The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China emphasized: "We should promote and practice the core socialist values" and "promote the culture of integrity". The "Opinions of the Supreme People's Court on Providing High-Quality Judgments to Support Scientific and Technological Innovation" states: "Regulate false lawsuits, malicious lawsuits, and abuse of litigation rights that hinder innovation in accordance with the law." Since the establishment of the Intellectual Property Court of the Supreme People's Court, it has adhered to the judicial concept of protecting integrity, strengthened the governance of malicious lawsuits for intellectual property rights, and promoted the construction of an integrity culture for intellectual property litigation. On November 19th, the Supreme People's Court released "A Record of the Intellectual Property Court of the Supreme People's Court Strengthening Integrity Construction and Managing Malicious Litigation" and typical cases of managing malicious intellectual property litigation. 

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Table of Contents

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I. Case of Malicious Litigation Involving "Vehicle Recording Device" Patent - (2023) Higher People's Court of Intellectual Property Civil Appeal Case No. 869 


II. The malicious lawsuit case involving the "target-type flowmeter" utility model patent - (2022) Higher People's Court of Intellectual Property Civil Appeal Case No. 1861 


III. Case of Malicious Litigation Involving "Guide Rail" Utility Model Patent - (2022) Higher People's Court of Intellectual Property Civil Appeal Case No. 2586 


IV. The malicious lawsuit case involving the "finished tank" utility model patent - (2023) Higher People's Court of Intellectual Property Civil Appeal Case No. 204 


V. Infringement Litigation Against the Patent for the Preparation Method of "Lohangguo Extract" - (2021) Higher People's Court of Intellectual Property Civil Appeal Case No. 1353 


I. Case of Malicious Litigation Involving "Vehicle Recording Device" Patent - (2023) Higher People's Court of Intellectual Property Civil Appeal Case No. 869 


Basic Facts 


Both Shun Company and Xiong Company are subcontractors of the outsider Bo Company. During the process of manufacturing the vehicle recorder products on behalf of Bo Company, Xiong Company completed the design and technical solutions corresponding to the 6 involved patents for Bo Company, and submitted the 6 patents under the names of Xu, the actual controller of Xiong Company and the supervisor of Ba Company, or Ba Company itself for patent application and obtained authorization. Later, the 6 involved patents were transferred to Ba Company. After Bo Company changed to Shun Company for the production of vehicle recorder products, Ba Company, based on the 6 involved patents, filed 18 patent infringement lawsuits against Shun Company as the defendant three times, but none of them were successful. 


During the litigation process, Bo Company sent a purchase order to Shun Company, but Shun Company rejected the order. In one part of the lawsuit, Bao Company applied for taking property preservation measures, and the court froze the property of Shun Company upon the application. 


Among the 6 involved patents, 2 were declared invalid because the products produced by Company A and sold by Company B before the patent application date lost their novelty; 2 were declared invalid because they marked the prior registered trademark used by Company B, which conflicted with the prior rights; the remaining 2 were upheld as valid through the invalidation procedure. In the patent infringement lawsuits filed by Company A based on the 2 valid patents, it was determined that Company B and Company Shun had the right to use these 2 patents because Xiong delivered the design drawings to Company B and reached an agreement with Company B to benefit from other projects of Company B, knowing that Company B would have the products produced and processed by Company Shun. 


Sun Company filed a lawsuit in court, claiming that the actions of Company A, Company Xiong and Xu were malicious lawsuits. It requested that they jointly compensate for economic losses of 1 million yuan and reasonable expenses for维权 (protection of rights) of 120，000 yuan. 


