Apple Wins China Design Patent Case: We Told You Not to Panic

China Design PatentsLast year, in the midst of media hullabloo regarding Apple having lost a design patent lawsuit in China, we wrote China’s Design Patent Scourge Has Snared Apple: Nobody Panic, calling for everyone to calm down because Apple would likely prevail in the end. Well Apple just did. Prevail that is. First though a large dollop of background, taken straight from last year’s post.

Big media today has been covering Apple’s BREA design patent dispute with “a small Chinese competitor” and I woke up this morning with my inbox filled with emails from financial analysts and reporters clamoring to talk with me about this news. I assume the other China lawyers at my firm are being similarly inundated. This is obviously huge news and for more on this story, check out the following:

But first, everyone calm down and let me explain.

I went on to make clear that I did not know anything but Apple’s specific case, but felt like I did, because our own China lawyers we had seen so many facially similar design patent matters.

I do not know anything at all specific about Apple’s case. Not a thing. My law firm does not represent Apple on its IP matters, nor do we represent the Chinese company with this patent claim. Additionally, I have not looked at a single pleading in this case, nor have I discussed this case with any of the China IP attorneys in my firm who may (or probably not) know more about this case than I. This post is based on what we have seen (especially lately) happening with China design patents, which is a whole lot.

In the last six months or so, we have gone from dealing with maybe one China design patent matter a year to at least one a month. We cannot pin down this massive acceleration in design patent matters on any one thing and so we simply think that word has gotten out among Chinese companies regarding the effectiveness of engaging foreign companies in design patent disputes.

I then explained China’s design patent laws:

China law defines a design as a shape, pattern, or combination thereof or the combination of a color with a shape and pattern, with an aesthetic appeal and for industrial application. If you think this definition is incredibly vague and potentially broad enough to drive a truck through, you would be right. On top of this, China’s patent office does not “review” design patents before granting them. Or, as I love to tell our clients over the telephone, “I could probably secure a China design patent on the blue socks I am wearing right now.” When I say that, I am being intentionally dramatic, but I honestly believe my chances of securing such a design patent are not that bad.

The other things you should know about Chinese design patents are that the patent grants its holder exclusive use of the aesthetic features of a product not its functioning portion. In other words, the patent is on how the product looks; its external appearance. Not kidding, but it is quite possible that the small Chinese company with the mobile phone design patent could use its design patent against any cell phone company with a product that looks like an iPhone.

I then discussed the design patent cases our China attorneys were handling:

These cases typically start with a phone call from a Western company telling us that some company (usually a company it already knows and usually either its manufacturer or a competitor) just contacted the Western company (or the Chinese company that makes the Western company’s product) and said that the Western company’s product is violating the Chinese company’s China design patent. The Chinese company then threatens to sue the Western company for patent infringement damages and to block any of the Western company’s “infringing” product from leaving China. Needless to say, the companies that call us on these matters are more than a little bit concerned.

Though I am not going to claim that these are pleasant situations or inexpensive for our clients, but I will claim that they are not as bad as they initially appear. I have heard that China issues around ten times more design patents than the United States patent office, which reinforces my contention that I could get a China design patent for my blue socks. There is no substantive examination of a design patent application in China. Instead, all you really need to do to get a China design patent is to complete your design patent application properly. So if I complete the design patent application on my blue socks, and attach a proper and appropriate drawing of them, along with a proper power of attorney and I make the right claims regarding my having designed my blue socks and regarding their being of a new design, I almost certainly will get my design patent.

I then explained why design patents are so weak as are most design patent cases filed by Chinese company plaintiffs:

BUT, my blue sock design patent will be as weak as a kitten. And it is for this reason why China design patent actions are not as scary as they first appear and why I am calling for nobody to panic on Apple’s behalf either.

In the cases we handle nobody has yet actually had customs block their product from leaving China. The reason is because China customs generally requires a party seeking such a block to post a substantial bond. That substantial bond then becomes available to the party whose product has been blocked by customs. Again though, you want to avoid these cases if at all possible because even if you end up prevailing, you will need to incur considerable time, trouble and money to get there.

The difference between the cases we have handled and the Apple one, however, is that in our cases the Chinese companies threaten to get an order blocking our client from having its product made in China, but they never do. They never do because they know the cost of doing so is high and the likelihood of their getting such an order and having that order stick is very low. I read somewhere once that something like 70 to 90 percent of all Chinese design patents get invalidated when challenged. These Chinese companies know that if we were to challenge their design patents we would prevail, so why spend big money only to lose in the end. The Chinese company’s power comes from the design patent threat, not from reality.

In the Apple case, the Chinese company has brought a lawsuit and by doing so it has increased its threat value. Did the Chinese company do this because it has a valid patent? Or is it because it views Apple has having such deep pockets it has decided to go strong in the belief that doing so will get Apple to pay big money in settlement to end the issue? I don’t have the answers.

Most importantly, I predicted both in my blog posts (“Based … on our own history with China design patents, I am guessing Apple will prevail in the end”) and in a CNBC article in which I was interviewed, that Apple would eventually prevail.

Well guess what. Apple just did prevail before the Beijing Intellectual Property Court: “The court ruled that the regulator {that previously ruled against Apple] did not follow due procedures in ordering the ban while there was no sufficient proof to claim the designs constituted a violation of intellectual property rights.” China design patents: fear them just enough to get your own as an offensive weapon, but not too much.

This article was written by Dan Harris and published on China Law Blog. Original Post: http://www.chinalawblog.com/2017/03/apple-wins-china-design-patent-case-we-told-you-not-to-panic.html      

View the original article here.

Dan Harris

Dan Harris is internationally regarded as a leading authority on legal matters related to doing business in China and in other emerging economies in Asia. Forbes Magazine, Business Week, Fortune Magazine, BBC News, The Wall Street Journal, The Washington Post, The Economist, CNBC, The New York Times, and many other major media players, have looked to him for his perspective on international law issues.