Supreme People’s Court acts against obstruction of litigation

In a recent case, the defendant successfully convinced the appellate court that the technical features of the alleged infringing equipment did not fall within the scope of protection for the plaintiff’s patent, which led to the repeal of the first-instance judgment. However, the defendant was still penalised for obstructing litigation during the proceeding.

Dongguan Yicheng Intelligent Equipment Co (Yicheng) filed a patent infringement suit before the Shenzhen Intermediate Court against Shenzhen Xinhui Electromechanical Equipment Co (Xinhui), claiming that the equipment manufactured and sold by the defendant infringed its patent rights. It requested a permanent injunction and compensation.

In order to ascertain the technical features of the alleged infringing equipment, the trial judge went to the defendant’s storage place to conduct an on-site inspection. However, Xinhui’s legal representative refused to provide access to the password for the equipment and instructed the staff to remotely invalidate the password. Further, they kept thwarting the court staff by employing alternative approaches to start the machine, which resulted in a failure to identify the technical solution of the defendant’s equipment.

Moreover, Xinhui defied the court order to fulfil the burden of proof by refusing to submit evidence on the operating condition and technical features of its equipment.

Thus, the first-instance court found infringement and ordered the cessation of the infringing behviour, as well as damages of Rmb200,000.

However, Xinhui appealed to the IP Court of the Supreme People's Court and submitted evidence showing the technical features of the alleged infringing equipment. Yicheng raised no objection to the authenticity of the evidence. While the evidence adduced by Xinhui in the second instance was not new per se, it was pertinent to the fundamental facts of the case, and long overdue because of Xinhui’s deliberate withholding. The IP Court therefore found the evidence admissible and overturned the first-instance decision.

Although the final decision is in Xinhui’s favour, its actions in obstructing the litigation are not exempt from civil liability. On 17 March 2021, the IP Court issued a penalty decision, finding that:

• the defendant obstructed the court investigation in the first-instance proceeding, which should be sanctioned. The IP Court therefore imposed a Rmb100,000 fine on Xinhui and a Rmb50,000 fine on its legal representative; and
• the defendant deliberately provided evidence that was long overdue in the second-instance proceeding without providing a reasonable explanation, which should be imposed a fine of Rmb50,000.

Comment

It is intriguing that the amount of the total fine is equivalent to the damages awarded by the trial court. Xinhui may be off the hook in terms of patent infringement, but it surely did not expect a fine for deliberate withholding evidence and obstruction of litigation.