Recently, the Supreme People’s Court issued a draft open for public comment on the Rules on the Application of Evidence in Civil Litigation Cases on IP Rights. The Evidentiary Rules are at the stage of seeking opinions from the IP circle and the public. The overall principle of China’s current evidence rules is “burden of proof borne on the party who asserts”, and there is no statutory “evidence discovery” mechanism. Therefore, collection of evidence is crucial for the success of the case in Chinese judicial practice. In the context of strengthening judicial protection of IP rights, the policy of facilitating both parties to produce evidence in “positive, comprehensive, correct, and honest” way marks further improvement on China’s IP protection system.

I. Background

As a refinement of the Some Provisions on Evidence in Civil Procedures issued by the Supreme People’s Court in 2019 in the IP litigation area, the current Evidence Rules in IP cases consider more about the characteristics of IP litigation and the technical issues in patent and trademark litigation, which is used to ease the burden of proof in IP civil litigation, and standardize the reviewing of evidence in civil litigation in IP.

II. Main content

The rules mainly include four aspects, namely, burden of proof, investigation, collection and preservation of evidence, evidence exchange and cross-examination, and evidence review, with the purpose to cover all aspects of evidence in IP civil litigation as much as possible in a comprehensive but not too complicated manner.

1. Burden of proof

This part mainly explains some problems and difficulties in the burden of proof under the precondition that the burden of proof is borne by the party who asserts. In particular, some of the previous judicial practice is solidified through these rules.

For example, in Articles 2 and 3, it is made clear that the burden of proof should be allocated by comprehensively considering the parties' possibility of holding evidence and the capability of presenting evidence. Specifically, in Article 3, the burden of proof for the manufacturing method of non-new products is still mainly borne by the IP right holder, but if the IP right holder has made reasonable efforts to collect evidence, the burden of proof will be shifted to the other party. This has fully considered that it is very difficult for the IP right holder to have access to and obtain the corresponding evidence for the manufacturing method of products. In this case, it is unrealistic to further impose 100% burden of proof on the IP right holder, which is not favorable to the protection of IP rights.

In addition, in Article 5, it is specified that information such as evaluation reports, industry profits, and even the relevant records on the company's website or brochure can be used as the basis for determining the damages. This is also used to solve the dilemma that the IP owner is unable or difficult to obtain the evidence of the infringer’s illegal profits, and then cannot claim suitable damage. In the previous judicial practice, the IP owner usually requested the court to order the alleged infringer to provide financial data such as financial accounting books, but usually the alleged infringer was unwilling to provide or only provided incomplete financial accounting books. In this case, the court has to determine the damages according to the statutory damages on court’s discretion. Through this provision, the IP owner can make use of the industry evaluation report, industry general profits, and even some promotion information of the alleged infringer to compel the alleged infringer to provide real and valid data, thus obtain reasonable and considerable amounts of damages. In recent years, in IP infringement cases of high damages, most have used such evidence, which shows that this practice has been recognized by the courts in judicial practice.

As for the defense against legitimate sources, this Rule not only requires the alleged infringer to provide evidence for legitimate sources, but also consider the duty of care of the infringer, and clearly defines the business scale, professional level and market trading habits, etc. of the infringer to be used as elements to determine the reasonable duty of care. Since the “duty of care” falls into the subjective category, it is difficult to prove it, so the introduction of the objective “business scale, professional level and market trading custom” is more favorable to the evaluation of this subjective state, thus to prevent the alleged infringer fully aware of infringement from using “legitimate sources” defense to escape from the liability.

In this part, the validity of the evidence collection by purchasing the infringing products intentionally is confirmed. Furthermore, to facilitate the IP protection, especially for the convenience of foreign IP owner to file lawsuits, the formalities requirements of evidence formed outside China have been relaxed, and it is not strictly required that all foreign evidence must be notarized and legalized, except Power of Attorney.

2. Court investigation and preservation

This part stipulates in details the procedure and scope of court evidence preservation, also the factors that needs consideration from the court for evidence preservation. In particular, in this part, the court made it clear that the purpose of preservation is only to solidify the evidence, therefore, the devaluation of the preserved subject and the impact on the normal business of the evidence holder should be minimized. The loss caused by evidence preservation due to the mistakes of IP right holder can be compensated.

In this part, since IP cases usually involve many complex technical issues, in the process of preservation, expert(s) can be required to attend, and technical investigators can be designated to participate in evidence preservation

For the evidence involving trade secrets, the court can limit the parties to the least or only attorneys in on-site preservation, and all the participants need to sign a confidentiality agreement.

