German Company Wins Key Design Patent Case in China

In one of the biggest design patent infringement cases since China joined the WTO in 2001, German bus maker Neoplan Bus has won damages of Rmb 21.16 million ($3 million) against two Chinese companies for copying its Starliner bus design.

The Beijing Number 1 Intermediate Court made the decision on January 14 after a two-year legal battle.

"The verdict shows that our faith in the Chinese legal system was warranted and that industrial property rights are taken seriously in China," said Stefan Straub, spokesperson for Man, the parent company of Neoplan.

The court has issued a press release stating that it ruled that the alleged infringer Zhongwei Bus & Coach Group and its parent company Zonda Industrial Group failed to prove that they had independently created its A9 model bus or that they possess a prior right to use it even though the company had obtained a design patent for the bus.

The court also stated that the difference between the accused bus design and Neoplan's design is too slight to constitute a notable visual effect on the entire design. But no details of how the compensation was calculated have been released.

Neoplan's Starliner coach was granted a design patent in September 2004 and was manufactured and sold in China. The German auto maker sued the Chinese companies for copying its bus design in the spring of 2006, claiming Rmb40 million ($5.7 million) in damages. It also purchased an infringed model for almost Rmb1 million ($143,000) for notarisation to serve as evidence in the court.

Zonda then launched two patent invalidation proceedings before the Patent Reexamination Board, but these were overruled, according to Straub.

Ji Lijun, a spokesman for Zhongwei, said on Wednesday that the company will appeal the ruling. Ji was quoted in a Reuters report as saying: "There are some similarities between the two vehicles. However, details are different." He also stated that their products were approved by the National Development and Reform Commission for sale in 2005.

Chinese auto makers have been frequent targets of design patent infringement suits launched by foreign companies in recent years, but the foreign companies have had little success. The most recent battle was the lawsuit brought by Italian auto maker Fiat against Great Wall Motor Company for infringing the design patent for its Panda model. A high court in Hebei province, northern China upheld the decision made by the province's intermediate court that rejected Fiat's claim.

In 2006, Toyota lost a design patent dispute against Shuanghuan Auto, in which it claimed compensation of Rmb100 million ($14.3 million) for infringing its CR-V model.

Prior to that case, General Motors (GM) settled a lawsuit outside court against the Chinese Chery Automobile Corporation which was accused of copying GM's design for a subcompact car.

As design patent registration doesn't require substantial examination in China, some believe that these rights can be abused.

"This approach can lead to a monopoly over designs that in fact have been evolving for a long time, " said Paul Jones, partner of Jones & Co based in Toronto. "It can also lead to a monopoly in the supply of spare parts for the commercial life of the car model."

Jones also referred to a SIPO-commissioned report published in 2005, in which it discussed some of the major foreign-related IP cases decided after China joined the WTO, including recent design patent disputes in the automobile industry.

The report stated that the enforcement of IP rights shall not eliminate or restrict competition. But strategic IP systems would be an important tool for Chinese companies to get to the market when facing incoming foreign competitors. It also pointed out that Chinese companies have not yet managed to integrate IP into production and business activities, especially the use of legal strategies to gain a market advantage.

China's Anti-Monopoly Law came into force last August and the Supreme People's Court has begun drafting a judicial interpretation of the Law in November. This will include an interpretation of Article 55, which concerns the abuse of IP.

"Car parts and design patents will be something that will need to be more thoroughly addressed," said Jones.

(Source: Managing Intellectual Property)