further, according to the above-mentioned provisions, the establishment of an indirect patent infringement act is premised on the establishment of a direct infringement act.

In judicial practice, however, in order to better protect the interests of patentees, indirect patent infringement is not always required to presuppose a direct infringement act under special circumstances.

For example, Article 119 and Article 130 of the Guidelines for Patent Infringement Determination (2017) promulgated by Beijing High People’s Court in 2017 describe the following provisions:

“119. Where a party, clearly knowing that a certain product is a raw material, intermediate product, component, or equipment specially used for implementing the technical solution of a patent in suit, without the authorization of the patentee, for a commercial purpose, provides said product to another party who commits an act of patent infringement, the party’s act of providing the specially used product constitutes the act of assisting another party in committing the act of patent infringement as provided for in Article 118 of the Guidelines, however, where the another party belongs to circumstances prescribed as in Article 130 of the Guidelines or items (3), (4), (5) of Article 69 of the Patent Law, the party shall bear civil liability.”

“130. Exploiting other’s patent for personal use rather than for production or business purpose, does not constitute patent infringement.”

In the IWNCOMM v. Sony China case, the first-instance court held the following opinion: “In general, an indirect infringement act shall presuppose the existence of a direct infringement act. However, this does not mean that the patentee shall prove another entity actually performs the indirect infringement act, but only needs to prove that user’s use of the accused product in a predetermined manner of the product satisfies all elements of the patent. Whether the user will bear the infringement liability has nothing to do with the establishment of the indirect infringement act.” The second-instance court agreed with the first-instance court, stating that “Since a direct implementing act does not constitute patent infringement, unless an actor of ‘indirect infringement’ is ruled to bear civil liability, a considerable communications and software usage patents cannot be effectively or fully protected by law, which is not conducive to encouraging scientific and technological innovations and protecting legitimate benefits of patentees.” At the same time, the second-instance court also strictly restricts conditions of applying the exception that the direct implementer does not infringe the patent right and the indirect infringer bears the civil liability.

At the Fourth National Intellectual Property Trial Work Meeting held in July 2018, Kaiyuan TAO, the former Vice President of the Supreme People’s Court, said that “the contributory infringement in the patent field is premised on the act of the assisted person who uses the infringing special product that satisfies all elements of the patented claim, but it neither requires the act of the assisted person to certainly constitute a direct infringement act in the legal sense, nor does it require to regard the assistor and the assisted person as joint defendants”. According to this judicial policy, the establishment of indirect patent infringement is not contingent on the establishment of a direct infringement act, but on the condition that the act committed by the assisted person using the infringing special product satisfies all elements of the patented technical solution. As such, it can be said that indirect patent infringement is no longer subordinate to direct patent infringement.

In the present case, Tenda Company provided users with the routers. The user’s act is not a patent infringement act because the users themselves do not use the routers for a commercial purpose. If the rule that indirect patent infringement is premised on the establishment of direct patent infringement were strictly applied, obviously the selling act of Tenda Company would not constitute indirect infringement. According to the above judicial policy, however, it is not necessary to consider whether the user’s act constitutes direct patent infringement in a legal sense. In the present case, the Router Product satisfies all elements of the claims of the patent at issue when the user authenticates the Internet connection in the “ON” mode of Web authentication. Nevertheless, other requirements still need to be met in order for Tenda Company’s sales activities to constitute indirect patent infringement.

Regarding contributory infringement, it is necessary to determine whether the Router is a special product. In the present case, it is hard to determine the Router as a special product because it has not only the Internet connection authentication function of the patent at issue, but also other Internet connection authentication functions.

Regarding inducing infringement, it is necessary to determine whether Tenda Company “actively induced users to implement the technical solution when clearly knowing that it would constitute patent infringement”. In the present case, Tenda Company might be considered to induce the implementation of such an act because it did advertise the Web authentication function when selling the Product, but there was no evidence showing Tenda Company clearly knew that this act would constitute patent infringement.

In the present case, the plaintiff did not argue that the sales act of Tenda Company constituted indirect patent infringement. It seems that there are more matters to prove in order to claim indirect infringement, and it is more difficult for the patentee to exercise his rights.

