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Does Providing Infringing Products to a Retail Store for Sale Before the Publication of a Patent Grant Constitute Intent or Negligence in Patent Infringement?
Recently, the Supreme Court rendered Judgment 2024 Tai Shang Zi No. 620 (Judgment Date: November 7, 2024), which requires subordinate courts to provide their opinions and determinations on arguments related to this point in dispute.
In this case, the patentee (the plaintiff in the first-instance) alleged that the belts (hereinafter referred to as the “disputed product”) manufactured by Leather Company A and sold by Ready-to-Wear Store B (A and B are co-defendants in the first-instance) infringed its utility model patent for a belt structure (hereinafter referred to as the “disputed patent”). The patentee sought joint damages from Leather Company A and Store B. In the trial process:
• The first-instance judgment rendered by the Intellectual Property and Commercial Court ruled that the disputed product did not fall within the scope of the disputed patent and, thus, did not infringe on the patent right.
• The second-instance judgment overturned the first-instance's decision, opining that the disputed product infringed the patent and holding Leather Company A and Store B jointly liable for damages.
In the first-instance, Leather Company A claimed that at the time the disputed product was provided to Store B for sale, the patent grant of the disputed patent had not been published. Leather Company A thus argued that it was unaware of any potential infringement and denied any intent or negligence. In the second-instance, Store B argued that it could determine potential patent infringement only by dismantling the disputed product using specialized tools, which it could not do as a retailer without manufacturing capability. Furthermore, upon receiving a warning letter from the patentee, it immediately ceased sales and sought clarification from Leather Company A. Therefore, Store B contended that it did not act with intent or negligence.
In the aforementioned judgment, 2024 Tai Shang Zi No. 620, the Supreme Court emphasized the following:
For a patentee to claim damages for infringement, the infringer’s intent or negligence is a necessary element. Intent refers to the infringer knowingly and deliberately causing the infringing act, or foreseeing its occurrence and being indifferent to the result. Negligence refers to a failure to exercise due care that could and should be taken. The standard for due care is determined based on whether the infringer failed to act with the care expected of a prudent person. Failure to exercise the care expected of a prudent person that should be taken refers to failure to exercise due care that should be taken by a person with considerable knowledge, experience, and good faith in accordance with common trading concepts. In addition, the determination of whether the infringer failed to act with the care expected of a prudent person should consider various factors, including the infringer’s knowledge, profession, business operations, the nature of the infringing act, the severity of the harm caused, the importance of the rights infringed, and the costs of preventing the harm.
Based on the above, the Supreme Court opined that: (1) the aforementioned arguments made by Leather Company A and Store B were crucial defenses; (2) the original instance disregarded them and ruled against the appellants without addressing these points, resulting in the judgment constituting a violation of law due to a lack of grounds. Therefore, the Supreme Court nullified and remanded the original judgment.
Additionally, in this case, Leather Company A argued that although the disputed product was manufactured slightly later than the filing date of the disputed patent, the preparation for manufacturing required two to three months, indicating that the necessary preparations had been completed at least before the filing date. Therefore, Leather Company A contended that the effects of the disputed patent should not extend to its actions, invoking the "prior use defense." However, the second-instance rejected this defense because Leather Company A failed to prove that it had implemented the disputed patent domestically before the filing date of such patent.