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Co-author: Xiaolin WANG, Harlem LU
Forum shopping is an important issue in a patent infringement lawsuit. Under the Chinese Civil Procedure Law, a plaintiff in an infringement case shall file the litigation with a court at the place of infringement or at the place where the defendant is domiciled. However, it often happens that the alleged infringing manufacturer or seller is not in the jurisdiction where the plaintiff wishes to bring the litigation. Fortunately, the ever-growing online shopping business in China seems to provide an opportunity. That is, a patentee may, under the witness of a public notary, purchase the suspected infringing goods online and receive the goods at the place where the lawsuit is to be brought.
A typical scenario involves, (1) the alleged infringer (often the manufacturer or the seller) is not domiciled at the place of receipt; (2) the purchase is conducted online, usually at the alleged infringer’s online store or through a B2C e-commerce platform; (3) the place of receipt (often the plaintiff’s domicile) is served as the only connection to determine the jurisdiction. This brings us to the main topic discussed in this article: does the court at the place of receipt have jurisdiction?
To answer this question, one must ask whether the place of receipt can be deemed to be the place of infringement. The place of infringement, pursuant to Rule 24 of the Supreme People’s Court’s (SPC) Judicial Interpretation on Application of the Civil Procedure Law issued in 2015, includes the places where the infringement is conducted and where the consequence of the infringement occurs. Specifically, according to Rule 5 of the SPC‘s Several Provisions on Issues Concerning the Application of Law to Trial of Cases of Patent Disputes issued in 2001 and amended in 2015, the place of sale shall be deemed as place of infringement, which includes places where the infringing sale is conducted and places where consequence of the infringing sale occurs.
If, the seller is sued and the court at the place of sale shall have jurisdiction, then one may naturally be led to the central question of this article: Could the place of receipt be deemed as the place of sale? If the answer is yes, could one assume, based on the laws and interpretations, that the place of receipt shall be deemed as the place where the infringing sale is conducted or where the consequence of the infringing sale occurs? We will try to answer this question by looking into some of the leading cases where the courts tried to provide guidance on this hotly debated issue.
SPC Interpretations analyzed
In 1994, the Beijing Higher People’s Court wrote an official letter to the SPC, and requested for instructions regarding the Beijing 1st Intermediate Court’s jurisdiction on Beijing Greatwall Titanium v. Hebei Zunhua Titanium Equipment. The alleged infringing product was manufactured in Hebei Province and finally shipped to a third party, Beijing Gear Factory (the purchaser). At that time, the purchase was conducted offline. The plaintiff filed the lawsuit against the manufacturer before the Beijing 1st Intermediate Court. In its letter to the SPC, the Beijing Higher People’s Court suggested that the place where the purchaser was domiciled (which was also the domicile of the plaintiff) shall be deemed as the place of sale. The SPC suggested in its reply that Beijing was the place of sale and the Beijing 1st Intermediate Court shall have jurisdiction.
Similarly, in the mid-1990s, some courts held the view that the place where the plaintiff was domiciled or where the alleged infringing goods was received shall be deemed as the place where the consequence of the alleged infringing sale occurred. Nevertheless, these lower courts’ opinions were disagreed by the SPC in 1998, according to a memorandum of the SPC’s Trail Work Conference for IP Cases.
Fast-forward to 2015, when the 2015 SPC Interpretation of the Civil Procedure Law was announced, Rule 20 was believed to have provided a favorable hint in line with the view that the place where the plaintiff is domiciled or where the alleged infringing goods is received shall be deemed as the place of sale. Rule 20 provides that, if a contract of purchase and sale is entered into via the internet, and the subject matter is delivered in ways other than the internet, the place of receipt shall be deemed as the place where the contract is performed.
Under Rule 20, the place of receipt shall be deemed as the place where the contract for purchasing the alleged infringing product is performed. Not surprisingly, many sales that are involved in patent infringement cases often have a purchase and sale contract. However, Rule 20 is primarily provided to interpret the jurisdiction of a “contract” dispute case instead of an “infringement” case, which means that a judge may refuse to apply this rule in the latter. And neither Rule 20 nor other applicable laws and the SPC interpretations are clear on whether, in a patent infringement case, the place where the sale contract is performed can be deemed as the place of sale.
Lack of clear guidance from courts
One may conclude that no applicable laws have yet provided a clear guidance. This could be reasonably understood when looking at the current e-commerce boom in China. A single online sale can involve many actions at many different places, such as the purchaser’s domicile, the seller’s domicile, the place of payment, the place dispatching the goods, the place of receipt, etc. Any one of these places may be deemed as the place of the sale, but the laws have not yet provided a clear guidance on the place or places that may be served as the connection for determining the jurisdiction.
In view of this, the judge’s perspective becomes an important indicator. However, our study of the relevant cases reveals that the Chinese courts’ opinions sway in both directions.
Dozens of cases decided by the courts in Zhejiang, Jiangsu, and Guangdong provinces upheld that the place of receipt shall be deemed as the place where the consequence of the alleged infringing sale occurs, and that the court therein has the jurisdiction.
In Shenzhen Worlddvr v. Shanghai Kaicong, et al, the plaintiff, Shenzhen Worlddvr, purchased the alleged infringing product from the defendant’s online store and received the goods in Shenzhen (which was also the plaintiff’s domicile). The purchase process, goods, and receipt were notarized by a Shenzhen public notary. The case was filed before the Shenzhen Intermediate Court. The defendant challenged the jurisdiction and the court decided not docketing the case and removed it to a Shanghai court where both defendants were domiciled. The plaintiff appealed the Shenzhen Intermediate Court’s removal decision. The Guangdong Higher People’s Court overruled the lower court’s decision, and reasoned that the Shenzhen Intermediate Court had the jurisdiction, since the place of receipt shall be deemed as the place where the consequence of the alleged infringing sale occurred.
When we shifted our study to courts in Beijing and Shanghai, search results for similar cases are very limited. A judge at the Beijing IP court has even published an article with an explicit disagreement on such jurisdiction determination method and rejected docketing a similar case. According to the article, the rejected case was filed by a Taiwan company against a company domiciled in a southern province of China, based on Beijing as the place of receipt for the alleged infringing goods purchased online. The judge held that the place of receipt was not a proper venue as the place where the consequence of the alleged infringing sale occurred, to determine the jurisdiction.
Moreover, we recently found two rulings rendered by the Guangdong Higher People’s Court and the Guangzhou IP Court. The two rulings were made in the same month but with opposite holdings.
In Zhang Bin v. Shenzhen Mingpin, et al, the plaintiff, Zhang Bin, purchased the alleged infringing products online and received the goods in the Luogang District of Guangzhou. The Guangzhou IP Court held that the place of receipt shall “not” be deemed as the place where the consequence of the alleged infringing sale occurred, and refused to docket the case. This decision was rendered in January 2015. Almost contemporaneously, the Guangdong Higher People’s Court held in another similar case, Shenzhen Liyang v. Guangdong Tongfang, that was in line with its previous opinions, for example, the Shenzhen Worlddvr v. Shanghai Kaicong case, that the court at the place of receipt has jurisdiction.
Risks for patent owners
In conclusion, there may be some risks for a patent owner wishing to establish jurisdiction solely based on the place of receipt, especially before some Chinese courts which take a stricter approach. We would like to point out that different courts may hold different opinions on this issue. We urge that a uniform and explicit guideline be provided.