Newsletter January 2021

With a judicial tendency of strengthening IP protection, the Supreme People’s Court specially issued the judicial interpretation, “Several Provisions of the Supreme People’s Court on Evidence for Civil Lawsuits Involving Intellectual Property” (hereinafter “the Provisions”) to try to break the dilemma. The Provisions came into effect on November 18, 2020, and make many significant breakthroughs to effectively reduce the IPR holder’s burden of proof in civil lawsuit, which are summarized as follows:

1. Effectively reducing the burden of proof for IPR holders whose patented process does not produce a new product

Article 3 of the Provisions stipulates that where an IPR holder (the plaintiff) whose patented process does not manufacture a new product has fulfilled the burden of proof for the following facts:

(1) the product manufactured by the defendant is identical to that manufactured by the patented process;

(2) the product manufactured by the defendant is more likely to be produced by the patented process;

(3) the IPR holder (the plaintiff) had made reasonable efforts to prove the defendant’s use of the patented process,

the court may transfer the burden of proof to the defendant, requiring them to produce evidence to prove that their manufacturing process is different to the patented process.

2. Setting up a remedy of evidence preservation, obstruction and punishment

With respect to evidence preservation conducted by the court, Articles 13 and 14 of the Provisions further emphasize that where the defendant, without reasonable ground, refuses to cooperate or interferes with the court’s action of evidence preservation so that the evidence could not be preserved, or where the defendant, without authorization, conducts the acts of disassembling, tampering with or any other acts of destroying the evidence successfully preserved so that the evidence could not be used, the defendant shall bear all the adverse consequences arising therefrom. Furthermore, where such acts constitute judicial nuisance, the defendant will be punished with fines, detainment and even criminal sanction.

3. Citing mandatory submission orders of evidence and evidence presumption

In consideration that some critical evidence is controlled by the defendant, and the IPR holder is unable to acquire it, under the basic principle of “who claims, who adduces evidence”, Article 24 of the Provisions further allows the court, according to characteristics of evidence in different civil lawsuits, to directly issue mandatory submission orders to the defendant who possesses the evidence, ordering them to submit relevant evidence. Article 25 further stipulates that where the defendant, without proper grounds, refuses to submit, submits false evidence or destroys evidence or conducts any other acts that make the evidence unusable, the IPR holder’s corresponding claims relating to the evidence will be presumed tenable.

4. Expanding the scope of evidence regarding damages

In order for further improving current issue of “high amount of claim but low amount of award of damages”, Article 31 of the Provisions expands the scope of evidence regarding damages, IPR holder is allowed to adduce the evidences including but not limited the financial accounts, sales contract, annual reports, prospectuses, records on the websites or brochures, transaction data stored in equipment systems, commodity circulation data from third-party platforms, evaluation reports, licensing contracts, and records from relevant authorities of market supervision, taxation and financial departments, etc., to support its claims of damages.

The Supreme Court unanimously upheld the High Court’s 2017 decision which held that as an alternative to an injunction a Defendant could enter into a licence on FRAND terms, which would be determined by the court. The High Court determined the terms of a global FRAND licence to be offered by Unwired Planet to handset manufacturer Huawei as an alternative to an injunction against infringement of two UK patents.

The Supreme Court upheld the High Court’s judgment, and also provided guidance on:

i) When a global licence will be FRAND;
ii) In what circumstances the UK will be the suitable forum to determine a FRAND licence;
iii) Whether licensors are obliged to offer all licensees the lowest rate they have offered elsewhere; and
iv) The effect of the CJEU’s judgment in Huawei v ZTE.

The Supreme Court's decision was given in the context of appeals in two separate cases. In one appeal patentee Unwired Planet sought an injunction against further infringement of its patents unless Huawei took a FRAND license, and the determination of what a FRAND licence should be. In the other case Conversant sought similar relief against Huawei and ZTE.

The Supreme Court's decision can be accessed online here.

