Circumstances of a case:
The patentee, M-I Co., Ltd., is a subsidiary of Schlumberger, the world's largest multinational oilfield technology services group. Schlumberger entered China's oil market as early as 1980 to conduct business of oilfield services. Schlumberger has always been committed to working together with China's major oil companies and has made significant contributions to the development of China's oil industry. Schlumberger and its subsidiaries and affiliated companies have always attached importance to intellectual property protection and own a large number of basic patents in all fields of oilfield technology.
For global protection of its intellectual property rights, M-I Co., Ltd. filed an application of 337 investigation against a company in China with the United States International Trade Commission (ITC) in the second half of 2019, and subsequently brought several patent infringement proceedings to the Beijing Intellectual Property Court in China.
During the litigation, the defendant, as the petitioner, submitted a request for invalidation to the China National Intellectual Property Administration (CNIPA) at the end of 2019 and at the beginning of 2020 respectively against the Chinese patents for invention owned by M-I involved in the litigation and their patent families. Unitalen and the Orrick team have done a lot of serious and meticulous work and successfully maintained the total validity of the two patents involved, paving the way for success in the proceedings.
Recently, the Beijing Intellectual Property Court made a judgment, in which the court determined the infringement facts of the defendant and determined that the defendant’s continued sale of the allegedly infringing products was with subjective malice because the defendant learned that the alleged products might be infringing at that time. Therefore, the defendant was ordered to stop the infringement and compensate the plaintiff for economic losses and reasonable expenses totaling 6.16 million yuan.
The most complex legal issue in this case lies in whether the defense of legitimate sources claimed by the defendant is tenable.
Opinions of Unitalen attorneys: according to the evidences submitted by the defendant, although the contract signed between the defendant and its customers (who are not involved in the case)_ is called "Sales Contract of Industrial Products", there are many contracts showing that the objects sold are parts such as frameworks, injection frameworks, flat injection molds, etc., and some contracts show that provisions of the production standards include "products should be produced strictly according to the drawings and model numbers provided by Party A (the defendant)", "the products should be designed and produced according to the model provided by the seller (the defendant)", etc. Accordingly, the products purchased were mainly assembled parts, and the finished products were assembled by the defendant. In fact, the final products were also sold in the name of the defendant. Therefore, the above-mentioned acts involved in the case should pertain to manufacturing consignment, and such a mode was not in conflict with the fact that the defendant manufactured and sold the infringing products as its own products.
In the end, the court recognized Unitalen attorneys' view, and held that the evidence on record submitted by the defendant were insufficient to prove that the alleged infringing products sold by the defendant had a legitimate source, and that the defendant's defense of legitimate source is untenable.