In the high-profile patent infringement disputes between the Chinese company Innoscience and Infineon (as part of the global patent war between the two companies), the Supreme People's Court (SPC) maintained a preliminary injunction issued by the lower court against Infineon concurrently with the first-instance judgment, and in its ruling SPC provided hitherto the clearest guidance on how a request for such a preliminary injunction should be evaluated.

This case reinforces a procedural paradigm already reflected in a number of previous court cases: the patent owner can try to apply for a preliminary injunction when it believes that the court is ready to make a favorable first-instance judgment and the patent in dispute has been upheld by the patent office in the invalidation action filed by the accused infringer. Meanwhile, SPC’s market share analysis in its ruling has drawn criticisms from observers for a number of reasons.

Procedural paradigm built from previous cases

The lower court granted, and SPC maintained, Innoscience’s request for a preliminary injunction after (1) the lower court had found infringement in its first-instance judgment, and (2) the patent office (and Beijing IP Court) had upheld the validity of the patents in dispute in invalidation actions filed by Infineon.

This procedural paradigm is built upon 3 previous cases: the XinheCheng (新和成) case (for trade secret infringement), Qualcomm v. Apple (for patent infringement) and the Xianglansu (香兰素 or vanilline) case (also for trade secret infringement). The Qualcomm v. Apple case was slightly different only in that when the first-instance court issued the preliminary injunction, it has not issued its judgment but had completed the hearings on infringement analysis and thus was quite confident to make an infringement finding.

The above history implies that the Chinese judiciary has recognized this "post-judgment, pre-finality" paradigm as one under which the court should feel relatively comfortable to grant a preliminary injunction if the relevant factors are believed to have been met. Such a preliminary injunction granted in the middle of a suit may not be as desirable as a pre-suit preliminary injunction but may still be very valuable for the patent owner if it is issued on a critical juncture. This was likely the case for Innoscience as it obtained this injunction order when it had just received an unfavorable ruling in German and mixed rulings from the US ITC.

Primary factors to be considered

Preliminary injunctions are behavioral preservation measures under the PRC Civil Procedures Law. SPC in its judicial interpretation “Provisions on Several Issues Concerning the Application of Law in the Review of Behavioral Preservation Cases in Intellectual Property Disputes” provides guidance on the specific factors the courts should examine to decide whether to grant a preliminary injunction in the context of IP disputes. SPC applied the guidance to the specific facts of this case, thus providing more clarity to the various stipulations in the judicial interpretation.

The 5 major factors evaluated by SPC are:

1. Factual and legal basis (likelihood of success)

Under SPC’s analysis, the lower court’s finding of infringement in its judgment and the patent office’s upholding of the patent in dispute provide a very strong factual and legal basis for a preliminary injunction. From this case, and from another much newer case in which SPC rejected the patent owner’s request for a preliminary injunction (see https://mp.weixin.qq.com/s/KRgNDDsCaXGYDNO9JpuhhA), it is clear that SPC still evaluates the patent owner’s likelihood of eventual success under this “factual and legal basis” cover (the above-mentioned judicial interpretation on behavioral preservation measures when it was adopted used the “factual and legal basis” language in place of the “likelihood of success” language previously used in the context of preliminary injunctions).

2. Irreparable harm

SPC found this factor satisfied on the ground that the accused products directly compete with the patented products, causing market share loss, price erosion, and loss of "first-mover advantage" to the patentee.

It is noteworthy here that Infineon has submitted evidence that Innoscience’s relevant market shares have actually increased, but SPC was not persuaded. SPC’s reasoning here is worth reading verbatim (emphasis added):

“Second, for Infineon’s arguments that Innoscience’s market share did not decrease and product iteration did not affect market shares, Infineon’s evidence is insufficient to prove that the market shares of Innoscience’s patented products did not decrease. And, the impact on market shares from the accused products is not limited to reduction of market shares, but could also be in the form of reduction of the growth of market shares. Since the accused products are in direct competition with the patented products, sales of the accused products must have negative impact on the market shares of the patented products. The fast iteration cycle of 2~3 years of the relevant products further underscores this negative impact.”

SPC’s analysis here has drawn criticisms. One criticism is that it essentially makes the burden impractically high for the accused infringer to prove that its sales of the accused products did not negatively affect the patent owner’s market share, as SPC’s analysis implies that the accused infringer not only needs to prove that the market shares of the patented products do not fall or even have actually increased, but further needs to prove that the shares would not go even higher in the absence of the accused products, which is a hypothetical scenario almost impossible to prove. Another criticism is that the basic theory behind the market share and direct competition analysis has blurred the boundary between preliminary injunctions and permanent injunctions (in China, this theory has been the foundation for permanent injunctions).

Some observers have further noted apparent inconsistency in SPC’s market share analysis between this case and the Dreame v. Roborock case in 2024. In that case, there was also evidence that the patent owner’s market shares had actually increased, and SPC specifically recognized this point and held that "there was no evidence of a significant reduction in market shares" as one of the reasons to nullify the lower court’s preliminary injunction order (of course, one can argue that the Dreame case is different from this case in a major aspect as SPC also pointed out: the patent owner in that case had a long delay in applying for a preliminary injunction, which SPC held as strong evidence there was no urgency or irreparable harm to the patent owner).

Given the above, and given the timing of the issuance of this preliminary injunction, some observers (particularly foreigners) have questioned whether SPC had extralegal considerations in its decision making. This Chinese preliminary injunction was issued approximately one month after the US ITC's rulings in the US disputes between the two companies and at a time when Innoscience had lost in Germany. Against this backdrop, some international commentators have questioned whether the SPC's ruling was aimed at providing strategic leverage to a Chinese company facing litigation pressures abroad.

3. Balance of hardships

On this point, SPC held that the balance tips in favor of the patentee. It stated that once a first-instance judgment has found infringement, the alleged infringer, as a good-faith business operator, has a duty of prudence to cease the infringing acts out of respect for the judgment and the patent. This position is also new to many practitioners, as again it to a good extent blurs the boundary between preliminary injunctions and permanent injunctions.

4. Public interests

SPC held that the accused products are not public welfare goods (e.g., unrelated to health or safety), and substitutes exist. There was no dispute on this point.

5. Security

Innoscience has provided a cash bond of RMB 10 million, which the SPC found sufficient. The lower court’s ruling also includes an order that if evidence shows that the loss Infineon suffers from the preliminary injunction is exceeding this amount, Innoscience shall provide additional security.