Case Study | CG360-DISPUTE-RES-CASE-033

How a Japanese Manufacturer Enforced a Patent in China: Case Study

A Japanese industrial automation company with a globally respected patent portfolio found its core technology being manufactured and sold in China by a local competitor without authorization. The infringement, which involved a crucial component used in automated assembly lines, threatened to erode the Japanese company’s competitive position in the rapidly growing Chinese manufacturing market. This case study examines how the Japanese company navigated China’s patent enforcement system, including the administrative route through the China National Intellectual Property Administration (CNIPA) and civil litigation at the Beijing Intellectual Property Court, ultimately securing a comprehensive remedy that included an injunction, damages, and a favorable precedent-setting ruling.

Background: The Patent and the Infringement

Nippon Automation Systems Co. (name anonymized), a Tokyo-headquartered manufacturer of precision servo motors and industrial control systems, held a Chinese invention patent for a high-efficiency servo drive controller that reduced energy consumption by up to 35% compared to conventional designs. The patent, filed in China through the Patent Cooperation Treaty (PCT) route in 2013 and granted as Chinese Patent No. ZL201380XXXXXX.X in 2016, had been recognized within the industry as a significant technological advance. The company’s servo drives were used by major Chinese manufacturers in the automotive, electronics, and semiconductor industries.

In 2019, the Japanese company’s technical team discovered that a Chinese competitor, Suzhou Huatong Electric Co., Ltd., was manufacturing and selling a servo drive controller with specifications nearly identical to the patented design. The infringing product was being sold at approximately 40% below Nippon Automation’s price, directly undercutting the Japanese company’s market position. An independent technical analysis commissioned by the Japanese company confirmed that the Huatong product implemented all key elements of the claimed invention.

Initial Approach and Evidence Gathering

The Japanese company’s initial response was measured. Through a Chinese patents law firm with offices in Beijing and Suzhou, the company sent a formal cease-and-desist letter to Huatong in January 2020, attaching the patent specification and claim charts demonstrating infringement. The letter requested that Huatong cease manufacturing and sales of the infringing product, provide an accounting of sales to date, and negotiate a licensing arrangement for past use.

Huatong’s response, received two months later, rejected all allegations. The company asserted that its product used different control algorithms and that the Japanese patent was invalid because the claimed invention had been publicly disclosed in a Chinese technical journal before the PCT filing date. This invalidity challenge, supported by a prior art reference the Chinese company had discovered, introduced a significant risk factor into the enforcement strategy.

Before initiating formal proceedings, the Japanese company’s legal team conducted extensive evidence gathering. They purchased samples of Huatong’s infringing product through a third-party procurement agent, preserved the chain of custody with notarized purchase records, and commissioned a technical expert report comparing the Huatong product’s implementation against the patent claims. The expert report, prepared by a professor of electrical engineering at a Chinese university, concluded that the Huatong product implemented all elements of at least claims 1, 3, and 7 of the Japanese company’s patent.

The legal team also gathered evidence of the scale of infringement through market surveys and customer interviews. They identified four major Chinese manufacturers that had purchased the Huatong product, obtained samples, and documented the pricing differential. This evidence of commercial impact strengthened the case for significant damages.

Dual-Track Enforcement Strategy

The Japanese company’s legal team recommended a dual-track enforcement strategy, taking advantage of China’s unique system where patent enforcement can proceed simultaneously through administrative and judicial channels.

Track One: Administrative Enforcement through CNIPA. The Japanese company filed a patent infringement complaint with CNIPA’s Patent Administrative Enforcement Department, requesting an administrative order requiring Huatong to cease manufacturing and selling the infringing product. The administrative route offers certain advantages: faster processing (typically 3-6 months), lower costs, and the ability to conduct on-site inspections of the alleged infringer’s facilities without prior notice. CNIPA’s administrative inspectors have the authority to enter premises, inspect manufacturing records, and seize infringing products.

Track Two: Civil Litigation at the Beijing Intellectual Property Court. Concurrently, the Japanese company filed a patent infringement lawsuit at the Beijing Intellectual Property Court (BJIPC), one of China’s specialist IP courts established to handle complex technical patent cases. The civil action sought: (1) a permanent injunction against further infringement, (2) damages of RMB 25 million, based on either Huatong’s profits from the infringing sales or a reasonable royalty, (3) an order for destruction of infringing inventory and manufacturing tooling, and (4) publication of the court judgment in a specified industry journal to restore the Japanese company’s reputation.

