How can Chinese companies respond in U.S. intellectual property litigation

Recently, was sued by Cisco in Texas for patent and copyright infringement. Domestic media are very concerned. In fact, Chinese companies have been sued in the United States for intellectual property rights infringement, including patents, since the 1990s S. I have handled several such cases. This is a normal suppression of competitors' business behavior among American enterprises, with little involvement in the so-called complex political factors. Looking at the Annual Reports of US-listed companies, it is not difficult to find that few technical companies do not say goodbye or become defendants. Chinese companies enter the U.S. market. If they have their own brands and want to occupy others' markets, intellectual property rights litigation will occur. Some Chinese private enterprises that have been sued by their U.S. competitors for intellectual property rights have paid tuition fees, and their survival has become increasingly mature. They can calmly deal with all kinds of intellectual property frictions in the United States, therefore, independent brands have a place in the United States. After China's entry into the WTO, more and more Chinese export-oriented enterprises will encounter intellectual property litigation in the United States. This article aims to introduce how to respond to American intellectual property litigation for Chinese enterprises to study and think.

Pre-litigation negotiation

  There are very few sudden patent cases in the United States. Due to high litigation costs, most companies hope to win the battle before litigation. Therefore, once an infringement is discovered, American companies generally seek advice from intellectual property lawyers on whether the infringement was established. If the answer is yes, the company will entrust a lawyer to negotiate with the other party before the lawsuit.

Pre-litigation negotiations often begin with the issuance of a letter of prohibition (cease & desist letter. The letter of prohibition is a lawyer's letter notifying the other party which products infringe upon the intellectual property rights, asking the other party to immediately stop manufacturing, use, sales, promise sales and import, and compensate for the infringement. The letter of prohibition plays an important role in litigation. For example, in a patent lawsuit, if the patent holder fails to mark (marking) the patent number on its product as required by law, the calculation of compensation starts from the day on which the defendant receives the letter of prohibition, if the defendant did not receive a letter of prohibition before the lawsuit, the calculation of compensation starts from the date on which the defendant received the indictment. However, the letter of prohibition can be a legal "notice" and must meet strict requirements: to identify infringing products, to identify specific patents, and to identify infringing facts, it also indicates the attitude of the patent holder requesting the other party to stop infringement, pay compensation or reach a license. After the letter of prohibition is issued, the patent holder must continue to negotiate with the other party for several years without causing laches or inequitable estoppel. There are many cases in the United States because the letter of prohibition has not been written, or after the letter of prohibition has been issued for many years, the holders of intellectual property rights have not taken further enforcement measures, and finally the Court finds the infringement of the other party, but there is no compensation.

After receiving the letter of prohibition, Chinese companies do not have to worry about it. Eager to reply to the other party is often at a disadvantage in the negotiation, but delayed replies often lead to litigation soon. The rational approach is that the recipient should first consult the U.S. intellectual property lawyers to analyze whether the product infringement or intellectual property rights are valid. If no legal opinion has been raised regarding the alleged non-infringement opinion or invalid patent invalidity opinion, at this time, Chinese companies should consider immediately making a formal written legal opinion on the alleged product without infringement or invalid rights.

Legal Opinions on non-infringement before litigation play an important role in determining the compensation amount of the defendant in future litigation. The Patent Law, trademark law, and Copyright Law of the United States impose a statutory three-fold amount of compensation for intentional infringement and additional attorney fees. In general, the compensation amount and attorney fee in intellectual property cases are already very high, so triple compensation is a very heavy punishment. How can we avoid such high compensation? First, a legal opinion shall be issued by a lawyer regarding no infringement or invalidity of intellectual property rights. If the defendant asks the intellectual property lawyer to analyze the product and conduct a thorough investigation on the intellectual property right before the defendant is accused of infringement, such written legal opinions will cause the intentional infringement to fail, the so-called money to buy safe. Generally, a written legal opinion that does not infringe the patent right or that does not invalidate the patent right costs 2-6 US $, but almost all technical companies have to do so. It will be too late to complete the lawsuit. Therefore, if did not ask us patent lawyers to make written legal opinions on Cisco's five patents before entering the U.S. market, or the product is not infringing, or the patent is invalid, it can only be expected to win the patent invalidity or non-infringement, or to seek mediation before the trial. Otherwise, if the lawsuit goes to the compensation stage, it will be difficult to avoid multiple times of compensation results.

