The Supreme People's Court issued a ruling on a jurisdictional dispute in a lawsuit seeking confirmation of non-infringement. The Court stated that when a patent holder sends a warning letter that does not clearly identify which patent is being infringed or which specific product or method is accused of infringement, courts can still determine the scope of the case by considering several factors. These factors include the specific patents that the warning may possibly refer to, the specific products or methods that may be accused, and the potential negative impact that the warning may have on the warned party or other interested parties. Based on these considerations, the court can reasonably define the scope of the case and use that to determine which court has jurisdiction.
Company A and Company B filed a lawsuit with the Shanghai Intellectual Property Court. Both companies shared the same legal representative, Individual X. The lawsuit explained that Individual Y, using an email address belonging to Company C, had sent an Infringement Notice to the investors of Company A and Company B. The Notice claimed that products with PET and MR reconstruction enhancement features, which were operated by companies X had registered in China, as well as some products X operated in the United States, were infringing Company C's patents. After receiving the Notice forwarded by their investors, Company A and Company B immediately responded to Y and Company C. They demanded that the Notice be withdrawn and that the facts be clarified. However, after more than two months, Company C and Y neither withdrew the Notice nor filed a patent infringement lawsuit. As a result, Company A and Company B filed a lawsuit seeking a Declaratory Judgment of Non-Infringement. They asked the court to confirm that the disputed products that they manufactured, sold, and offered for sale did not infringe Company C's patent. They also asked the court to order Company C to withdraw the Infringement Notice.
Company C and Y raised a jurisdictional objection during the period for filing a statement of defense. Their main arguments were as follows:
Company A and Company B had no legal claims against Y, whose residence was in Shanghai. Y was not the patent holder and was not a proper defendant. Therefore, jurisdiction should be based on the residence of Company C, which was in Nanchang, Jiangxi Province. In addition, the Infringement Notice was directed at products manufactured by another company, Company D, for which X also served as legal representative. The products made and sold by Company A and Company B were unrelated to the Notice.
The first instance court rejected the jurisdictional objection. The court reasoned that the Infringement Notice did not clearly identify the specific infringing party or the specific infringing products. Therefore, the court had to consider the content of the Notice as a whole to determine the potential scope of its negative impact. The Notice stated that products operated by X's China registered companies, which had PET and MR reconstruction enhancement features, infringed multiple patents owned by Company C. The court found that X was the controlling shareholder of both Company A and Company B, and also the legal representative of Company D. Company A had already obtained a medical device registration certificate for the disputed products, and Company B was the seller of those products. Company C owned the patent, which related to MR technology. Based on these facts, the court concluded that the disputed products manufactured and sold by Company A and Company B in China, which were under X's control, involved MR reconstruction enhancement features. These products could reasonably fall within the scope of the products accused in the Infringement Notice. Since Company B, as the seller of the disputed products, was located in Shanghai, the court found that sales activities had taken place in Shanghai. Therefore, the Shanghai court had jurisdiction as the court of the place where the alleged infringing acts occurred. Company C and Y appealed to the Supreme People's Court.
The Supreme People's Court upheld the first instance court's decision. It explained that the core dispute in a lawsuit for Declaration of Non-Infringement is whether the conduct of the warned party or the interested party actually infringes the patent holder's rights. Determining whether patent infringement has occurred is the central issue in the case. Therefore, the rules for determining jurisdiction in such cases can follow the same principles used for ordinary patent infringement disputes.
The Court then examined the Infringement Notice. The Notice did not directly identify the warned party or interested party, nor did it name specific products or methods. Instead, it broadly claimed that products operated by X's China registered companies, which had PET and MR reconstruction enhancement features, infringed multiple patents owned by Company C. Company C and Y argued that the Notice was actually directed at Company D and its specific products, the SubtleMR and SubtlePET, and did not involve Company A or Company B. However, the Court found that the language of the Notice was broad. It referred generally to companies X had registered in China and the products they operated with PET and MR reconstruction enhancement features. The Court could not conclude from the Notice that the accused party was only Company D, nor could it conclude that the accused products were only the SubtleMR and SubtlePET. Because X was the controlling shareholder of Company A and Company B, and because thedisputed products manufactured by Company A and sold by Company B involved the MR reconstruction enhancement feature mentioned in the Notice, the Court found that Company A and Company B were clearly affected by the Notice. Therefore, when Company A and Company B filed their lawsuit claiming that the Notice covered their products and their manufacturing and sales activities, they had a factual and legal basis for doing so. The argument by Company C and Y that Company A and Company B did not meet the requirements for filing a non-infringement confirmation lawsuit was rejected.
The Court also noted that Company A and Company B had submitted evidence, including sales contracts, purchase orders, distribution agreements, and sales invoices that were created before the Infringement Notice was sent. This evidence preliminarily showed that Company A manufactured the disputed products and Company B sold them. It also preliminarily showed that the sales activities related to the Notice took place in Shanghai. Therefore, Shanghai could serve as the jurisdictional nexus, and the first instance court had proper jurisdiction. Since that court had jurisdiction and had already accepted the case, the request by Company C and Y to transfer the case to the Nanchang was rejected.
Through this second instance ruling, the Supreme People's Court provided clear guidance on how to determine jurisdiction in non-infringement confirmation lawsuits. When an infringement warning letter is vague and does not clearly identify the infringing party, the infringing product, or the specific patent being infringed, courts can determine jurisdiction by considering the specific patents the warning might possibly refer to, the specific products or methods that might be accused, and the potential negative impact on the warned party or other interested parties. This ruling serves as an important reference for handling similar cases.
(2024) Zui Gao Fa Zhi Min Xia Zhong No. 59
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