Moreover, for example, in the IWNCOMM v. Sony China case, the second-instance court held the following opinion: as for methods implemented by multiple entities, “if without a direct implementer, only one of the component providers is determined to commit contributory infringement, which does not meet the constitutive requirements for the contributory infringement, and also excessively expands the protection of right holders, improperly harming the interests of the publics”. This opinion also renders it more difficult for patentees of method patents implemented by multiple entities to protect their rights and interests through indirect infringement.

4. Internet Connection Authentication by End User Using User Apparatus

When the end user authenticates the Internet connection via the Router using the user apparatus, all technical features of claim 1 of the patent at issue are fully implemented. Step A and step B are executed by the Router, and step C is executed by a user apparatus (for example, a personal computer, a cellphone, etc.) owned by the user. The end user owns and controls the user apparatus. There may be the following two situations for the owner/controller of the Router:

Situation I: The end user owns and controls the router. This situation is very common. For example, an end user buys a router, installs and uses it at home to build a wireless network for the Internet access at home.

Situation II: A business operator, who provides public network services, owns and controls the router. This situation is also very common. For example, routers are installed at airports, railway stations, restaurants, shopping malls, etc. to provide public network services.

In order to analyze whether Tenda Company should bear the infringement liability and on what legal basis the infringement liability should be borne when the end user authenticated the Internet connection, what comes first is to confirm the implementer of each step of the patented method in the above two situations. From the perspective of the technical solution, step A and step B are executed by the Router, and step C is executed by the user apparatus of the end user, but from the perspective of the Patent Law, the user or the implementer is obviously not the router and the user apparatus.

Pursuant to Article 11 of the Chinese Patent Law, it is only an entity or individual who implements the patented method and bears the civil liability. Thus, the answer seems self-explanatory as to who implements the patented method. For example, if a company improves productivity by a patented method during production/manufacturing, it is natural that this company is the implementer of this patented method. In some application situations, however, the implementer of a patented method is not always very clear, and there may be diverse understandings of the implementer.

For instance, in the patent infringement case of IWNCOMM v. Sony China, the method of claim 1 is executed jointly by a mobile terminal, an access server, and an authentication server. When a user accesses the wireless network through the WAPI function using the mobile terminal, the mobile terminal, the access server, and the authentication server jointly carry out all the steps of the patented method. In this situation, who is the implementer of this patented method? For example, as the user accessed the wireless network through the WAPI function, is it possible to certify the user as the implementer who fully implemented the patented method? Also, since the business operator who owns the authentication server provides the authentication service through the authentication server, is the implementer of the steps performed by the authentication server in the patented method the business operator who provides the authentication service? Furthermore, since the authentication program in the authentication server is devised and written by the manufacturer of the authentication server, and how the authentication program of the authentication server is executed is determined by the manufacturer of the authentication server, is the implementer of the steps performed by the authentication server in the patented method the manufacturer of the authentication server?

In the present case, it seems indisputable that the implementer of step C is the end user. However, in terms of step A and step B, there are various voices in judicial practice as to who the implementers thereof are.

(1) Opinion I: the implementers of steps A and B are users.

In the patent infringement case of IWNCOMM v. Sony China, the first-instance court held this opinion. In the present case, the first-instance court raised the following opinions: “In general, an indirect infringement act shall presuppose the existence of a direct infringement act. However, this does not mean that the patentee shall prove another entity actually performs the indirect infringement act, but only needs to prove that the user’s use of the accused product in a predetermined manner of the product satisfies all elements of the patent. Whether the user will bear the infringement liability has nothing to do with the establishment of the indirect infringement act. The reason for this interpretation is that in some usage patents, the entity who realizes ‘all elements’ of the claim of a patent at issue is a user in most instances, while the user uses it for ‘non-a commercial purpose’, so it does not infringe the patent. Under this circumstance, the rule that ‘an indirect infringement act shall presuppose the existence of a direct infringement act’ is mechanically applied, the usage patents involving the user will not be protected by law, which goes against the original intention of the Patent Law that grants patents to such usage.” “The defendant, clearly knowing that the accused product includes a built-in WAPI function module set and that this set is used specifically for an apparatus configured to implement the patent at issue, supplied this product without the permission of the plaintiff to another person for carrying out the patent at issue out of commercial purpose.”