The dual-track approach created a strategic dilemma for Huatong: they had to defend simultaneously before an administrative body and a specialized IP court, each with different procedures, evidentiary standards, and potential remedies. The administrative case, with its faster timeline, was expected to produce a result first, potentially influencing the court proceedings.

The Invalidity Challenge

As anticipated, Huatong responded by filing a patent invalidation request with CNIPA’s Patent Reexamination Board, challenging the validity of the Japanese company’s patent on grounds of lack of novelty and inventive step. The prior art reference cited was a Chinese-language technical article published in a domestic journal in 2012, which Huatong claimed disclosed the key technical features of the invention.

The invalidation proceedings required the Japanese company’s patent attorney team to prepare a detailed response distinguishing the cited prior art from the claimed invention. The legal team argued that the prior art article described a fundamentally different control architecture based on open-loop rather than closed-loop feedback, and that the combination of features claimed in the patent produced an unexpected technical effect that was not suggested or rendered obvious by the prior art. The response was supported by a technical declaration from the inventor and a supplementary expert report.

In September 2021, the Patent Reexamination Board issued its decision: the patent was maintained as valid, with the Board accepting the Japanese company’s arguments that the prior art had not disclosed the combination of features claimed in the patent. The Board’s decision also found that the patent had contributed significantly to the development of the relevant technical field, a qualitative finding that strengthened the patent’s enforceability.

The Administrative Enforcement Outcome

In February 2022, CNIPA’s administrative enforcement body issued its decision. The administrative panel found that Huatong’s product infringed the Japanese company’s valid patent and ordered Huatong to immediately cease manufacturing and selling the infringing product. The administrative order also directed Huatong to destroy all existing inventory of the infringing product and the specialized manufacturing tooling used to produce it. CNIPA inspectors conducted a follow-up inspection in March 2022 to verify compliance.

The administrative decision provided immediate interim relief while the civil litigation continued. Huatong was forced to stop production, creating a supply disruption for its customers and generating commercial pressure to resolve the matter comprehensively.

The Court Judgment and Damages

The civil litigation at the Beijing Intellectual Property Court proceeded through a series of hearings focused on both infringement and damages. The court appointed a technical expert to assist with understanding the patent claims and the accused product’s technical implementation. After two substantive hearings and a technical explanation session where the parties’ experts presented their analyses to the judges, the court issued its judgment in July 2022.

The BJIPC found that Huatong’s product infringed claims 1 and 7 of the Japanese company’s patent, while holding that one subsidiary claim was invalid for lack of inventive step in light of additional prior art introduced during the trial. The court rejected Huatong’s remaining invalidity arguments, finding that the main claims were novel and inventive over all cited prior art.

On damages, the court adopted a methodology based on a reasonable royalty approach rather than Huatong’s actual profits, which had been difficult to ascertain precisely due to incomplete accounting records. The court calculated a royalty rate of 6% of Huatong’s estimated sales of the infringing product over the three-year infringement period, arriving at damages of RMB 15 million (approximately JPY 300 million). The court also awarded the Japanese company’s reasonable litigation costs, including attorney fees and expert expenses, totaling approximately RMB 1.8 million.

The judgment included a permanent injunction prohibiting Huatong from manufacturing, selling, or offering for sale any product falling within the scope of the Japanese company’s patent claims. The court also ordered Huatong to publish a summary of the judgment in two industry publications at its own expense, providing reputational restoration for the Japanese company.

Key Takeaways for Foreign Businesses

Conclusion

This case demonstrates that China’s patent enforcement system provides effective remedies for foreign patent holders, including permanent injunctions, substantial damages, and administrative cease-and-desist orders. The dual-track enforcement strategy, combining CNIPA administrative proceedings with civil litigation at the Beijing Intellectual Property Court, created a comprehensive enforcement framework that produced results within approximately two and a half years from initial filing. While the invalidity challenge introduced risk and delay, the patent was ultimately upheld and the damages award of RMB 15 million represented meaningful compensation for the infringement. For foreign technology companies operating in China, this case underscores the importance of obtaining Chinese patent protection through the PCT system, maintaining rigorous evidence of infringement, and being prepared to pursue enforcement through both administrative and judicial channels to achieve optimal results.