The new normal? NPE issues in China

In recent years, a trend has emerged in China of patentees who don’t sell or manufacture any products or conduct scientific research, asserting their patent rights against active players in the market.

They have patents, and then aggressively aim to claim injunctions and large damages. These patentees are the Chinese versions of non-practising entities (NPEs). Although not as mature as the NPEs in the US, these Chinese NPEs have similar approaches and motivations.

One of hottest IP stories in China in 2018 was that of a self-described “inventor”, Mr. Li, who established two companies which owned more than 400 patents. He was charged with extortion in Shanghai when he launched group patent infringement litigation cases against several manufacturers and sellers of electrical readers at the critical time of initial public offerings (IPOs).

This was an exceptional case because to date, no other patentees have been charged with extortion for initiating patent infringement litigation in China.

In a different example another inventor, Mr. Zhang, who also owns a company holding several patents, filed group patent infringement lawsuits in 2018; in that case all the patents were invalidated.

Developments

There are some common characteristics among such “unserious” NPEs: initiating patent infringement lawsuits around the time of an IPO; claiming low damages for one case but accumulating group cases for high damages; and relying on patents of dubious validity.