According to the above-mentioned judgment, the first-instance court asserted that the user’s act of fully implementing the patented method did not infringe the patent, but Sony China, which supplied the special product to the end user, should bear the infringement liability.

If the user implements the patented method for a commercial purpose, judged from Opinion I, the user’s act of triggering the complete implementation of the patented method by accessing the wireless network through the WAPI function constitutes direct infringement, and shall desist from infringement and bear the liabilities of compensation for damages. However, the user owns and controls only the mobile terminal, while both the access server and the authentication server are owned and controlled by other entities. Therefore, there is no legal and factual basis to impose the civil liability arising from the steps performed by the access server and the authentication server on the user.

The above Opinion I is essentially recognizing the person who triggers the implementation of the patented method as the implementer of the method. From the standpoint of technical solutions of method patents involving multiple entities in the fields of network communications and IoT, there is usually a single “trigger person”. Therefore, if the implementer of the method were determined according to Opinion I, most of method patents implemented by multiple entities would not face the difficulty in infringement determination. However, as mentioned above, according to the Opinion I, the person who triggers the implementation of the method bears an excessive infringement liability that is not appropriate for the act, so the punishment is inappropriate and violates the principle of fairness.

(2) Opinion II: the implementers of steps A and B are the actual owner/controller of the router.

In the patent infringement case of IWNCOMM v. Sony China, the second-instance court did not adopt the above opinion of the first-instance court, but expressed the following points of view: “The patent at issue is typically a method patent ‘implemented by multiple entities’. This patented technical solution requires multiple entities to participate in the implementation process and can only be fully implemented when multiple entities collaborate or interact with each other. In this case, Sony China only supplies mobile terminals with a built-in WAPI function module, but does not supply AP and AS apparatuses. Mobile terminal MT, wireless access point AP and authentication server AS form a tri-element peer security architecture, and the mobile terminal MT, wireless access point AP and authentication server interact with one another such that the patent at issue can be implemented. Therefore, in this case, no implementers, including an individual user, can fully implement the patent at issue alone. Also, there are no such situations that a single entity guides and controls the implementation acts of other entities, or multiple entities jointly cooperate with each other to implement the patent at issue.”

The second-instance court did not identify the implementer of each step in the patented method, but clearly found that the individual user did not fully implement the patented method. This indicates that the individual user, as the actual owner/controller of the mobile terminal, is the implementer of the step concerning the mobile terminal in the patented method.

(3) Opinion III: the implementers of steps A and B are the router manufacturer, i.e., Tenda Company.

In the patent infringement case of Watchdata v. Hengbao⁹, the first-instance court held a similar view. In this case, claim 1 of the patent at issue relates to a physical authentication method, and when a user purchases the accused product and makes an account transfer using the same, the product executes the physical authentication method of the patent at issue. The first-instance court upheld the ruling below: “Whether the defendant Hengbao Company constitutes the act of use of other’s patented method under Article 11 of the Chinese Patent Law is determined as follows. Based on the whole technical solution of claim 1, ‘the correspondence relationship between the operational command and the physical authentication method has been set’ in advance by the manufacturer of the electronic device. Furthermore, the above technical solution relates to a system setting that is performed in advance with reference to the function of the electronic device by a protocol that the manufacturer of the electronic device has agreed in advance with the banking system and a communication interface established based on the protocol. Despite the fact that the user is involved in several steps, the user performs them based on the operating steps preset by the manufacturer of the electronic device, and the user cannot participate in or modify the background program. From this perspective, it is clear that the manufacturer of the electronic device is the implementer of the technical solution concerning the authentication method.”

In Opinion III, the implementer of the patented method is determined from the perspective of the source of technology. If this opinion were applied to the present case, the following conclusion would be reached: the router implements corresponding steps under the control of the end user, but its source lies in the manufacturer’s control, and the end user only acts as a command trigger. In other words, the root cause of routers implementing the steps is the production/manufacturing activities of the manufacturer -- Tenda Company. As per the Opinion III, it seems that the manufacturer’s liability for infringement may be investigated, so that the interests of the patentee can be fundamentally protected. However, even from this perspective, I think, there still remain various drawbacks.

