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Viewpoint | Judgment and Analysis of the Application of Article 77 of the Patent Law

Published:

2021-12-29

Article 77 of the "Patent Law of the the People's Republic of China" (hereinafter referred to as the "Patent Law") "The use, promise to sell or sell a patent infringing product that is not known to be manufactured and sold without the permission of the patentee for production and business purposes, can prove The legal source of the product shall not be liable for compensation." The content of this article is usually referred to as the "legal source defense" or the "sale/user non-infringement clause". However, in practice, the specific subject can be applied to the defense of this clause, but also according to the actual case, its role in the case and other comprehensive judgment. Example 1: Company A intends to obtain a certain product. It organizes personnel to design and complete the preliminary finalization of the product. However, because it has no actual production capacity, it chooses to hand over the design drawings to Company B. Both parties sign a contract called "Sales Contract", which stipulates that Company B will produce the products according to the design drawings provided by Company A and then sell them to Company A at a certain price, after company B delivered the product to company A according to the contract. Unfortunately, this product fell within the scope of protection of a certain patent right of Company C. Later, Company C sued Company A and Company B for infringement. During the litigation process, Company A presented the "Sales Contract" and the performance certificate, and defended against non-infringement on the grounds of Article 77 of the Patent Law. Example 2: Company B has a variety of products on sale, and also makes its products into brochures and other promotional materials to the market to promote its own products. Company A is interested in one of its products after obtaining Company B's product atlas. After Company A orders this product from Company B, both parties sign a contract called "Sales Contract", which stipulates that Company B will produce the products in its product atlas, and then Company B will deliver the products to Company A according to the contract. Unfortunately, this product fell within the scope of protection of a certain patent right of Company C. Later, Company C sued Company A and Company B for infringement. During the litigation process, Company A presented the "Sales Contract" and the performance certificate, and defended against non-infringement on the grounds of Article 77 of the Patent Law. The author believes that in the above two cases, Company A in Case 1 cannot apply the provisions of Article 77 of the Patent Law and should bear the liability for infringement and compensation. Company A in case 2 applies the provisions of Article 77 of the Patent Law and is only liable to stop the infringement without paying compensation for the following reasons: In Case 1, the design of the accused infringing product was completed by Company A, and when Company A ordered the accused infringing product to Company B, it had already provided the design drawings of the accused infringing product and explicitly required Company B to produce according to the design drawings. In the case of Company A explicitly designated design, whether it is made by Company B or by someone else, the alleged infringing products manufactured by Company B in accordance with the contract are unique, that is, they will inevitably fall into the scope of patent protection of Company C constitute infringement. Although the contract signed by Company A and Company B is called "Sales Contract", in fact, Company A has completed the pre-design and finalization of the accused infringing product, that is, it has participated in part of the production and manufacturing, so it is in line with the producer rather than the seller's identity. Therefore, the acts of Company A and Company B belong to the producers who jointly produce the accused infringing products, and Article 77 of the Patent Law cannot be applied. In case 2, although company B still produces according to the design designated by company A, because the design is made by company B itself and has nothing to do with company A, company A only chooses a certain product designed by party B based on its own needs, which is a typical purchase behavior, and then company B produces the accused infringing product according to its own design, and sell the product to Company A. In the whole process, Company A did not participate in any production process of the accused infringing products, and it can invoke Article 77 of the Patent Law to defend itself. With the improvement of China's socialist market economy, various new models of production and sales emerge one after another, but no matter what the model is, the judgment of the identity of the sales/user of Article 77 of the Patent Law should always be based on the substantive role played by the relevant responsible person in the infringement to judge whether the provision can be applied.

Example 1:Company A intends to obtain a certain product, and it organizes personnel to design and complete the preliminary finalization of the product. However, because it has no actual production capacity, it chooses to hand over the design drawings to Company B. Both parties sign a contract called "Sales Contract", which stipulates that Company B produces products according to the design drawings provided by Company A and then sells them to Company A at a certain price, after company B delivered the product to company A according to the contract. Unfortunately, this product fell within the scope of protection of a certain patent right of Company C. Later, Company C sued Company A and Company B for infringement. During the litigation process, Company A presented the "Sales Contract" and the performance certificate, and defended against non-infringement on the grounds of Article 77 of the Patent Law.

Example 2:Company B has a variety of products on sale, but also its products into brochures and other promotional materials to the market, in order to promote their own products. Company A is interested in one of its products after obtaining Company B's product atlas. After Company A orders this product from Company B, both parties sign a contract called "Sales Contract", which stipulates that Company B will produce the products in its product atlas, and then Company B will deliver the products to Company A according to the contract. Unfortunately, this product fell within the scope of protection of a certain patent right of Company C. Later, Company C sued Company A and Company B for infringement. During the litigation process, Company A presented the "Sales Contract" and the performance certificate, and defended against non-infringement on the grounds of Article 77 of the Patent Law.

The author believes that in the above two cases, Company A in Case 1 cannot apply the provisions of Article 77 of the Patent Law and should bear the liability for infringement and compensation.Company A in case 2 applies the provisions of Article 77 of the Patent Law and is only liable to stop the infringement without paying compensation for the following reasons:

In Case 1, the design of the accused infringing product was completed by Company A, and when Company A ordered the accused infringing product to Company B, it had already provided the design drawings of the accused infringing product and explicitly required Company B to produce according to the design drawings. In the case of Company A explicitly designated design, whether it is made by Company B or by someone else, the alleged infringing products manufactured by Company B in accordance with the contract are unique, that is, they will inevitably fall into the scope of patent protection of Company C constitute infringement. Although the contract signed by Company A and Company B is called "Sales Contract", in fact, Company A has completed the pre-design and finalization of the accused infringing product, that is, it has participated in part of the production and manufacturing, so it is in line with the producer rather than the seller's identity. Therefore, the acts of Company A and Company B belong to the producers who jointly produce the accused infringing products, and Article 77 of the Patent Law cannot be applied.

In case 2, although company B still produces according to the design designated by company A, because the design is made by company B itself and has nothing to do with company A, company A only chooses a certain product designed by party B based on its own needs, which is a typical purchase behavior, and then company B produces the accused infringing product according to its own design, and sell the product to Company A. In the whole process, Company A did not participate in any production process of the accused infringing products, and it can invoke Article 77 of the Patent Law to defend itself.

With the improvement of China's socialist market economy, the production and sales of various new models emerge in endlessly. However, no matter what the model is, the judgment of the identity of the sales/user in Article 77 of the Patent Law should always be based on the substantive role played by the relevant responsible person in the infringement to judge whether the provision can be applied.

Key words:

Point of View... How is the act of the lender and the borrower conspiring to defraud the guarantor's property from the case?

Government Investment and Financing Legal Observation (III). The exercise of the right of the government party to terminate the PPP contract -- take a government franchise agreement as an example.

Point of View... How is the act of the lender and the borrower conspiring to defraud the guarantor's property from the case?

Government Investment and Financing Legal Observation (III). The exercise of the right of the government party to terminate the PPP contract -- take a government franchise agreement as an example.