If the lawyer believes that the product is infringing upon preliminary analysis, and the patent invalid evidence is not conclusive, he shall not issue any written legal opinion to avoid being a case in litigation. Lawyers often verbally suggest receiving a letter from the company or suspending infringement activities or obtaining an authorization license with the other party. Before the formal prosecution, it was the easiest time for both parties to reach an agreement. Therefore, Chinese companies need to hire experienced lawyers to negotiate with each other. If the two sides remain unable to negotiate after several months, the US company will often file a lawsuit, but will not deliver the complaint. The copy of the indictment will be sent to the Chinese company as an ultimatum. The non-delivery phase is also crucial to the negotiation's success. At this stage, American companies often have used considerable attorney fees, and a small amount of compromise on compensation payments by Chinese companies will lead to the negotiation's success. Unfortunately, at this stage, many Chinese companies have delayed the timing due to the recruitment of lawyers unfamiliar with the U.S. litigation business, resulting in an escalation of the problem and failing to prevent the other party from formally serving the indictment.

Initial Stage of Litigation

  After receiving the indictment, Chinese companies should do the following:

If there is a substitute satisfactory to the customer, the sales of alleged infringing products in the United States should be immediately stopped. This action is not to acknowledge infringement, but to reduce the worries of American customers and the amount of possible compensation.

If there are no alternatives and there is no legal opinion on non-infringement, the prudent approach is still to stop selling.

If sales cannot be stopped, and lawyers are confident that the product will not be infringed, they should try to appease the customer's continued purchase of existing products. If necessary, the Chinese company must provide the customer with an indemnification guarantee, china Company shall assume all responsibilities if the customer is sued for infringement.

Hire a suitable lawyer to handle the case.

Domestic media have stirred up the hype of alleged product sales in the United States. It is wise to start from the patent litigation strategy. Chinese companies should not be arrogant in responding to the lawsuit in the United States. It is very unnecessary to carry forward nationalism and patriotism too much. Legal disputes between two companies in the United States need to be resolved rationally by means of law. It is normal to lose a lawsuit, and it is not a decent thing. Almost all major companies in the United States have the experience of winning or losing the case. Litigation settlement is not uncommon. More than half of intellectual property cases are settled in a settlement manner. Therefore, at the initial stage of litigation, the head of a Chinese company, especially the head of a Chinese headquarters, adjusted his mind and handled legal and commercial disputes in the United States in a western way, which is of great significance for responding successfully.

Hire a lawyer

  Chinese companies that have experience in litigation in the United States share the same feeling: it is very difficult to find a suitable law firm. Multinational corporations generally distribute their legal business to many well-known law firms. In this way, once litigation occurs, these top law firms cannot represent defendants due to conflicts of interest. Chinese companies are far from common American companies in terms of language, culture, and geographical location. Therefore, if a Chinese company cannot fully communicate with a top-notch firm, and may not necessarily make first-class results.

At the beginning of the lawsuit, the defendant was under pressure to respond within a few weeks and often hastily chosen a lawyer. This approach fails to achieve the desired results. Due to the evolution of U.S. intellectual property law in recent years, it is very dangerous to choose a lawyer who applies for intellectual property rights for the defendant or does not have infringement opinions as a legal counsel, because these lawyers may become important witnesses in the case, they may be asked to withdraw from the case after the case progresses to a certain extent, thus being disqualified, which will make the defendant very passive.

American intellectual property law firms are very efficient. Chinese companies generally can select several firms as the bidding targets and specify a date to request a response. A general firm will propose a lawsuit within a short period of time. Candidate firms should follow the following principles:

It is best to have offices on the east and west coast of the United States;

It is best to have an office in the jurisdiction of the Court. If not, the bidding firm should be required to submit the data of the selected local counsel;

It is best to have an office in Asia. If not, a bidding firm should be asked to clarify how to obtain evidence and exchange with the headquarters of a Chinese company;

Lawyers who are familiar with intellectual property litigation and have corresponding technical backgrounds;

Lawyers or legal assistants who have knowledge of Chinese language and culture should ask bidding law firms to clarify how to communicate with Chinese companies;

Previous experience in litigation in the United States on behalf of Chinese companies;

Although the United States is opposed to racial discrimination, it is best to select white lawyers as Chief Court lawyers in the future;

The bid law firm should be advised to have lawyers familiar with the rules of the competent courts (local rules). It is best to have lawyers who have been in court before the judges in this case;

The charge of attorney fees should be flexible and the bid law firm should be required to list the financial plans in detail.