Judgment result 


The Intermediate People's Court of Shenzhen City, Guangdong Province, made a first-instance judgment ordering Company A to compensate Company B with 300,000 yuan for economic losses. Both Company B and Company A appealed the decision. Company B appealed, claiming that the judgment should be changed to require Company A to compensate Company B with 1 million yuan in economic losses. After the Intellectual Property Court of the Supreme People's Court heard the case, it made a second-instance judgment. The court held that the technical schemes and design plans involved in the six patents in question were all designs made by Xiong Company for Bo Company. Company A, despite knowing that four of the patents should be declared invalid and knowing that Bo Company and Company B had the right to use the corresponding design schemes of the other two patents, still filed a patent infringement lawsuit against Company B after Bo Company chose Company B as the contract manufacturer. Its intention was to use the judicial process to strike down its competitors, which was clearly with subjective malice and constituted an abuse of rights. At this time, Bo Company had sent a purchase order to Company B, and Company A had already filed a lawsuit against Company B. Company B refused the order from Bo Company, and there was a clear causal relationship between Company B's order and Company A's lawsuit. Since the price and quantity recorded in the order were relatively clear, the expected loss of economic benefits suffered by Company B could be calculated accordingly. In addition, the interest on the funds occupied by property preservation, the legal fees, transportation fees, etc. incurred by Company B in the relevant litigation, all these losses exceeded the 1 million yuan claimed by Company B in the second instance. Therefore, its claim for compensation was supported. Ultimately, the second-instance judgment changed the judgment to require Company A and others to compensate Company B with 1 million yuan in economic losses. 


Typical significance 


Loss, in its literal sense, can be understood as "damage" or "loss". For the defendants in malicious lawsuits, it is necessary to recognize both the aspect of their being harmed (such as reasonable expenses like legal fees) and the aspect of their loss (such as the interest on funds occupied due to property preservation, and the business opportunities voluntarily given up due to avoiding legal risks). In simple terms, it means to recognize both the "expenditures that they should not have but have incurred" and the "income that they should have but did not obtain". 


In cases of malicious lawsuits, the low cost borne by the plaintiff and the high degree of loss suffered by the defendant are "seriously imbalanced". This has caused the defendant to "abhor" it deeply but also feel "powerless". Since the motive of the malicious lawsuit perpetrators might be to hinder others' development, even if the court rules them to lose and orders them to compensate a certain amount, as long as this amount is insufficient to cover the defendant's losses, to some extent, it can be said that the malicious lawsuit perpetrators' goals have been more or less achieved. 


The most significant typical aspect of this case lies in delineating the liability for malicious lawsuits, namely the "comprehensive compensation principle". The establishment of this principle has its theoretical basis, which is that "the liability for damages resulting from malicious intellectual property litigation falls under general tortious acts"; the application of this principle has its specific criteria, namely "examining whether there is a legal causal relationship between the damages claimed by the plaintiff and the tortious act". 


The second-instance judgment of this case states: "After the malicious lawsuit occurred, the defendant, fearing that the infringement would expand, voluntarily gave up the business opportunity out of the desire to avoid legal risks, refused the client's contract or order. The reasonable expected loss suffered by the defendant due to this is legally related to the malicious lawsuit. The defendant has the right to demand compensation from the plaintiff." 


Make every effort to ensure that the scope of compensation by the prosecutor and the losses suffered by the defendant "overlap". We must not allow malicious plaintiffs to "lose the case but win the essence", nor allow the defendant to "win the lawsuit but lose the company". In the judicial process of dealing with malicious lawsuits, this case is of typical significance. 


II. The malicious lawsuit case involving the "target-type flowmeter" utility model patent - (2022) Higher People's Court of Intellectual Property Civil Appeal Case No. 1861 


Basic Facts 


In March 2006, the utility model patent right of "Built-in Digital Display Target-Type Flow Meter" of a certain instrument and metering company was terminated due to the failure to pay the annual fee. As they were dissatisfied with the termination of the patent right by the National Intellectual Property Administration, the company filed an administrative lawsuit with the Beijing Intellectual Property Court in 2017. Later, in 2018, they applied to withdraw the lawsuit and it was granted. 


In May 2006, the company filed a lawsuit claiming that the products produced and sold by a certain technology company and a certain machinery company in 2005 infringed upon its patent rights. The court ultimately ruled that the actions of the certain technology company constituted patent infringement and ordered it to compensate the certain instrument and meter company 125,000 yuan. 


Subsequently, a certain instrument and equipment company, citing that the technology company had been producing and selling products infringing the patent rights in large quantities from May 2006 to 2010, filed lawsuits with the court again in 2015, 2019, and 2020, claiming damages of 3.5 million yuan, 4.5 million yuan, and 4.5 million yuan respectively. Among them, the second and third lawsuits were both withdrawn after filing, and the fourth lawsuit was handled as an appeal withdrawal due to failure to pay the appeal case filing fee. In the fourth lawsuit, the instrument and equipment company applied for property preservation and froze 4.5 million yuan of the assets of the technology company. 