(a) When a router is sold by a manufacturer, its property rights change. In the Situation I above, the router is actually owned and used by the user, and the user enjoys the ownership of the router, which is a complete property right. In the Situation II above, the business operator providing public network services enjoys the ownership, which is a complete property right. Regardless of Situation I or Situation II, whether the router performs steps A and B of the patented method depends on the actual owner’s own needs. In the Situation I, since the user needs to authenticate the Internet connection for the purpose of accessing the Internet using the terminal device, the router is thus triggered to execute steps A and B. In the Situation II, the business operator, who provides public network services, provides the authentication service for its own commercial profit for the user to access the Internet, and when the user accesses the Internet, the router executes steps A and B automatically. By selling routers, the manufacturer Tenda Company provides the owner/controller with a tool that realizes such a function, but whether such a function is realized by this tool has nothing to do with the manufacturer, but totally depends on the owner/controller.

Therefore, in the instance where the execution of steps A and B in the method of the patent at issue gives rise to an infringement liability, it is natural for the owner/controller of the router to bear the liability for infringement. In addition, even if Tenda Company is recognized as the implementer of steps A and B in such an instance, Tenda Company cannot control whether or not to carry out the patented method, so it is not realistic to order Tenda Company to be responsible for cease of infringement.

(b) The Opinion III above offers a new idea for the protection of method patents implemented by multiple entities, but new issues follow unavoidably. If the Opinion III is applied to other situations, this would result in much inappropriateness.

For example, as to a patent relating to a usage method, a purchaser purchases an apparatus having a function of executing this usage method from a manufacturer and implements the usage method using this apparatus to regulate the industrial process; as a result, the productivity is improved and the commercial profit is significantly increased. Under this assumption, it is clear that the purchaser has infringed the patent because he/she has fully implemented the patented method for a commercial purpose. However, when searching for the implementer of the patented method from the standpoint of the source of technology according to Opinion III above, the implementer of the act of using the patented method for a commercial purpose becomes the apparatus manufacturer, and the patent infringement liability incurred shall be borne by the apparatus manufacturer. This is impractical. Apparatus manufacturers are unable to prevent purchasers from keeping on using the patented method. Besides, it is also unfair to order the manufacturer to indemnify the patentee for damages based on the profits made by the purchaser from use of the patented method or on the damages of the patentee.

Moreover, a similar problem arises when Opinion III is applied to the usage situation of the patented product. Regarding the purchaser’s act of using the patented product for a commercial purpose, it is apparently inappropriate to certify the user of the patented product as the product manufacturer, which is the source of the technology, according to Opinion III.

In light of the analysis above, as for the implementers of steps A and B of the method patent in the present case, the author prefers Opinion II, namely, the actual owner/controller of the router is the implementer of steps A and B. Based on this recognition, the author further analyzes the infringement determination under the aforementioned Situations I and II.

In Situation I, since the end user owns and controls both the user apparatus and the router, all steps of the patented method are completely carried out by the end user. However, it is not an infringement act under the Patent Law because the end user usually does not do it for a commercial purpose. Further, as described above, the Tenda Company’s act of selling the router to an end user does not satisfy the constitutive requirements for contributory infringement and inducing infringement, and thus Tenda Company does not commit indirect patent infringement. Therefore, in Situation I, it is almost impossible to determine that Tenda Company commits an infringement act.

In Situation II, the end user owns and controls the user apparatus, and the business operator, who provides public network services, owns and controls the router. Therefore, the business operator providing the public network services is the implementer of steps A and B, and the end user is the implementer of step C. To determine whether there is patent infringement in this situation, one may try to apply the joint infringement prescribed in Article 8 of the Tort Liability Law, specifically, “If two or more persons jointly commit a tortuous act which results in damage to others, they shall bear joint and several liability.”