American law firms often charge by hour, and it is difficult to provide an accurate charge number in the early stages of the case, because the length of time required depends on the complexity of the case, the intensity of the original defendant lawsuit, and case Mediation sooner or later. However, Chinese companies can require a fee range and adopt a pre-approval system for work beyond a certain period of time. A typical patent lawsuit in the United States costs about $1 million. Therefore, managing external litigation lawyers is an important part of the daily work of in-house counsel in many large companies. Most Chinese companies still cannot hire American lawyers familiar with U.S. litigation as internal lawyers. Therefore, when selecting and managing American Litigation Lawyers, the skills in this process take some time to comprehend and learn.

Mediation during litigation

  Both parties can seek mediation before making a decision. For Chinese companies, there is only a small number of cases that need to compete for a high level. Most cases still involve camera mediation. However, if the case fails to be mediated before and at the beginning of the lawsuit, it proves that the two sides have an insurmountable gap. In most cases, the plaintiff's price is too high and the defendant cannot accept it. There are two possible ways for the plaintiff to ask too much: first, the defendant is the opposite of the plaintiff, and the plaintiff is not willing to turn the enemy into friends or take some money; second, the plaintiff is very optimistic about the victory, therefore, we do not want low-price mediation. The first case is often because both parties have completed the first and second review. When a Chinese company encounters such a competitor, it only has to fight for a dead network. The second case is that after both parties spend hundreds of thousands or even millions of dollars in attorney and legal proceedings, they realize that litigation has no winner, and then both sides make concessions. The litigation parties not only need to spend money, but also spend a lot of time and energy, and cannot concentrate on normal production and operation activities. For example, the deposition procedure in a lawsuit in the United States forces the company's main leaders to leave their work for a few days or even weeks to prepare and handle the interrogation of the other party's lawyers. Therefore, for Chinese companies that have always advocated and are expensive, developing short, medium, and long-term mediation policies at the beginning will save a lot of money and avoid a lot of trouble, your business interests can also be protected to the maximum extent.

Discovery program)

  At the beginning of the lawsuit, the lawyers of both parties will hold a meeting with the judges to discuss how the procedure was discovered. Discovery procedures are the longest, most important, and most expensive procedures in litigation. The main purpose of this procedure is to submit written evidence by both parties in accordance with procedural law to clarify the case and prepare for the final hearing of the Court. Legal channels used by the discovery procedure include: Document request, interrogatory, request for admission, and deposition ), generally, these four forms are staggered. After the discovery procedures are completed, both parties will employ experts to discover the procedures, including the reports and relevant documents submitted by both parties to technical experts, financial experts, and legal experts, and interrogation of witnesses from both experts. Then, both parties can prepare for the hearing.

The Discovery program lasted for one year or several years. The two sides will submit thousands of documents to each other and repeatedly ask several or dozens of witnesses. During this period, both parties will also submit several discovery motion to the Court, requesting the Court to intervene in the non-cooperation of the other party. Based on the existing evidence, both parties will also submit a number of pre-judgment motion (summary judgement motion) in the late stage of the discovery procedure to request the court to make a decision on the validity and invalidity of patents and Product Infringement. It takes us $2-3 million to interrogate a witness, and $1-10 million to make every motion. Therefore, we can imagine how much it costs to discover how much the procedure is.

When a Chinese company responds to the lawsuit in the United States, it finds that the costs of the program will be higher than the litigation between general American companies. Because many documents are in Chinese, a considerable translation cost is required. Chinese witnesses, such as the president, vice president, marketing department manager, sales department manager, production department manager, Technical Department Manager, and inventor of a Chinese company, will fly to the United States to accept the statement. The translation fee for various travel expenses is not small. International long distance, international fax, international postage, and international travel by lawyers will greatly increase costs. Therefore, if a law firm has branches or related law firms in China, the costs of the procedures will be much lower. The Chinese headquarters can also communicate with American lawyers in Chinese in the same time zone.

However, in expensive discovery procedures, one party can find the other's critical weakness and mediate deadlocked cases. For example, the defendant finds favorable evidence of the invalidity of the patent of the other party and submits a pre-judgment motion to the Court for invalidity of the patent. The plaintiff has to mediate in order to save the patent. In most cases, the verdict can be estimated at the end of the discovery procedure, so it is better for both parties to stop hearing the case than to spend another 100,000 or even millions of dollars. Most cases have therefore been settled before the discovery process ends.