A technology company filed a lawsuit in court, stating that a certain instrument and meter company, despite knowing that its patent rights had been terminated, maliciously initiated the third and fourth intellectual property lawsuits. Therefore, it requested that the instrument and meter company apologize, compensate for economic losses, and cover reasonable expenses for protecting its rights. 


Judgment result 


The Intermediate People's Court of Xiamen City, Fujian Province, made a first-instance judgment ordering a certain instrument and equipment company to compensate the other party (a technology company) for economic losses (including reasonable expenses) totaling 60,000 yuan. The instrument and equipment company appealed. The Supreme People's Court, in the second instance, held that the instrument and equipment company, despite knowing that its lawsuit lacked a legal basis, still filed the third and fourth lawsuits, causing damage to the other party, and had the intention to cause such damage, thus constituting malicious litigation. The court ruled to reject the appeal and uphold the original judgment. 


Typical significance 


The typical significance of this case is reflected in two "firsts": Firstly, it is the "first case" recognized by the Intellectual Property Court of the Supreme People's Court as constituting an act of malicious filing of a patent lawsuit; Secondly, it particularly highlights the "primary" issues that need to be considered when determining malicious litigation, namely the issue of the basis of rights. 


The party's right protection is based on rights and is grounded in facts. The concepts of "right basis" and "fact basis" are distinct. First, there must be rights; only then can we discuss whether the other party has committed any infringement. 


Regarding the basis of rights, the patent owner should ask themselves three levels of questions before filing a lawsuit, namely "passing three hurdles": 


One is the issue of "existence of the basis for rights". In this case, a certain instrument and equipment company had filed an administrative lawsuit regarding the administrative decision to terminate the patent rights before their expiration. Later, it applied to withdraw the lawsuit and the application was granted. The second-instance judgment held that, as it voluntarily gave up initiating the procedure for restoring the rights, the termination status of the patent rights in this case had been determined, and it should have been aware of the legal consequences. 


The second aspect is whether the legal basis is "solid". Sometimes, one's own patent rights may not be stable and cannot withstand the "test" of invalidity procedures. The plaintiff is fully aware of this but "pretends to be ignorant". In such cases, the judge may raise more doubts: "Is he really here to protect his rights?" In another case heard by the intellectual property court of the Supreme Court, the patentee concealed unfavorable patent evaluation reports. The court, considering other circumstances, determined that it was a malicious lawsuit. 


The third aspect is whether the "foundation" of the rights is "thick" or not. If the "foundation" of the patent's value is far too thin to support the "height" of the claimed compensation amount, the judge might question the plaintiff: "What exactly does he want to achieve?" In this case, an instrument and equipment company's first lawsuit was supported by the court with a compensation of 125,000 yuan. However, in the third and fourth lawsuits, they all made a claim for damages of up to 4.5 million yuan, and in the fourth lawsuit, they even applied for property preservation to freeze 4.5 million yuan of assets of a certain technology company. The second-instance judgment held that they were fully aware of the lack of a solid legal basis and the possibility of attempting to obtain improper benefits through litigation was extremely high. 


"Rights must come first. The more rights one has, the easier it is to initiate a lawsuit and the more difficult it is for the defendant to respond to the lawsuit." In cases of malicious litigation, the ease with which the plaintiff initiates the lawsuit and the difficulty for the defendant to respond to the lawsuit are "inconsistent". If the plaintiff cannot even ensure the "existence", "stability" and "thickness" of their rights foundation, they can disrupt the defendant's affairs and muddy the "water" of the business order. For the defendant, this is "obviously unfair", and for the business order, it is "absolutely unacceptable". Therefore, in cases of malicious litigation, reviewing the plaintiff's rights foundation is not only the "logical first step" of the trial process, but also the "justice first step" to achieve fairness. 


