Anyone who infringes a Patents can be sued for injunctive relief and damages. For this reason, anyone who receives a warning from the patent holder for patent infringement is seriously threatened. In many cases, the warned party will comply with the threat and forego a judicial review of the infringement allegation in order to remove themselves from the line of fire. What happens if the warning is unjustified?

Honda Corporation issued a warning to Shuanghuan Co. for infringement of a design patent for a vehicle shape and subsequently filed an infringement suit in Beijing. In turn, Shuanghuan Co. filed a negative declaratory judgment action in Hebei Province to have the non-infringement of the design in question judicially determined.

While the two court proceedings were ongoing, Shuanghuan Co. also filed a nullity application with the Patent Review Chamber of the Patent Office (SIPO). This was successful and was also confirmed by Beijing’s Higher People’s Court. It was only in the course of new proceedings ordered by the Supreme People’s Court at Honda’s request that the invalidity judgments of the lower courts were overturned and the validity of the design patent was confirmed.

Strengthened by the upholding of the design patent in court, Honda withdrew the previous infringement suit and filed a new Lawsuit with higher compensation claims. Shuanghuan also increased the pressure with higher compensation claims for unjustified warnings. The warning letter sent by Honda would have spread a harmful public opinion and affected the right to freedom of business and reputation.

The dispute over the patent infringement was taken all the way to the Supreme People’s Court. The court ruled that the Honda patent had not been infringed. Shuanghuan was also awarded damages in the amount of RMB 16 million (equivalent to approximately USD 2.5 million).

Honda had warned the distributors of Shuanghuan Co. at an advanced stage of the infringement dispute. Honda had only provided relatively superficial information. With this approach, Honda had violated its duty of care with regard to the selection of letter recipients and the level of detail of the warning.

Note: It is also permissible under Chinese law for the patent proprietor to send warnings. Damages are therefore not justified by the fact that the infringement action was ultimately dismissed and that – in retrospect – the allegation of infringement was groundless. Rather, the decisive factor is who is warned and how carefully the warning is carried out. First and foremost, the manufacturer of the disputed product or the source of the patent infringement must be warned. Warning customers or distributors, on the other hand, is very risky.