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Pretrial injunction: a choice for IP owners to resist irreparable harms in China

Recently Shanghai Pudong District Court issued typical cases of internet-related unfair competition, including Alipay v Jiangsu Zebra Software Technologies Inc[1], as one of the 50 typical internet-related unfair competition cases in 2020. It is the first nationwide pretrial injunction granted in the unfair competition dispute on the app triggering strategy. In this case, Pudong District Court decided unfair competition acts of Jiangsu Zebra by setting up the same app triggering strategy as Alipay to increase the visitor volumes, has inappropriately impeded the normal directing to Alipay app at iOS system and severely interrupted the operation of Alipay app. The Court thereby granted a pretrial injunction ordering Jiangsu Zebra to stop using the same URLSchem as Alipay app which has effectively prevented the potential irreparable harm that the applicant Alipay would suffer during the Double 11 Shopping Festival. In recent years, more pretrial injunctions have been issued by the Chinese courts in the IP related disputes as the right owners opt to pursue a pretrial injunction in urgent situations to defend against irreparable losses and the legislation and regulations are clearer than before for the courts to make reasonable decisions.

1. An overview of pretrial injunction in China

As is known to us, a pretrial injunction is a court-ordered command to do something or, more often, to not do something before a lawsuit or an arbitration is commenced. Pretrial injunction is an important mechanism established in the Chinese civil proceedings that help to stop a specified act or behavior, or command carryout of certain act or behavior in order to avoid irreparable losses that a party may suffer. It ought to be sought before court proceedings or arbitration are commenced and it is a statutorily ex parte procedure, different from an injunctive relief that granted during the litigation and by law the courts should inquire both the applicant and respondent before issuing it. Only when a surety bond is provided to protect the respondent in case the grant is later determined to be in error, and certain requirements are met, the Chinese courts would grant pretrial injunctions to the applicants. After receiving an applicant’s request, the court should decide whether to issue a pretrial injunction within 48 hours. The most important factor to be considered for granting a pretrial injunction is that, it is extremely urgent to stop or order certain act or behavior to protect a party from suffering irreparable harm. In such cases, due to the short term for the courts to decide pretrial injunctions, to win a pretrial injunction, good preparation on evidence collection and grounds organization are vital.

In China, before our access to WTO, there was no pretrial injunction or similar systems. To satisfy the requirements of the International Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement when China entered in WTO, intellectual property laws revised then i.e. patent, trademark and copyright laws absorbed the pretrial injunction system. The judicial interpretations issued by the Supreme People's Court on application of pretrial injunctions in patent and trademark infringement cases provided specified criteria for the courts to decide whether to grant the injunctions. After the implementation of the China Civil Procedure Law in 2013, pretrial injunction mechanism is formally established.

The current pretrial injunction system is mainly regulated by article 101 of the China Civil Procedural Law, specific IP laws and the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Reviewing the Injunction Cases Involving Intellectual Property Disputes that becomes effective on January 01, 2019. Since January 01 of 2019, scope of application of pretrial injunction is widened from the trademark, patent and copyright dispute cases to various aspects of IP disputes such as trade secret, privacy dispute cases and etc.

Under existing law and practices, the IP right owners and some licensees may apply for a pretrial injunction. Exclusive licensees may file for a pretrial injunction independently. A licensee under a sole licensing contract may file for a pretrial injunction on its own in case the rights owner does not submit such an application. A licensee under a normal non-exclusive licensing contract may file the application on its own if the right owner expressly authorizes the licensee to file the lawsuit in its name. Therefore, to evaluate whether a pretrial injunction may be pursued, it is important to ascertain in which kind of license that the interested party is engaged.

2. The major differences between pretrial injunction and injunction during the court proceedings

The commencing times and situations where they should be applied are different. A pretrial injunction will be issued before a lawsuit or an arbitration is instituted, while the latter is issued when the litigation is ongoing. The courts will issue a pretrial injunction if irreparable harm will be suffered by the applicant and it is urgent for the applicant to obtain a pretrial junction to prevent severer harms, whereas if due to the acts or behavior of one party or other reasons, a judgment may longer be enforceable or the opposite party would suffer other losses, the courts will issue an junction during the litigation.

