Chinese Patent Litigation – Practice Tips for US Companies (Part 3)

Trends and Predictions

In light of the current socio-political environment in China, these two cases appear to be the tip of an iceberg, as many more similar decisions may follow.

On the one hand, the Chinese government has emphasized the importance of IP rights, and supported China’s own R&D efforts for the past 10 years. And many Chinese companies have learned to patent their innovations and technology. On the other hand, the Chinese industries, especially electronics industries, have been fed up with foreign patent holders’ aggressive (and sometimes insensitive) stance in enforcing their patent rights against Chinese companies in China and globally.

Therefore, it was only a matter of time before Chinese companies and courts would find ways to counter the perceived imbalance in IP enforcement. And these two cases illustrated the trend.

Zhejiang Province’s emergence as the “Eastern District of Texas” of China does not come as a surprise. Zhejiang Province is one of the main commercial centers in China, and unlike other highly developed provinces in China, Zhejiang Province does not have many large state-owned companies in China. Instead, it houses any successful medium and small private companies. As a result, courts in Zhejiang Province have less political risks when the judges issue high damage awards against foreign entities in favor of private businesses. In addition, although Zhejiang companies export products all over the world, they are not large enough to suffer major repercussions outside China.

The trend, however, is not against US companies in the long run. As the courts continue to issue high damage awards, sooner or later, they will have to rule in favor of plaintiffs who happen to be US companies. Therefore, these two cases will continue to push China forward to become a world leader in patent litigation.

(To Be Continued. Stay Tuned for Practice Tips for US Companies.)