The Mystery of the Preliminary Injunction’s Tiny Role in Patent Litigations in China and Some Newest Developments

Sen “Alex” Wang, MJLST Managing Editor

In an unpublished note completed early February this year, I compared the current standards of granting preliminary injunctions in patent litigations in the Chinese People’s courts and the US federal courts. The preliminary injunction, an equitable remedy that has long been available to patent litigants in the US, was not codified in the Chinese Patent Act until 2000 as part of China’s effort to fulfill its obligations after joining the WTO. Since then, China has been consciously strengthening the protection for intellectual property rights within its jurisdiction and has taken great pride in the progress it has made so far. In particular, the numbers of patent applications as well as litigations in China have skyrocketed in China, and the People’s courts have become more confident in handling high profile patent cases and issuing large damage awards. However, the preliminary injunction, even after its inception in the Chinese Patent Act, has only played a mysteriously tiny role in protecting the patentees’ rights during the years. For example, from 2003 to 2009, the People’s courts in Guangdong province, one of the biggest and most developed provinces in China, ruled respectively on 54, 19, 21, 20, 24, 5, and 11 preliminary injunction applications involving intellectual property rights (not just patents) while granting only 17, 6, 12, 8, 5, 2, and 1 of the applications in each corresponding year. By contrast, the number of intellectual property cases considered by the People’s courts in Guangdong during the same time frame was 1465, 3199, 4257, 3644, 3989, 5312, and 7152, respectively.

As a powerful and drastic remedy, the preliminary injunction exists to provide speedy relief from irreparable injury and is “generally granted under the theory that there is an urgent need for speedy action to protect the plaintiff’s rights.” Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1334 (Fed. Cir. 2012) (O’Malley, J., concurring-in-part, dissenting-in-part) (internal citation omitted). In the US, the Federal Circuit utilized, for a long time, a balancing—or so called “sliding scale”—test for issuing preliminary injunctions, where the movant must establish a right thereto in light of four factors: (1) a reasonable likelihood of success on the merits; (2) irreparable harm if an injunction is not granted; (3) the balance of hardships tipping in its favor; and (4) the impact of the injunction on the public interest., Inc. v., Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001) (citing Hybritech, Inc. v. Abbott Laboratories, 849 F.2d 1446, 1451 (Fed. Cir. 1988)). None of the factors, taken individually, is dispositive; rather, the court must “weigh and measure each factor against the other factors and against the form and magnitude of the relief requested.” Id. However, following the Supreme Court’s rulings in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) and Winter v. NRDC, Inc., 555 U.S. 7 (2008), the Federal Circuit has given up its balancing test to comply with the more rigorous requirements set forth by the Supreme Court. Compare Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1365 (Fed. Cir. 2008), with Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1375–76 (Fed. Cir. 2009). Currently, “a showing on one preliminary injunction factor does not warrant injunctive relief in light of a weak showing on other factors.” Wind Tower Trade Coal. v. United States, 741 F.3d 89, 100 (Fed. Cir. 2014).

Across the Pacific Ocean, the Chinese People’s courts, under a civil law system, rely heavily on statutes, regulations, and other promulgated rules. To comply with the requirements of the TRIPS Agreement, both Article 66 of the Chinese Patent Act and Article 100 of the Chinese Civil Procedure Act now recognize the preliminary injunction as a provisional remedy in patent litigations. While the acts passed by the People’s Congress form the statutory bases for issuing preliminary injunctions, in practice, the more detailed procedural as well as substantive requirements for obtaining such provisional remedy are actually found in in several judicial interpretations and judicial policy documents promulgated by the Supreme People’s Court (SPC). The foundational judicial interpretation in this regard is the Several Provisions of the Supreme People’s Court Concerning the Application of Law to Pre-trial Cessation of Patent Infringement (最高人民法院关于对诉前停止侵犯专利权行为适用法律问题的若干规定) [hereinafter Provisions on Pre-trial Cessation of Patent Infringement] (2001), the Article 11 of which requires the People’s courts to consider four factors when ruling on an application for a preliminary injunction, namely (1) whether the alleged current or imminent conduct infringes the patent; (2) whether the applicant will suffer irreparable harm without an injunction; (3) the guarantee provided by the applicant; and (4) whether the public interest will be disserved. Despite the SPC’s wording of the first factor, it has been treated as inquiring into the applicant’s likelihood of success on the merits. As to the second—irreparable harm—prong of the test, there had been a great amount of confusion among the lower courts until Cao Jianming, vice president of the SPC, pointed out in February 2008 that the core of the irreparable harm analysis is whether the damage can be compensated by monetary award and whether there is a reasonable expectation of collecting such award in light of the alleged infringer’s financial condition.