The courts may decide ex officio to grant a junction during the court proceedings and for the situations that are not urgent, the courts may decide when to issue injunctions on different facts. However, a pretrial injunction will only be issued by the applicant’s request and should be granted within 48 hours since the request is received by the courts.

Surety bonds are necessary when filing the request to the courts for a pretrial injunction. For the junctions granted during the litigation, the courts may base on the facts of cases and decide whether to require the applicants to provide surety bonds.

3. Factors to be considered in determining whether to grant a pretrial injunction

According to current judicial practices, four factors should be considered before a pretrial injunction is applied, including 1) whether the applicant has legal and factual basis to request a pretrial injunction; 2) whether the applicant is at risk of irreparable harm; 3) whether the damages to the applicant without an injunction would outweigh the damages that the alleged infringing party would suffer if an injunction is made and 4) whether applying pretrial injunction would compromise the public interest.

(1)the applicants legal and factual basis

In evaluating the first factor, the courts generally will relying on the types or natures of the IP rights that are alleged for protection, examine whether the relevant IP rights are valid, whether the IP rights have gone through substantive examination, whether the alleged rights are pending in invalidation, cancellation procedures or any possibility of revocation or cancellation of the rights exists, whether any dispute exists on ownership of the concerned rights and other facts that may affect the validity of the relevant IP rights exist. It is generally easier for the courts to judge the validity of trademark rights and copyrights, while it would be much harder to confirm the validity of design patents, to define the scope of inventions and utility models, or to decide whether the relevant competitive interest exists and should be protected.

Besides considering whether to grant a pretrial injunction, the courts will examine preliminary proofs about the existence of infringement acts, and the burden of proof is lighter than in examining the merits of the cases that high degree probability of success should be established by the plaintiffs.

(2)the risk of irreparable harm

It is hard and often complicated to decide whether there is risk of irreparable harm. In general, in the situations that, if the respondent’s acts will damage the applicant’s reputation, or personal rights i.e. right of publication or right to privacy and cause irreparable harm, or the respondent’s acts would lead to the alleged infringement out of control and evidently aggravate the applicant’s suffered harm, or the respondent’s acts will cause distinct decrease of the applicant’s market share in the relevant market, the courts will decide the applicant is at risk of suffering irreparable harm in case no pretrial injunction is made.

To decide whether a pretrial injunction is necessary, it is important to decide whether it is in extremely urgent need. According to the stipulations of the Provisions of the Supreme People’s Court on several Issues Concerning the Application of Law in Reviewing the Injunction Cases Involving Intellectual Property Disputes, “urgent situations” may include: (1) trade secrets of the applicant are about to be illegally disclosed; (2) right of publication, right to privacy and other personal rights of the applicant are about to be infringed; (3) disputed intellectual property rights are about to be illegally disposed of; (4) the intellectual property rights of the applicant are being or will soon be infringed on occasions with relatively higher degree of timeliness like trade fairs; (5) popular shows with relatively higher degree of timeliness are being or will soon be infringed; (6) other situations in which act preservation measures shall be taken immediately. In recent years, the Chinese courts are more positive to issue pretrial junctions in the cases that fall within the above listed situations such as Novartis China Biomedical Research v He feng trade secret infringement dispute[2] and Shenzhen Tencent vs. Guangzhou Netease Computer System Co., Ltd., etc. in relation to right to network dissemination of information infringement dispute[3]. In Novartis China v He Feng case, the court granted pretrial injunction to enjoin He Feng to disclose, use or permit others to use 879 documents (including the document names) listed by Novartis China before the court rendered a judgment in relation to the subject case. In Tencent v Guangzhou NetEase case, the court decided, Tencent owns right to dissemination of information online over 623 pieces of music and argued the five respondents including Guangzhou NetEase had provided the involved musical works through “NetEase cloud music” app through mobiles and the relevant online platform which constituted infringement upon Tencent’s right. Considering the large number of the involved works of music in the network, NetEase would grab the market share by enforcing other’s rights and cause severely irreparable damages to Tencent’s right.

