China's Supreme People's Procuratorate (SPP) has released five typical cases concerning the punishment of malicious intellectual property litigation, covering utility model patents, design patents, trademark rights, and unfair competition across multiple intellectual property domains.
Among these, the case of Foshan Company A v. Wuxi Company B regarding utility model patent infringement was selected as one of the typical examples.
Basic Facts
Wuxi Company B is primarily engaged in the R&D, manufacturing, and sales of automated material handling system equipment, including metering and batching systems, with applications across chemical, food, and pharmaceutical industries. The company holds over 100 patents and software copyrights, and is officially recognized as a high-tech enterprise and a "little giant" specialized and sophisticated enterprise in Jiangsu Province. Foshan Company A operates in the new energy equipment manufacturing and chemical new material equipment sectors. Both companies compete in the same market with similar products and patents, and have frequently bid against each other for the same projects.
In August 2019, Company A obtained the utility model patent at issue. On January 10, 2023, Company A filed a patent infringement lawsuit against Company B before the Wuxi Intermediate People's Court, claiming CNY 23 million in damages. This amount was strategically calculated to exceed 10% of Company B's disclosed net assets. Under the Information Disclosure Rules for Companies Listed on the National Equities Exchange and Quotations, such amount triggers mandatory disclosure obligations. At that critical juncture, the stock exchange had accepted Company B's IPO application only days earlier, and Company B's listing process was consequently suspended.
Case Discovery and Investigation
In March 2023, the Wuxi People's Procuratorate identified the case during routine case monitoring and promptly initiated a coordinated investigation with the local grassroots procuratorate. The investigation focused on the following key issues:
First, the validity of Company A's patent. On November 23, 2022, at Company A's own request, the China National Intellectual Property Administration (CNIPA) issued a patent evaluation report concluding that all claims of the patent in question did not meet the requirements for patent grant.
Second, whether Company B had actually infringed the patent. Evidence revealed that Company B had engaged a supplier to manufacture the identical product as early as June 2018, predating Company A's patent application date by over a year. No infringement was established.
Third, whether Company A acted with subjective malice. Based on the competitive relationship between the parties, the timing of the lawsuit, which coincided with Company B's critical IPO phase, and the amount of damages claimed, the prosecutors determined that Company A had acted with malicious intent.
Fourth, the damages suffered by Company B. The investigation confirmed that Company A's litigation had directly caused the suspension of Company B's listing process, resulting in tangible harm.
On April 12, 2023, the Wuxi People's Procuratorate referred the case to the Wuxi Intermediate People's Court, setting forth the facts and legal grounds establishing malicious litigation, and urging the court to identify and penalize such conduct in accordance with the law. Concurrently, the procuratorate informed Company B of its legal rights and remedies, and Company B elected to file a counterclaim to protect its interests.
In April 2023, the Court held a public hearing and delivered its judgment on the same day, dismissing all claims of Company A, ordering Company A to compensate Company B CNY 400,000 for reasonable expenses, and requiring Company A to issue a public statement on the China Capital Market Service Platform to eliminate the adverse effects. Company A appealed, and in June 2024, the Supreme People's Court rendered its second-instance judgment, dismissing the appeal and affirming the original ruling. Company B successfully completed its IPO in December 2023.
Throughout the proceedings, the Wuxi People's Procuratorate actively engaged with the Wuxi Intermediate People's Court, reaching a consensus on effective measures to punish malicious litigation, protect the legitimate rights and interests of enterprises in a timely manner, prevent the further expansion of adverse effects caused by malicious litigation, and safeguard the healthy development of businesses.
Significance of the Case
This case establishes that where a party, knowing its patents are defective or lacking factual basis, initiates litigation against a commercial competitor at a strategically critical moment (such as during the competitor's IPO process) with the intent to obtain undue advantage, thereby harming the legitimate rights and interests of others and disrupting judicial order, such conduct shall be deemed malicious litigation.
When handling supervision cases involving malicious litigation, procuratorial authorities should adopt a comprehensive investigative approach, thoroughly examining whether the intellectual property rights at issue are valid, whether infringement has actually occurred, and whether the plaintiff was aware of the defects in its rights, as well as the plaintiff's litigation motives and timing.
For intellectual property cases still pending before the people's courts, where a procuratorate determines after examination that the litigation constitutes malicious conduct, it may refer case-related information to the court to draw attention to any irregularities, thereby enabling effective punishment of malicious litigation, upholding judicial fairness and authority, and promoting the development of a social credit system.
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