Global Licensing

The judges of the Supreme Court reached a unanimous decision that the UK courts could determine the terms of a global licence, including the per-patent royalty rates for patents said to be essential to 2G, 3G and 4G. The royalties that could be determined could relate to patents in force in other jurisdictions, even where there were existing proceedings between the parties as to the validity and essentiality of those patents in the foreign jurisdiction.

In reaching their decision the Supreme Court relied on the terms of the undertakings entered into by SEP holders, in particular those of the European Telecommunications Standards Institute (ETSI). The court determined that based on those undertakings, and in the context of the standards in question, a global licence was FRAND. On that basis, an implementer could be subjected to a UK injunction based on a standard essential UK patent if it refused to enter into a global licence to the patents owned by the patentee.

The court also strongly implied that the decision would remain the same if considering the undertakings of the International Telecommunications Union (ITU).

It remains possible that for certain parties, industries, technical fields, or types of portfolio, a global licence may not be FRAND.

Suitable Forum

The English court determined that the evidence submitted before the lower courts was insufficient to show that there was an alternative jurisdiction in which the court would set the terms of a global licence. For that reason, there was no basis to interfere with their decision that England was the appropriate forum.

In future cases where the court is satisfied of the ability of one or more foreign courts to set a global FRAND licence, it will be necessary for the English courts to decide questions that were not answered by the Supreme Court. In particular, the English courts will have to reach a conclusion on (a) the question of whether FRAND litigation is properly characterised as a claim for settlement of a licence, or whether it is a claim for infringement of patents with a contractual defence; and (b) in each case whether England is the natural forum for the determination of the issues in the claim, according to the approach set out by the House of Lords in 1986 in The Spiliada (link).

Discrimination

The Supreme Court was asked to decide whether the 'non-discrimination' part of FRAND meant that the Claimant was obliged to give an offer to Huawei at the same rate at which it gave an offer to Samsung. This rate was lower than that settled by the court in the global FRAND licence.

The Supreme Court decided it was not necessary for an offer to match the lowest offer given to a similarly situated licensee, the effect of the non-discrimination limb was general and not 'hard-edged'.

Safe Harbour

The Supreme Court also considered the effect of the CJEU's decision in Huawei v ZTE (link). They held that the behaviour set out in Huawei v ZTE provides a safe harbour within which conduct will not be anticompetitive, but that this did not mean that conduct which did not strictly comply with the CJEU's decision would be inherently anticompetitive. The Claimant had not acted abusively, as it was willing to grant a licence on whatever terms the court deemed to be FRAND.

Licence Terms

The Supreme Court considered that some potential issues with global licensing could be addressed by the use of adjustment clauses, that allowed overseas decisions about the essentiality and validity of patents to cause an adjustment of the rate in the UK licence. The Supreme Court did not, however, consider whether the licence could account for royalty rates set by foreign courts in respect of the patents in their jurisdiction.

The question of whether adjustment clauses will be FRAND will be dictated by the extent to which they have the potential to reduce uncertainty in the royalty rate under the licence. For important jurisdictions (in terms of sales volume) such clauses are more likely to be FRAND, particularly where the cost of the necessary litigation in that jurisdiction is proportionate.

Many legal technologies and AI operations are still nascent and typically do not yet offer the best approach for online IP rights enforcement. For example, AI and other technologies available today are still unable to consistently differentiate between original and counterfeit products from the images and information displayed on the E-commerce platforms and the internet.

Therefore, some of the most effective measures for online IP enforcement still involve manual online searches by experienced local investigators with deep understanding of the behaviors of local users (both sellers and buyers) and the ability to link relevant information across online platforms.

Thailand’s Department of Intellectual Property (DIP), as the governmental office responsible for IP-related matters in Thailand, has initiated its new Memorandum of Understanding on the Protection of Intellectual Property Rights on the Internet. This memorandum of understanding (MOU) does not create additional rights for IP owners, but acts as a mechanism to gather all the relevant stakeholders to address issues related to online IP infringement in a unified, mutually agreeable manner.