III. Case of Malicious Litigation Involving "Guide Rail" Utility Model Patent - (2022) Higher People's Court of Intellectual Property Civil Appeal Case No. 2586 


Basic Facts 


A certain new materials company in Guangdong provided the Zhongshan-based product factory with complete technical drawings of the "a kind of guide rail" utility model patent, requesting the factory to produce samples based on the drawings and purchase them. Subsequently, the Guangdong-based new materials company filed a patent infringement lawsuit against the Zhongshan-based product factory and its investor Li. During the lawsuit, the Guangdong-based new materials company also sent an infringement warning letter to the customers of the Zhongshan-based product factory, stating that the factory was suspected of infringing the patent rights and advising the customers not to purchase the infringing products. The court held that the alleged patent infringement behavior was carried out with the permission of the patentee and did not constitute an infringement without permission, and thus dismissed the lawsuit request of the Guangdong-based new materials company. The Guangdong-based new materials company was dissatisfied and appealed, but the second instance court rejected the appeal. 


After the case was concluded, a certain product factory in Zhongshan City and Li claimed that the malicious evidence-gathering actions of Guangdong Certain New Materials Company constituted malicious litigation and commercial defamation. They filed a lawsuit demanding compensation for the reasonable expenses incurred during the litigation and payment of damages for mental distress. 


Judgment result 


The Guangzhou Intellectual Property Court made a first-instance judgment, ordering a certain new material company from Guangdong Province to compensate the losses of 30,000 yuan to a certain product factory in Zhongshan City and 85,000 yuan to Li. All parties involved filed appeals. The Supreme People's Court conducted a second-instance trial and held that the actions of the certain new material company clearly exceeded the reasonable limits of legitimate rights protection. It had the illegal purpose of interfering with, influencing, and suppressing competitors through litigation. The company had a relatively obvious malicious intent, and it caused losses to the certain product factory in Zhongshan City and Li in terms of legal fees. Its behavior constituted malicious litigation. The second-instance court dismissed the appeals and upheld the original judgment. 


Typical significance 


Prudence is a requirement that both courts in handling cases and parties exercising their rights should follow. The second-instance judgment of this case pointed out that for the court, "When applying the principle of good faith to determine whether a party's behavior constitutes an abuse of the right to file a lawsuit, it is necessary to carefully and strictly grasp the applicable conditions"; for the parties, "They should exercise their rights in good faith and prudently, and must not harm the interests of others or the public interest of society." 


In the second instance of this case, the court comprehensively considered the following circumstances: "Without any evidence indicating that the Zhongshan Products Factory had infringed or was about to infringe, the company induced it to manufacture and sell related products and used these products as evidence to file a lawsuit. In a situation where the infringement facts were obviously difficult to be established", it claimed a high amount of compensation and applied for property preservation. "Even before the infringement lawsuit was concluded, it still sent an infringement warning letter to the customers of the Zhongshan Products Factory, knowing that its evidence-gathering behavior had significant flaws and a high risk of losing the lawsuit." Based on these circumstances, the court determined that the Guangdong New Materials Company was malicious. 


It can be seen that in this case, the certain new materials company in Guangdong did not exercise its rights prudently; and when the court was determining whether the company's filing of the lawsuit was malicious, it always considered "under what circumstances" and "what actions" the company had taken, demonstrating a cautious grasp of the conditions for applying the rule against malicious litigation. 


It can be said that this case not only advocates for the "prudent" exercise of rights by the parties, but also provides an example for courts to "prudently" determine malicious lawsuits: When evaluating a specific action of the parties, it is necessary to consider their specific circumstances at that time, and "determine good or evil based on evidence". 


This case originated from the inducement evidence-gathering behavior of the patent owner. The key point of the judgment is clearly stated as follows: "If a patent owner, without any other evidence to prove that others have infringed or will infringe, actively provides a technical solution to induce the infringement behavior and then files an infringement lawsuit based on this, thereby interfering and affecting the normal business operations of others, it can be determined that such behavior constitutes malicious filing of intellectual property litigation." 


When collecting evidence from the parties involved, it should be "collected through legitimate means and used for legitimate purposes". The name of the patent involved in this case is "A Guide Rail". It is hoped that this case will serve as a warning for relevant market entities and guide their related litigation actions towards the right direction.