From this part, we can see that it takes efforts to reach a balance between the applicant and the respondent of evidence preservation, which not only ensures the effective evidence collection, but also avoids considerable damage to the rights and interests of the respondent. Moreover, if the result of evidence preservation is not ideal for the IP owner, and the IP owner wants to give up the evidence obtained by preservation, then the court still has the authority to review the evidence preservation, which can restrict the IP owners from abuse of evidence preservation.

3. Evidence exchange and cross-examination

This part mainly aims at several issues of evidence exchange and cross-examination. The first is the timing of asserting defense against the prior art or prior right. It is made clear that if the defense is not raised in the first and second instances, then it will not be considered in Retrial Procedure; otherwise the first and second instances will lose their significance, which will be unfair to the patentee. This rule is reflected in the ruling [(2017) Zui Gao Fa Min Shen No. 604].

Secondly, this part also stipulates the principles of evidence exchange and cross-examination in cases involving trade secrets, and determines that when the parties raise objection to whether trade secrets are involved, rebuttal evidence should be provided and be subject to cross-examination first. This ensures that business secrets would not be disclosed.

Furthermore, this part also stipulates that the people’s court should examine the identity of expert witnesses (persons with expertise), and the main contents of the examination include identity information, academic qualifications, technical titles, etc. it also clarifies that the scope of expert witnesses’ testimony only involves technical issues rather than legal issues, and stipulates the principle of recusal of appraisers as expert witnesses. The opinion of the expert witness shall be regarded as the opinion of the party who invites the expert witness. If the party disagrees with the opinion of the expert witness, they need to present and explain the reasons in detail in court.

For the technical investigator, its position in the court is regarded as a judge, which means that the inquiry of the technical investigator should be treated carefully and seriously by both parties.

4. Review of evidence

The review of evidence part stipulates several principles for evaluating the authenticity of evidence. Firstly, for the authenticity of electronic data, there is no further regulation in this part, but still consistent with the principles in Some Provisions on Evidence in Civil Procedures issued by the Supreme People’s Court at the end of last year. As a further advance, this part also proposes that the courts can confirm the authenticity of emails that are sent to unspecified persons from public mailbox. Currently, there are no precedent cases about how to decide this point in judicial practice. As we understand, it may be practical that if multiple unspecified people receive an email with the same content at the same time, the authenticity of the email could be confirmed. This has also raised the requirements for e-mail evidence.

This part also stipulates the authenticity of defective notarial certificate. The general principle is that if there are substantial defects in notarial evidence, for example, the environment of notarization is not clean, then the whole notarial evidence cannot be accepted. For the formal defects, the whole notarial evidence is not invalid, which can be made up by explanations or corrections. This shows that the focus of the litigation is more inclined to the substantive content certified by the notarial certificate.

III. Significance

1. Trying to solve the dilemma caused by inappropriate burden of proof

One of the most important points of this provision is that in Article 2, it is proposed that the court may, in accordance with the principles of fairness and good faith, decide the burden of proof in civil proceedings for IP rights, taking into account such factors as the party’s possibilities of holding evidence, ability to present evidence, and the possibility of the occurrence of the certain circumstances. This article is based on the principle of “burden of proof borne by claimant” and considers comprehensively all aspects of the situation. The practical significance of this article lies in: under the precondition that there is no evidence discovery system in China, for most IP cases, both the infringement evidence and the damage evidence are held by the infringer, which is difficult for the IP owner to obtain. In this case, it often happens that the IP owner knows that the alleged infringer is infringing its patent right, but it is unable to obtain such evidence. The proposal of this article lays a legal foundation for the court to allocate the burden of proof by comprehensively considering all aspects of the case, and provides a solution to the solve the evidence dilemma in IP civil litigation.

2. Facilitating evidence collection

In this provision, evidence with defects is not totally denied. For example, for notarized evidence with defects, if the defect is only a formal defect and does not affect the facts shown in the substantive evidence, it can be corrected by making supplemental explanations to the certificate, etc., to avoid complete denial of the entire evidence. Besides, foreign evidence, even if there are flaws in notarization, can be accepted if it can be supported by other evidence. This provides convenience for both parties to collect and prepare evidence.

