The global knowledge economy and trade have developed vigorously, and the influence of tariff barriers has been gradually weakened by the establishment of the WTO rules. However, on the contrary, intellectual property has become the most important tool of international economic competition, and a sharp weapon of market competition and the focus and barrier of enterprises in participating in the international competition.

The Chinese enterprises are taking advantage of the products with “low-price and good-quality” to gradually take up the global market. However, it has become an inevitable challenge for them to "dance with the wolf" in the international intellectual property game while opening up to the international market. It requires their strategic thinking and input to change the disadvantageous position in the international community.

Market share is the basic reason for all the parties concerned to initiate intellectual property litigation. Throughout the intellectual property lawsuits launched by the multinational corporations in recent decades, the purpose is not to get compensation for infringement, but to prevent the Competitors from entering into relevant markets, and even to take advantage of the time consuming intellectual property lawsuits and huge litigation costs to directly drag them down.

Patent litigation is occurring the most frequently among the intellectual property litigation. How to identify the potential risks of patent litigation and cope with them is always the top priority of the intellectual property work for the enterprises going abroad. The following part discusses the identification of risks and coping method and management of oversea patent litigation.  

1.Identification of risks of oversea patent litigation

There are mainly two types of risks, i.e., the internal management risks and external risks, and they are interacting with each other. Proper management of the internal risks will reduce or avoid the losses caused by external risks, while improper management will increase the losses. Oversea patent litigation belongs to external risks. According to the different initiators of the litigation, there are competitor litigation, NPE litigation, procurement litigation, client litigation, and cooperative litigation; according to the different purposes of the litigation, there are market barrier litigation and permitted income litigation. At present, the patent litigation faced by the Chinese enterprises overseas is mainly competitor litigation, which is directly manifested as market barrier litigation. Permitted income litigation and NPE litigation also occur frequently.

The initiator of market barrier litigation is generally the industry competitor. Its main purpose is to prevent the new market participants from accessing to the relevant industry market. The methods used are mainly: (1) putting forward huge amount of infringement compensation and impose strong psychological pressure on the other party; (2) prosecuting in different countries or different courts in different regions of the same county, so that the high litigation and attorney fees often make the underprivileged companies retreat without fighting; (3) preferring reconciliation, but often forces the other party to accept all kinds of harsh conditions; (4) if it fails to prevent the other party from entering the market, they will ask for a large amount of licensing fee to increase the cost of its products.

2. Coping strategies for oversea patent litigation

Based on the different types of oversea patent litigation and their corresponding purposes, enterprises need to develop different strategies to deal with them. Nowadays, the rules of the international intellectual property game of “patenting technology, patent standardization and standard monopolization” have been established. In addition to constantly strengthening innovative capacity, occupying the commanding heights of the industry technology, and developing a reasonable layout of intellectual property rights at home and abroad, it is also essential for enterprises to understand different strategies in the face of oversea litigation and take corresponding actions.

2.1 A good strategy is required to deal with oversea patent litigation

In the face of an oversea patent litigation, most enterprises are not only afraid of the large amount of infringement compensation but also timid about the unfamiliar judicial system and language environment, which brings them a fear of "knowing nothing". Therefore, the premise of developing the litigation strategy is to calm down and take control.

In general, the factors that the enterprises should take into consideration when developing the coping strategies are (1) the importance of the accused product to the enterprise; (2) the market share of the accused product in the litigation country or region; (3) the status of the intellectual property rights of the enterprise in the litigation country or region; (4) the financial position of the enterprise; (5) accessibility to the information about the plaintiff and industry; (6) the supporting resources of the enterprises.

The following cases are derived from the analysis of specific litigation strategies based on the above information:

(1) Passive response: if the accused product is the main product of the enterprise which is crucial to production or is the strategic product in the future and has a certain market share, or the enterprise has the intention to develop the market in the litigation country or region but has poor intellectual property rights, it can only respond passively to the litigation. When developing the strategy, it should consider more about the case itself, such as invalid patent defense, non-infringement defense, and litigation subject qualification defense, and be well prepared to respond.

(2) Mutual prosecution strategy: in addition to actively pleading the original case, if the enterprise has accumulated a wealth of intellectual property rights, it may consider to litigate against the other party's products. When choose the country for litigation, the enterprise should consider its intellectual property reserve, the analysis result and its financial standing. It is obvious that if considering the familiarity with the country's judicial system, most enterprises prefer to litigate in China. By initiating another lawsuit, the enterprise can not only demonstrate a positive attitude to the other party, but also show its intellectual property and enterprise strength. More importantly, it can be used as a bargaining chip to gain the base of negotiation, which is much better than negotiating with nothing.

(3) Comprehensive competition strategy: in the long-term competition or when litigation is initiated between the two parties, all information should be collected and analyzed to find out the potential impacts on the other party. For example, to examine whether there is an abuse of rights or monopolies in its licensing history and the ongoing lawsuit. Multinational corporations are usually highly sensitive to suspected monopolies, so initiating a lawsuit or investigation of suspected monopolies can usually resolve the litigation or disputes quickly in a package. The author used to launch an anti-monopoly lawsuit in China twice to force the other party to agree to settle the intellectual property lawsuit in the United States, so as to resolve all the lawsuits between the two parties. According to the information collected and the behavioral differences of the competitors, there might be violations of the Anti-unfair Competition Law or other laws, so it is necessary to analyze the specific circumstances to make clear the legal category in which the greatest influence can be exerted on the competitor.

(4) Supportive strategy: if the enterprise is short of funds, it should strive for the support of the trade association or other enterprises according to the influence of the lawsuit on the enterprises in the industry in China.