Expert witness

  In intellectual property cases in the United States, especially patent cases, both parties of the original defendant must hire expert witnesses. Experts include technical experts, Compensation experts, financial experts, and patent law experts. The recruitment of expert witnesses shall be handled by the original defendant, and the court will not interfere. After an expert witness is hired, he/she must submit an expert report to the other party and receive the other party's lawyer's interrogation of the expert report and the witness himself/herself. In most cases, expert witnesses must testify in court. Expert witnesses are charged hourly. The hourly fee for each expert witness ranges from USD 100 to USD 400, and the fee for each expert witness ranges from tens of thousands to USD 100,000. Therefore, the costs of expert witnesses are a huge number in litigation. Expert witnesses generally participate in litigation in the middle and late stages of discovery procedures, and the litigation costs will also rise from then on.

Technical experts are generally university professors or industry experts in the patent technology field involved in the case. Their role is to put forward expert opinions on the effectiveness of patents and whether they are infringing. Chinese companies should work with lawyers to find technical experts at the beginning of the lawsuit. This process takes a long time. Some technical experts may have seen or published existing technologies (prior art) that can invalidate patents, so good technical experts play a very important role in winning the case.

Compensation and financial experts should prove the amount of compensation under the assumption that the infringement was established, generally by a company with a financial background. The plaintiff's expert must prove the plaintiff's loss, the defendant's profit, or, in the hypothetical negotiation, how much right, license, or license fee the plaintiff will charge to the defendant. The defendant's experts should use a variety of financial figures or financial indicators as evidence to prove that the amount of compensation is minimal or not.

Patent law experts are rarely used in litigation because many judges are patent law experts and are not very concerned about the opinions of other legal experts. However, if there are many procedural and physical corrections in the patent application process, it is necessary to hire patent law experts, verify the validity of patent applications and review procedures.

Trial and Appeal

  General intellectual property cases are all handled by a jury. However, if a Chinese company is sued by an American company, a jury should be avoided. Since jurors are common people and infringing products made in China are almost a household name in the United States, Chinese companies will receive very negative judgments. American judges are relatively fair, so the judge's review is more fair than the result of the jury's review.

In general, the case should be tried separately (Bifurcation), the tort liability should be first reviewed, and then the compensation should be reviewed. If the infringement fails, there is no need to try again for compensation. In this way, the judicial efficiency is relatively high.

Generally, it may take a week or even weeks to process a case. Before the session, both parties had fully exchanged the evidence to be used by each party and numbered them one by one. Therefore, evidence of the killer seen in movies does not exist in intellectual property cases. The original defendant often had a hotel in his/her own bag. He tried to talk about it in court every day and prepared various motion at night ). Sometimes, the person in charge of the defendant will attend the court. Chinese guests must pay attention to their dress and etiquette, because the jurors and judges will notice their every move, which will affect the verdict. Before the formal judgment, the two sides still have the final opportunity to settle.

All patent cases are to be appealed to the Federal Circuit Court of Appeal in Washington, USA. Currently, only a few Chinese companies have appeared in the Court of Appeal. The Appeal Review is a written review and generally does not listen to the witness's testimony or conduct any additional investigation into the facts confirmed by the lower courts. Only checks whether the Court of first-case is in violation of applicable law, abuse of judicial discretion, violation of procedural law, and whether the evidence adopted supports the decision for review. During the session, the lawyers of both parties each made a 15-minute statement, and the appealer dismissed the case within five minutes. The Court of Appeal will hear 5-8 cases at the same time, so the lawyer's statement should be outstanding to win the attention of the judge. There are some outstanding patent appeal lawyers in the United States, but they hope Chinese companies will not use them soon.

Conclusion

  Responding to intellectual property cases in the United States is a very professional task that requires time, money, and patience. If a Chinese company wants to enter the U.S. market, this kind of thing will be unavoidable and will only grow. To avoid unnecessary litigation, Chinese companies should carefully review their intellectual property assets before entering the United States, and clear product clearance for products to be imported into the United States ), and take a series of preventive measures introduced by the author in the relevant articles to eliminate the problem in the bud.

The author is the director of the Sino-US commercial intellectual property business department of deacons in Hong Kong, and a lawyer in New York and Virginia.

How can Chinese companies respond in U.S. intellectual property litigation