(3)the principle of balancing the interest

Following the principle of balancing the interest of the interested parties, when the injury suffered by the applicant as a result of failure to enforce injunction will exceed the injury suffered by the respondent if a pretrial injunction is made, the courts will grant the injunctions to prevent the imminent damages to the applicants like in the LangRenSha case Shanghai Jia Mian Information and Technology v Hangzhou Netease and etc. [4], the court considered, the four respondents’ unfair competition acts have decreased the market share of the applicant and caused derogation of its reputation, besides there’s possibility that injuries would be broadened that could lead to the applicant being squeezed out from the markets. The harm is irreparable to the applicant if the respondents’ acts are not enjoined. In another case Shandong Ni Hong Wang Electronics v Zhongshan Ge Lin Man Light and Electricity Technologies[5] involving patent infringement dispute, the court considered if the respondent’s 79020 sets of products are prohibited to be exported, it will probably affect the normal operation of the respondent. In comparison, the applicant will not suffer more losses, if no pretrial injunction is granted. The court therefore rejected the applicant’s request to grant a pretrial injunction.

(4)public interest

The concept of public interest is general and unclear, which is therefore not often used in judicial practices. Besides in the case that a request for pretrial injunction is filed, generally only civil rights of the interested parties are involved. Thus, this factor in most cases will not play a role in the courts’ decision about whether to issue an injunction. However, in some cases where issuance of pretrial injunction would damage the public interest such as in the situations that some necessary medical procedures, or supply of medicines or appliances are obstructed, it will lead to the courts’ decision not to grant an injunction.

4. Concerns on the current pretrial injunction mechanisms

In China, if a pretrial injunction is made, review application should be filed before the same court that granted it and the ruling should be made ten days from the court’s receipt of the review application. It means, a pretrial injunction if opposed by any party will be reconsidered by the same court that grants the injunction. It appears the court rarely will change its mind on reconsideration after only ten days, and therefore, it is yet effective enough to supervise the court’s ruling or provide real relief to the opposing party. We believe reconsideration procedure needs more specified regulations to realize the procedural justice and to avoid damages caused by a wrong pretrial injunction.

Following the current laws and regulations, a pretrial injunction is decided ex parte that should be decided within 48 hours since the petition for the junction is filed by an applicant. No hearing is statutorily required before the court to issue a pretrial injunction, nor the court needs to inquire both parties. The junction becomes effective once it is granted and often affects significantly the respondent’s interest. To guarantee the correctness of the injunctions, in practices, the Chinese courts usually hold hearings to give the parties full chances to present counter arguments. For example, in the influential case of “the Voice of China” trademark infringement dispute[6], Beijing Intellectual Property Court after a hearing granted the pretrial injunction ordering the respondents to cease using the registered trademarks and the name “the Voice of China” of the TV show. Since hearings are held in most cases, we believe hearing be stipulated in legislature as necessary procedure before issuing a pretrial injunction will better protect the parties’ interest.

To be summarized, where a monetary award cannot compensate for the wrong and when urgent needs exist, pretrial injunction before a litigation or an arbitration is a good choice for the right owners to stop infringement and prevent enlargement of damages, and it has been more frequently chosen by the right holders in China. During the past years, the Chinese legislature has provided much clearer criteria to be followed by the courts, yet specific enough to guide the courts in making decisions. As discussed above, further revision on the related regulations are still needed. With the development of technologies and internet, in recent years internet-based companies generate high revenue through online sales, financial transaction fees, paid advertising, cloud services and a host of other business lines. In the meanwhile, more online infringing actions have been emerged that may rapidly damage the rights and cause losses of IP rights and competition interest of different online market players. We forecast more requests and grants of pretrial injunctions in IP related dispute cases in the next few years and let us expect more legal certainty for the Chinese courts to issue the injunctions to protect the real owners of the interest.

 

[1] (2020) Hu 0115 Xing Bao No. 1 civil decision.

[2] (2014) Hu Yi Zhong Min Bao Zi No. 1 civil decision.

[3] (2019) Hu 0115 Xing Bao No. 1 civil decision.

[4] (2019) Shan 01 Xing Bao No. 1 civil decision.

[5] (2019) Yue 73 Xing Bao No. 2 civil decision.

[6] (2016) Jing 73 Xing Bao No. 1 civil decision.