There are many other litigation strategies, and enterprises usually adopt more than one strategy to solve the problem according to different circumstances and make adjustment at any time based on the information collected at different stages.

2.2 Specific countermeasures for oversea patent litigation

After the development of the general strategy, what is required the next is the specific countermeasures for oversea patent litigation.

(1)   Making a plan to defend actively: if the enterprise is sued overseas, after analyzing the case and the information obtained, it should develop the defense plan with local lawyers. Although there are over 30 types of defense with reasonable justification, the most often used ones are these 7 types: subject qualification defense, prescription defense, non-infringement defense, rights invalidity defense, knowledgeable technology defense, exemption defense (prior right, exhaustion of right, and temporary frontier), and the principle of prosecution history estoppel defense. These types of justification include a number of secondary or even tertiary levels of justification. For example, the justification for patent invalidity defense includes novelty or creativity defense, prior rights infringement defense, the principle of full disclosure, the actual scope of the patent, intentional non-public and other specific justification.

(2)   Patent invalidation: in the face of a patent litigation, in addition to active defense, invalidation of the patent involved is also necessary. The purpose of patent invalidation should be determined based on the situation of the case and collected evidence. When there are multiple patents or series of patents, it is necessary to determine which patent/s can be invalided. It is the best way to invalidate all of the other party's patent claims when there is conclusive and complete evidence; however, in some cases, the patent claims cannot be invalidated, but the key claims can be determined by comparing the patented technology scheme with the products involved. The invalidation of the key claims can provide a strong support for subsequent infringement compensation or reconciliation; sometimes invalidation is even proposed simply to verify that some key technical solutions are conventional technology or design. One of the American patent lawsuits that the author has dealt with is to compel the plaintiff to sign a non-prosecution agreement in order to protect its existing licensing proceeds by invalidating some of the key claims of the basic patents since the plaintiff has already granted a series of invalid patents to a number of enterprises in the same industry, and we abandoned the right to appeal against the patent invalidation.

(3)   Collecting conclusive evidence: as we all know that in the opinion of the judges, there is only evidence and no “facts”, and evidence is the key to winning the litigation. After the litigation strategy and defense plan are determined, the enterprise should develop the plan for evidence collection with the lawyer to determine the supporting evidence and the direction of evidence collection for all the defense justification. In addition, it should also determine according to the justification which evidence should be provided by the other side and what skills can be used to obtain it.

(4) Making good use of the litigation procedures: the oversea litigation procedures are often complicated and the Chinese enterprises are usually unfamiliar with them, but it is very important to make good use of them. For example, if a competitor sues for the same case in more than one area of the same country, the enterprise should file a motion for a unified trial and for the prohibition of re-prosecution for the same case. Narrowing the battlefield is very important for the enterprise to save manpower, materials and fighting energy.

(5) Understanding the litigation intentions and seeking for reasonable solutions in due course: intellectual property is a tool of business game, and safeguarding the fairness and justice of law and the legitimate rights and interests of the rights-holders are not the real purpose of intellectual property litigation in many cases. A large proportion of oversea patent litigation is eventually settled by reconciliation. In seeking reconciliation at the outset of a lawsuit, the opposing party often imposes harsh conditions, including withdrawal from the market or substantial compensation or high licensing fees. In the process of litigation, with the progress of evidence discovery, more and more evidence will be disclosed and the litigation considerations of both parties are constantly changing. Based on the favorable or disadvantageous evidence, the enterprise can foresee the possible litigation results and timely propose or accept reasonable conditions for reconciliation. On the other hand, the enterprise should also consider the invalidation of patent (if there is any) or other countervailing lawsuit or countermeasures and put forward or accept reasonable conditions for reconciliation. One of the American lawsuits that the author has dealt with is that the countervailing lawsuit in China has been advancing and is much faster than the American lawsuit process. So the other side has no confidence in China's lawsuit and put forward reconciliation. The case was eventually solved with a small cost package, and a pre-litigation settlement mechanism was established for intellectual property issues of both sides.

3. Management of oversea patent litigation

The management of oversea patent litigation has become the key for enterprises to go abroad. The author puts forward the following suggestions for reference:

(1) Patent retrieval for product research and development: patent retrieval analysis and evaluation should be conducted at the stage of product development and research. For example, risk-averse technology schemes should be considered, and attention should be paid to the collection of relevant information that may affect the stability of the patent during the R&D process.

(2) Before the products are listed overseas, the enterprise should be familiar with the laws and regulations of the target market and produce product non-infringement opinions: when products are sold overseas, the enterprise should be familiar with the intellectual property laws, regulations and policies of the country or region, as well as the relevant litigation in the industry, so as to avoid entering an unknown area. Before the products are listed overseas, it is particularly important to ask the lawyers of the target countries to analyze whether there is product infringement risk. If there is no infringement risk, a non-infringement opinion should be developed. If there is a high risk of infringement, it is important to formulate a precautionary plan. In the United States, a non-infringement opinion can support both Markman hearings and court decisions in case of infringement and reduce the amount of infringement compensation.

(3) Raising the awareness of intellectual property risks and making oversea intellectual property layout: the previous development model that relies on resources and manpower no longer exists, and many industries can no longer rely on brute force to succeed. The future is an era of technological creation and knowledge economy where more and more attention is paid to the protection of intellectual property rights. Therefore, it is crucial to change the previous management model and raise the awareness of intellectual property risks. Without a strong sense of risk management, it is impossible to conduct intellectual property management. It is the basis of preventing oversea patent litigation to make patent layout in the key target market countries and pay special attention to intellectual property management.

In summary, enterprises should identify the risks for oversea patent litigation, formulate reasonable coping strategies and adopt appropriate methods, and only by this, will they effectively deal with all kinds of oversea patent litigation.