There have long been several theories about the nature of joint infringement. (i) Theory of intentional communication: it is believed that joint perpetrators must communicate intentionally, which means they have joint intentions, to constitute joint infringement. (ii) Theory of joint fault: it is believed that the essential characteristic of the joint infringement act is that multiple actors have joint faults leading to the consequences of damages, which means that the joint perpetrators have joint intentions as well as joint negligence to constitute joint infringement. (iii) Theory of joint act: it is believed that the joint act is the basis for joint perpetrators to bear joint liability, and that the occurrence of joint perpetration is always closely related to the act of joint perpetration. (iv) Theory of joint relevance: it is believed that if there is objective joint relevance among consequences caused by all infringement acts, a joint infringement act can be established, even without intentional communication between the actors. Theories (i) and (ii) relies on subjective factors as the essence of joint infringement while theories (iii) and (iv) describe that the essence of the joint infringement act is an objective requirement. In China’s infringement law theory, the subjective standpoint is always the mainstream of the nature of the joint infringement act¹⁰.

In the patent field, the dominant opinion as to the joint infringement is the theory of joint fault, that is, the requirements for establishing joint patent infringement are subject to subjective communication of intentions between joint infringers, or joint negligence. For example, in the case concerning “solenoid valve”¹¹, the Supreme People’s Court indicated that the joint infringement prescribed in Article 8 of the Tort Liability Law shall meet the following requirements: there are two or more perpetrators; the perpetrator share subjective joint intentions; there exist objective mutual use, cooperation or support among the acts of the perpetrators; and the damages caused by the perpetrators’ acts fall within the scope of their joint intentions. In addition, the Beijing High People’s Court also expressed a similar view: “the implementation of the acts of patent infringement with conspiracy or with labor division and cooperation by two or more parties constitutes joint infringement”.

In the Situation II above, the end user only intends to access the Internet using the terminal, and there is no subjective communication of intentions or joint negligence with the business operator that provides public network services, so the constitutive requirements for the joint patent infringement are not met. Therefore, in the Situation II, no joint patent infringement is constituted during the complete implementation of the patented method that occurs when the end user accesses the Internet using the user apparatus. In view of this, it is of course impossible to determine that Tenda Company infringes the patent.

IV. Adjudication Rule of “Irreplaceable and Substantial Role”

Based on the above analysis of the stages from the design and development to the final use of the Product, i.e., the Router, the author finds that according to the court policy so far, only the testing act conducted by the accused infringer (Tenda Company) during the design and development constitutes patent infringement. However, as mentioned above, this policy tends to sacrifice the substance for the shadow and is insufficient to protect the interests of the patentee.

In the present case, the Supreme People’s Court did not adopt the available court policy. Instead, for the sake of protecting the interests of patentees reliably and rationally, it put forward a new adjudication rule, namely, an adjudication rule of “an irreplaceable and substantial role”: “If an accused infringer incorporates a substantial part of a patented method into an accused product for a commercial purpose, and this act or the result thereof plays ‘an irreplaceable and substantial role’ in satisfying all elements of a patented claim, that is, the end user can reproduce the process of the patented method naturally in the normal use of the accused product, it shall be determined that the accused infringer has implemented the patented method and infringed the rights of the patentee”.

This rule includes the following requirements:

(1) for a commercial purpose;
(2) incorporating a substantial part of a patented method into an accused product; and
(3) this act or the result thereof plays “an irreplaceable and substantial role” in satisfying all elements of a patented claim, that is, the end user can reproduce the process of the patented method naturally in the normal use of the accused product.

In light of the conventional interpretation of the “use” act as described above, incorporation of a substantial part of a patented method may not be recognized as the use of the patented method. However, according to the above-mentioned adjudication rule, if the above-mentioned constitutive requirements are satisfied, “incorporating a substantial part of a patented method into an accused product” is direct use of the patented method and directly infringes the method patent.

