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Research on the Jurisdiction of Disputes over Liab...
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Research on the Jurisdiction of Disputes over Liability for Damages Caused by Initiation of Intellectual Property Lawsuits with Malicious Intent
2019.06.29
Junzhiquan represented a Shenzhen-based company in responding to a case of dispute over liability for damages caused by an intellectual property (IP) lawsuit maliciously initiated by a Shanghai-based company, and raised an objection to jurisdiction. Its claims was upheld by the Beijing Intellectual Property Court (hereinafter referred to as the "BIPC") a few days ago. The BIPC ruled that it had no jurisdiction, and the case was then transferred to the Shenzhen Intermediate People's Court (hereinafter referred to as the "SIPC") for trial. The ruling clearly defined the jurisdiction of the case of "dispute over liability for damages caused by initiation of an IP lawsuit with malicious intent" and established a standard for judgment.
Background Information
 
In 2018, a company based in Shenzhen initiated six lawsuits with the SIPC against a company based in Shanghai for infringement of its invention and utility model patents. After examination, the SIPC placed the case on file as it met all conditions for filing a case.
 
In January 2019, the Shanghai company claimed that the aforementioned six IP lawsuits were initiated by the Shenzhen company with malicious intent. It said the Shenzhen company reported the alleged case to the China Securities Regulatory Commission (hereinafter referred to as the "CSRC") after initiating these lawsuits, which caused a loss to the company as its equity restructuring project had been hampered by a conditional CSRC approval and on-site inspection. It added that it filed a lawsuit with the BIPC because such loss was incurred in Beijing, requesting a court order to compensate for its loss.
 
The Shenzhen company filed an objection to jurisdiction during the statutory defense period.
 
 
Abbreviature of Adjudication
 
1
 
A case of "dispute over liability for damages caused by initiation of an IP lawsuit with malicious intent" is an infringement dispute, and is under the jurisdiction of the place where the act of infringement occurs or the place where the defendant resides. The place where the act of infringement occurs refers to both the place where the act of infringement is committed and the place where the result of the infringement occurs.
 
2
 
The act of infringement regulated in the cause of action in a case of "dispute over liability for damages caused by initiation of an IP lawsuit with malicious intent" involves only the behaviors related to the lawsuit, and exclude derivative behaviors unrelated to the lawsuit.
 
A malicious lawsuit is a lawsuit initiated by a party with false facts in order to obtain illegitimate benefits. A dispute over liability for damages caused by initiation of an IP lawsuit with malicious intent is a dispute resulting from an act of infringement that infringes on the legitimate rights and interests of others under the guise of protecting one's own IP, thereby causing others to suffer losses. Therefore, the act of infringement involved in a dispute over liability for damages caused by initiation of an IP lawsuit with malicious intent shall be taken as an act of using the litigation mechanism to file a lawsuit maliciously.
 
That is to say, the purpose of stating the cause of action for "a dispute over liability for damages caused by initiation of an IP lawsuit with malicious intent" is to prevent malicious accusations. The cause of action judges whether the lawsuit is initiated with malicious intent, whether the lawsuit initiated by the right holder has legal and factual basis, and whether the lawsuit conforms to the provisions of the Civil Procedural Law, but it does not regulate behaviors unrelated to the lawsuit.
 
When initiating the six patent lawsuits against the Shanghai company, the Shenzhen company submitted the certificate of patent granting, the certificate of patent, and payment invoices of patent annuities, which certified stable and legally effective patent rights. Therefore, the Shenzhen company's initiation of lawsuits was an exercise of its legitimate rights. The lawsuits had factual and legal basis, conformed to the provisions of the Civil Procedure Law, and was initiated without malicious intent.
 
The allegation that the Shenzhen company reported the case to the CSRC after initiating the lawsuits as claimed by the Shanghai company was not a behavior related to the lawsuits, but a subsequent derivative behavior unrelated to the lawsuits. Therefore, it was not an act of infringement regulated by this case.
 
3
 
"The place where the act of infringement is committed refers to the place where the act of infringement is directly committed. If subsequent derivative behaviors are subject to the same jurisdiction, there will be uncertainty in the connection point of jurisdiction over a case."
 
The act of infringement in this case refers to the lawsuit initiation of the Shenzhen company, which was performed in the place where the court is located, i.e., the SIPC.
 
The on-site inspection by the CSRC, as mentioned by the Shanghai company, is not an act of infringement in this case, but a subsequent derivative behavior. Therefore, Beijing is not the place where the act of infringement is committed.
 
4
 
"The place where the result of the infringement occurs is the place where the direct result of the infringement occurs."
 
The Summary of the 2013 Report of the Supreme People's Court on Intellectual Property Cases clearly stipulates that: "the place where the result of the infringement occurs shall be the place where the direct result of the infringement occurs."
 
In this case, the act of infringement refers to the initiation of the six patent lawsuits by the Shenzhen company, and the place where the direct result of the infringement occurs is in Shenzhen, rather than Beijing.
 
The on-site inspection by the CSRC and the consumption of a large amount of human and financial resources, as mentioned by the Shanghai company, is a subsequent derivative behavior conducted by the Shenzhen company after the lawsuits were initiated. It is neither a behavior related to the lawsuits, nor an act of infringement regulated by this case. Therefore, the result of the behavior, that is, the on-site inspection by the CSRC, is not the result of infringement. Therefore, the claim of the Shanghai company shall not be taken as the result of the infringement in this case, and Beijing is not the place where the result of the infringement occurs.
 
Furthermore, some courts held that in IP cases, jurisdiction is generally not determined based on the place where the result of the infringement occurs. For example, in the second-instance civil ruling of the case No. 501 [2016] Final, Civil Division, Shanghai, the court of second instance held that: In IP cases, if the place where the result of the infringement occurs is taken as the basis for jurisdiction, there will be too many connection points of jurisdiction that will result in jurisdiction conflicts and contradictions. Therefore, in IP cases, the basis for determining jurisdiction is generally the place where the act of infringement is committed, rather than the place where the result of the infringement occurs.
 
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