With the first two factors being the most important in the determination, the standard in China looks very similar to the one currently used in the federal courts in patent cases as the Rule 65 of Federal Rules of Civil Procedure also mandates the applicants to provide security. This similarity between the standards makes one even more curious about why preliminary injunctions have only been utilized at such a low rate in patent cases in China. The answer—also the problem of the current Chinese approach—lies in the restrictions buried in two judicial policy documents from the SPC. Although the four-factor test seems to be applicable to all patent cases, the SPC has confined the issuance of preliminary injunctions to cases where the facts are clear and the infringement is easy to determine. Opinions on Issues Concerning Maximizing the Role of Intellectual Property Trials in Boosting the Great Development and Great Prosperity of Socialist Culture and Promoting the Independent and Coordinated Development of Economy (关于充分发挥知识产权审判职能作用推动社会主义文化大发展大繁荣和促进经济自主协调发展若干问题的意见) [hereinafter Opinions on Maximizing the Role of Intellectual Property Trials], art. 16 (2011). In particular, when there is no literal infringement and the court has to conduct complicated technical comparisons, a preliminary injunction is deemed inappropriate. Opinions on Several Issues Concerning Intellectual Property Trials Serving the Overall Objective Under the Current Economic Situation (关于当前经济形势下知识产权审判服务大局若干问题的意见) [hereinafter Opinions Under the Current Economic Situation], art. 14 (2009). In addition, if the alleged infringer has challenged the validity of the patent(s) in question or has initiated a separate declaratory judgment action, the courts are required to be extremely cautious in granting preliminary injunctions. Id.

This “clear” and “easy” yet rigid approach seems to be contrary to the legislative intent of introducing such a provisional remedy in the first place and only makes sense to some extent when considered in a bigger context. On several different occasions and in various promulgated documents, the SPC has expressed some serious concern that preliminary injunctions or the process by which they are granted may be abused to impede competition, while adding to the concern is the present procedural setup of obtaining a preliminary injunction. In the People’s Courts, there is no similar remedy as a TRO but only a general preliminary injunction. It is general in the sense that the application can be filed before, at the same time with, or after the commencement of an infringement action, and once granted, the injunction will usually remain in force until the final adjudication on the merits take effect. Provisions on Pre-trial Cessation of Patent Infringement art. 14. Furthermore, a preliminary injunction issued before the filing of an infringement action will, so long as the applicant initiates the formal infringement suit within 15 days of getting the injunction, enjoin the alleged infringer all the way until the end of the infringement action. Id. Also, a preliminary injunction can be issued without notice to the enjoined party, although the courts have the obligation to notify the enjoined party no later than 5 days after the issuance of the injunction. Id. art. 9. Moreover, the People’s courts only have 48 hours (96 hours at most) to make a decision in writing after receiving eligible applications. Id. Additionally, though the People’s Courts are authorized to summon one or all parties to clarify factual issues, no hearing of any form is required. Id. One final point, the enjoined party has no right to appeal but may apply, within 10 days of receiving the injunction, for review once, though the injunction will not be suspended during the review period and there will still be no guaranteed hearing opportunity. Id. art. 10. Given the powerful nature of the remedy once granted, the tight time frame for making a decision in writing, and the limited hearing requirement, it is understandable that the fear of mistakes and misuses has prompted the SPC to take a cautious position.

Although the SPC’s current approach is to some extent understandable, it has comprised the preliminary injunctions’ function as an important provisional remedy for patent holders and has likely caused many patent holders to refrain from even considering this option as evidenced by the extremely low application rate in Guangdong. Fortunately, the SPC has finally noticed this alarming trend. On February 26, 2015, the SPC published for public comment a draft SPC Judicial Interpretation on Several Issues in Application of Law in Determination of Action Preservation in Intellectual Property and Competition Controversies ((最高人民法院关于审查知识产权与竞争纠纷行为保全案件适用法律若干问题的解释) (征求意见稿)). This new judicial interpretation purports to supersede prior judicial interpretations involving preliminary injunctions in patent and trademark cases. According to the draft, the time frame for rendering a preliminary injunction decision is a non-emergency matter may be adjusted to 30 days. It also details other procedural as well as substantive aspects of preliminary injunctions such as the jurisdiction of the court, what constitutes “irreparable harm,” hearing and notice requirement, handling of appeals of cases and handling of oppositions to provisional measures, the effect of changed circumstances, civil liability arising from wrongful application, and other matters. Notably, the draft adopts the exact same four-factor test in the US federal courts. However, it only requires the People’s courts to evaluate the four factors as a whole under the circumstances without identifying any single factor as dispositive. This arguably bears a resemblance to the balancing or sliding scale analysis once used in patent cases in the US federal courts, which opens up the possibility of greater use of preliminary injunctions in the People’s courts in the near future.