Representing Zhejiang Kanghua Glasses Co., Ltd in a Patent Infringement Case against OBE- Werk Ohnmacht & Baumgartner GmbH & Co. KG

Impact of the Case: Top 1 of Fifty Typical Cases on Judicial Protection of Intellectual Property for 2009

Attorneys: Ping LIU, Zhong LI

Synopsis:

This is a typical case of misuse of patent right. The result of this case is supposed to have a significant impact on the development of China’s glasses processing industry; therefore, it attracts the attention of the local industry associations as well as lots of companies within the industry. Zhejiang Kanghua Glasses Co., Ltd (defendant, hereafter Kanghua) is a private company specialized in producing and processing glasses accessories and components. After ten years of hard working on its business operation, Kanghua has become a leading company in the national industry. It enjoys the highest production in the national industry and its products win good reputations both in quality and price. Therefore, it becomes highly competitive in the international market. OBE - Werk Ohnmacht & Baumgartner GmbH & Co. KG, (plaintiff, hereafter OBE) is a time-honored German eyeglasses manufacturer, which has the strongest R&D capacity in the glasses manufacture industry around the world. As a result, Kanghua and OBE become rivals in the global eyeglasses market.

In June 2002, OBE filed a lawsuit against several Chinese companies, including Kanghua, alleging that Kanghua and others infringed its invention patent No. 96191123.9 by producing and selling glasses using the patented spring hinges. OBE asserted that the methods Kanghua used to manufacture the spring hinges have covered all the indispensable technical features in Claim 1 of the said invention patent. Accordingly, OBE sought for the cessation of infringement, extension of apology, destruction of production mold and a damage of 4’150’000 yuan for its revenue loss.

Beijing No.1 Intermediate People’s Court reached a judgment on December 20, 2005, finding that Kanghua’s manufacture methods infringed OBE’s patent and should pay a damage of 50’000 yuan to OBE. Beijing No. 1 Intermediate People’s Court (2002) Yi Zhong Min Chu Zi No. 5048 Another company, who was also accused of infringement like Kanghua, chose to settle with OBE. The result of this case greatly shocked Kanghua and numerous other companies in the domestic industry. It was a nightmare for the domestic glasses processing industry that a traditional manufacture process, which had been followed for decades long, was declared an infringement. This would lead to the shutdown of hundreds of factories that used the same manufacture processes. Meanwhile, OBE spared no effort on broadcasting the news to the world that “China’s counterfeiting products” infringed its invention patent and sending warnings to Chinese companies’ western clients. Consequently, Kanghua suffered great loss both in its reputation and its market share.

Kanghua retained Mr. Ping LIU and Mr. Zhong LI as its attorneys on the appeal. After accepting this appointment, LIU and LI did a thorough research on the manufacture methods of both parties and analyzed tons of relevant patent literatures. They concluded that the traditional process of manufacturing spring hinges was neither identical nor equivalent to OBE’s patented method. Moreover, they pointed out that the reason why OBE managed to prove the traditional Chinese process was equivalent to its patented method was that OBE first established an erroneous theory by misusing the patent method terminologies, and then manipulate the doctrine of valid patent and the doctrine of priority to patent claims to support its arguments. Finally, they successfully demonstrated that OBE’s arguments at trial were without sound factual and legal basis.

Precise analysis, full preparation and elaborated arguments all contributed to Kanghua’s victory at the appellate court. On December 22, 2006, Beijing High People’s Court reached a final decision in which appellant’s arguments were fully acknowledged. Beijing High People’s Court (2006) Gao Min Zhong Zi No. 1367 The Court amended trial court’s judgment and found Kanghua as well as other Chinese companies to be innocent.

Keynotes of the Final Opinion:
Beijing High People’s Court holds that the trial court erred in finding Kanghua’s method of manufacturing hinges is equivalent to OBE’s method protected by Claim 1 of its invention patent. Thus, the judgment should be amended. Appellant Kanghua’s arguments that the allegedly infringing manufacture method does not constitute infringement have both factual and legal basis. The Court finds in favor of Kanghua’s appeal.
The Final Judgment of the High Court:
I. Civil Judgment Beijing No.1 Intermediate Court (2002) Yi Zhong Min Chu Zi No. 5048 Vacated.
II. Reject OBE - Werk Ohnmacht & Baumgartner GmbH & Co. KG’s complaints.
The cost of the trial shall be borne by OBE. The cost of the appeal shall be borne by OBE.
This judgment is the final judgment.