There are three pivotal Directives of the Supreme People’s Court concerning the non-infringement declaratory judgments (NIDJ). This article considers these Directives and discusses the likely future development of NIDJs and their effect on litigation strategy.

Origin of NIDJ proceedings

The concept of NIDJ was first established in the case Suzhou Longbao Bioengineering Industry Co. Vs. Suzhou Langli Health Care Co., Ltd., in a written reply from the Supreme Court to the Jiangsu Province High People’s Court regarding this dispute over patent infringement.  The Supreme Court indicated that a claim of non-infringement was legitimate.  This case set up a principle unheard of in the past whereby a Plaintiff may initiate proceedings solely based on a claim of non-infringement.

Development of the concept of NIDJ

Besides the Directive of the Supreme People’s Court concerning a jurisdiction dispute in the case of Eli Lily Vs. Changzhou Huasheng Pharmaceutical Co. Ltd., the Court further issued the most recent Directive concerning another jurisdiction dispute with respect to the case of Honda Technology Research Co. Vs. Shijiazhuang Shuanghuan Auto joint-stock company & Beijing Xuyang Hengye Trading Co., Ltd. The Supreme Court has confirmed that the first filing rule is used to resolve a dispute over jurisdiction between two courts of different jurisdictions. Thus the first person to file proceedings chooses the jurisdiction.

Types of NIDJs

The recent Directives issued by the Supreme People’s Court are limited to patent infringement disputes and copyright infringement disputes. However, we expect that the NIDJs will be expanded to other types of intellectual property disputes such as trademark infringements, and even anti-unfair competition disputes, by virtue of the general principle regulated under Article 35 of the Civil Procedure Law of PRC.

Jurisdictions of NIDJs

According to Article 29 of the Civil Procedure Law, a lawsuit brought on a tortuous act shall be under the jurisdiction of the Court of the place where the tort is committed or where the defendant has his domicile.  As far as the NIDJs are concerned, they shall be under the jurisdictions of the Courts of the places where the defendant has his domicile and where the warned plaintiff’s products are produced and/or distributed. For example in the Eli Lilly case, Eli Lilly sent a demand letter to Changzhou Huasheng, Changzhou subsequently filed the NIDJ case before the Nanjing Court (their home jurisdiction); and it was held that the Nanjing court had jurisdiction over the case under the fist filing rule.

Considering NIDJs when initiating proceedings

The essential condition for lodging a non-infringement declaratory judgment is a demand letter from the patentee to the alleged infringer/defendant, rather than the filing of an IP infringement lawsuit. Thus by sending a demand letter the patentee risks the alleged infringer suing for an NIDJ in their home jurisdiction.

Under these circumstances, we suggest that the patentee should not send a Cease and Desist letter but lodge litigation directly if they are worried that the defendant/infringer could choose a home jurisdiction to sue for a declaration of non-infringement in order to control the speed/progress of the litigation.