3. Defining the detailed procedure and scope of evidence preservation

In this provision, the elements of evidence preservation to be reviewed are clarified, and the principle is established that the scope of preservation should minimize the damage to the preserved property and minimize the impact on the business of the evidence holder. For trade secret evidence, it specifies in details the people who can participate in the preservation process, and minimizes the damage to the evidence holder. Meanwhile, it also stipulates that if the applicant abuses the preservation system, the other side has the right to claim compensation. Thus it balances the interests of the applicant and the respondent from two aspects.

4. Establishing the status of technical experts and technical investigators

This provision establishes that technical experts can be applied for by litigants or hired by the court and the court needs to review the technical qualifications of technical experts, and stipulates that technical experts can only express opinions on technical issues, and the appraisers participating in the case or experts from the same appraisal institution shall not be assigned as technical experts in the same case. From this, it is determined that the technical expert only acts as a technical assistant, while the technical investigator is regarded as part of the court, and their status in the court is different.

For the technical experts employed by the parties, the opinions of the technical experts will be regarded as the opinions of the parties. If the parties have any objection to this, the reasons must be explained in detail, that is to say, the parties must bear the possible adverse consequences due to the introduction of technical experts.

5. Defining the evaluation method for the authenticity of electronic data

This provision recognizes the legitimacy of electronic data as evidence, and it is easier to recognize the authenticity of notarized electronic data or electronic data provided by a neutral third-party depository platform. Furthermore, the innovation of this provision lies in that the court can confirm the authenticity of the e-mail sent to multiple unspecified people through public mailbox, which provides a new way to verify the authenticity of electronic data.

6. Facilitating the trial of cases with the help of professionals

Because IP cases involve plenty of technical issues, it is proposed to bring in professionals in many articles of this provision. For example, in Article 28, litigants may apply to the court for entrusting professional institutions or professionals to make evaluation reports, economic analysis reports or market investigation reports on the specific issues of the cases. Patent cases are more closely related to the market economy. Therefore, through the introduction of professionals, the court can have better understanding on the case, especially on the damages.

In addition, in Article 38, it is also proposed that the parties or the court may apply for or notify persons with expertise to present in court, so that opinions of experts can be cross-examined as the basis for fairness.

IV. Room for improvements

Despite that the promulgation of the Evidence Rules concerning IP Civil Litigation has alleviated difficulty in presenting evidence on IP right to some degree, there are still some aspects that need to be improved from the current version:

1. Further refining and expanding the shift of burden of proof

Although the shift of burden of proof is mentioned in both Articles 2 and 3, in practice, such clauses still need to be refined, and the extent of effort mentioned as “reasonable effort” in provision still needs clarification by the court.

In addition, for the holders of non-method patents, in the case of specific products, such as B-B products, there is still the situation that the evidence of infringement cannot be obtained. Whether the shift of burden of proof can be applied in such case is subject to further evaluation by the court.

2. Appropriately relaxing the review standard of evidence preservation

In the provisions, it is clear that evidence preservation should minimize the damage to the value of the preserved subject and the impact on the business of the evidence holder, and the evidence can be preserved by taking photos, audio recording and video recording, etc. on the site.

With these prerequisites, the court should expand the scope of application of evidence preservation, reduce the review standard of evidence preservation, and thus further solve the dilemma of evidence collection. For example, for some products that are difficult for the IP owner to obtain, such as those exclusively purchased or customized products that are not widely circulated in the market, if the IP owner provides preliminary evidence, the court may require the alleged infringer to provide relevant products to prove that the products do not infringe the patent right, because the products are in the possession of the alleged infringer, so it is very easy for the alleged infringer to provide the products as manufactured by itself, but it is very difficult for the IP owner to do so.

By lowering the standard of evidence preservation, the court expands the scope of active investigation and evidence collection, and can obtain evidence for alleged infringing products through video recording and other means, which reduces the difficulty of obtaining evidence for the right holder and is favorable for fact-finding in the case.

3. Introducing penalty provision for refusing to implement evidence preservation and refusing to provide evidence

So far, the refusal of infringer to provide evidence is only subject to limited penalty. For instance, for the damage evidence, if the alleged infringer refuses to provide financial information, the IP owner cannot obtain any evidence. In this case, the court can only assess the damages within the scope of statutory damages, which may be lower than the value calculated according to the true financial information.

In fact, there should inevitably be relevant evidence held by the alleged infringers. By refusing to provide evidence, the alleged infringers instead could “surprisingly” obtain some favorable results, which is not favorable to “good-faith” principle. Therefore, the court should consider introducing corresponding penalty provision, compelling the alleged infringer to provide evidence in its possession.