The signatories of the MOU fall into four categories:

• Governmental authorities: DIP, Department of Business Development, and Department of International Trade Promotion
• E-commerce platform operators: Lazada, Shopee, and JD Central (the most popular e-commerce platforms in Thailand)
• IP rights holders: Particularly including trademark owners facing ongoing counterfeiting problems in Thailand
• Law firms

Although the MOU is not legally binding on the signatory parties, it demonstrates the intent of the government authorities and the e-commerce platforms to collaborate in the prevention and suppression of online IP infringement. This is expected to greatly improve the cooperation of the e-commerce platforms in online infringement matters.

The inaugural signing ceremony of the MOU has been scheduled for mid-January 2021. After this, the DIP will still allow other IP owners to join the MOU as the signatory members upon request. IP owners who join this MOU will be visibly recognized and will receive strong support from both government offices and the participating e-commerce platforms to resolve IP infringement issues in Thailand.

Joining the MOU would be especially beneficial to IP owners and e-commerce platforms, so we look forward to assisting these parties with the formalities in order to help them obtain the benefits possible via this collaborative mechanism and enhance the potential of online IP enforcement in Thailand.

The Act provides a registration system for a variety of seeds and plants, giving a breeder an exclusive right for 25 - 30 years from the registration date. Such registered breeder’s right secures an exclusive right to utilize the registered variety of seeds and plants plus their processed products for business. So then, the breeder’s right is considered one of the intellectual/industrial property rights in agricultural industries. The registration system is operated by the Minister of Agriculture, Forestry and Fisheries (MAFF). MAFF provides an examination procedure to review characteristics of the different variety of seeds and plants, and other requirements in the registration application. The registered breeder’s right can be licensed to a third party and may be enforced by injunctions, damages and other measures to restore the reputation of a business against an infringer of a breeder’s right. The infringer may also be penalized by imprisonment for 10 years or less and/or fine of 10 million JPY or less in the case of an individual. If the infringement was conducted by a corporation, a fine of 300 million JPY or less can be imposed.

Despite the current system to protect intellectual assets achieved by longtime efforts to create a new variety of seeds and plants, various seeds and plants created have been transferred from Japan to other countries via loopholes in the Act; because the erosion to foreign business persons/farmers either directly or indirectly can occur via Japanese farmers, individuals and seeding dealers. Such situations could be exempted and be legal under the old Act. In particular, rice, grapes, strawberries and cherries have been especially targeted.

The amendment in December 2020 tries to fix the above mentioned situation by the following measures. First, the amendment gives a breeder the opportunity to specify a limited purpose and a limited territory for utilizing the registered variety of seeds and plants when they transfer the registered variety of seeds and plants to a farmer, an individual and/or a seeding dealer. Second, in the case of a farmer who wants to conduct self-propagation, the farmer is required to have the consent of the breeder. This amendment makes it easier for the breeder to prove how the farmer intentionally or inadvertently conducts unauthorized self-propagation. It may also ease the application of criminal penalties and damage claims against the illegal conduct of farmers.

Additionally, an indication of registered seed and plant varieties also becomes mandatory. In order to achieve more efficient utilization of a breeder’s rights, an assumption of identity will be also adopted regarding the identity of alleged infringed characteristics of seeds and plants with the registered characteristics in the registry. This assists a breeder in easily asserting any infringement of their rights in a courtroom. Furthermore, an amendment procedure of the characteristics of the variety and an administrative arbitration of MAFF is also adopted.

On the other hand, the above mentioned expansion of a breeder’s right unfortunately leads to political tension with farmers, especially small-size farmers wishing to keep their freedom to conduct self-propagation and are against the increasing costs of registration at MAFF and royalties to breeders. They remain skeptical about any amendment which may suppress their freedom. This situation still remains and should be monitored to see how it may influence future developments of the Act.