The above-mentioned adjudication rule of the Supreme People’s Court does not define a new patent infringement act by breaking the provisions of the current law, nor does it violate the “all elements rule”, but provides a rational interpretation of the act of using the patented method stipulated in Article 11 of the Chinese Patent Law. In the present case, the defendant Tenda Company incorporated a substantial part of the patented method into the accused router when manufacturing it. Since such incorporation leads to the implementation of the entire technical contents of the patented method and plays “an irreplaceable and substantial role” in the implementation of the entire technical contents of the patented method, it is not an auxiliary act that creates conditions and assists in the implementation of the patented method, but an act of using the patented method, and thus constitutes direct infringement.
The act of incorporating a substantial part of the patented method occurs in the production/manufacturing of the routers. In the patent infringement case of Gree Electric Appliances v. Midea Company, the infringement act was established from the production/manufacturing of the accused product, but the court policy was absolutely different from that applied to the present case. In the present case, the Supreme People’s Court found that the act of incorporating a substantial part of the patented method that satisfies the above requirements was an act of using the patented method, whereas in the patent infringement case of Gree Electric Appliances v. Midea Company, the second-instance court believed that the act of incorporating the patented method that occurred during the production/manufacturing of the accused product would surely enable each step in the patented method to be carried out during the production/manufacturing, and the understanding of the act of use was still a general understanding in practice.

The Supreme People’s Court creatively proposes the rule of “an irreplaceable and substantial role” while adhering to the “all elements rule”. This is a new breakthrough in determining infringement of method patents implemented by multiple entities in China, facilitates patent protection in areas such as communications technology and IoT technology, and promotes technological progress in relevant technical fields.

In accordance with the above court rule, in the patent infringement case of Gree Electric Appliances v. Midea Company and the patent infringement case of Watchdata v. Hengbao, the accused infringer’s acts of incorporation occurring in the production/manufacturing process satisfy the above three requirements and can be recognized as the use of the patented method, thereby constituting direct infringement. However, in the patent infringement case of IWNCOMM v. Sony China, the opinions may differ as to whether the adjudication rule can be applied to determine that Sony China’s act of incorporating the steps concerning the mobile terminal into the mobile terminal is the use of patented methods. As mentioned above, in the IWNCOMM v. Sony China case, the complete implementation of the patented method requires collaborations of the mobile terminal, the access server and the authentication server, and the steps performed by each of them are essential for the implementation of the patented method. In this context, it is indeed worth debating about whether the steps concerning the mobile terminal incorporated into the product by Sony China can be recognized as a substantial part of the patented method, or whether the act or the result of the act of Sony China plays “an irreplaceable and substantial role” in satisfying all elements of the patented claims.
Therefore, how the above new adjudication rule presented by the Supreme People’s Court will be applied in other cases in the future, for example, how to grasp and determine “a substantial part of the patented method”, “an irreplaceable and substantial role”, etc. still requires us to look for an answer from future judicial practice.

V. Conclusion

Based on the facts of the “Dunjun v. Tenda” patent infringement case, this paper has analyzed the stages from the design and development to the final use of the accused router product, organized the current situation of the patent infringement policy of “a method implemented by multiple entities”, and deciphered the court rule of “an irreplaceable and substantial role” proposed by the Supreme People’s Court, so that readers will have a systematic understanding of the infringement determination policy of the present case and a better understanding of the new adjudication rule. We shall keep eyes on the application of this new court rule in future judicial practice.


 
¹Civil Judgment “(2019) Zui Gao Fa Zhi Min Zhong No. 147”, Supreme People’s Court of PR
²Civil Judgment “(2015) Jing Zhi Min Chu Zi No. 1194”, Beijing Intellectual Property Court
³Civil Judgment “(2017) Jing Min Zhong No. 454”, Beijing High People’s Court
⁴Guidelines for Patent Infringement Determination (2017), Beijing High People’s Court
⁵Qu Guifang. “On Users of Operating Methods”, China Invention & Patent, No. 5, 2014
⁶Civil Judgment “(2011) Yue Gao Fa Min San Zhong Zi No. 326”, Guangdong High People’s Court
⁷Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law to the Trial of Patent Infringement Disputes (2015)
⁸Yin Xintian. Introduction to the Patent Law of China, Intellectual Property Publishing House, 1^st Edition in March 2011
⁹Civil Judgment “(2015) Jing Zhi Min Chu Zi No. 441”, Beijing Intellectual Property Court
¹⁰ Yang Lixin. Tort Liability Law of the People’s Republic of China, Law Press·China, 3rd Edition
¹¹ Civil Judgment “(2018) Zui Gao Fa Zhi Min Zai No. 199”, Supreme People’s Court of PRC