[Author: Shanji Fang]

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In order to strengthen the protection of patent rights and try to solve the problems of "long cycle, difficult evidence production and low compensation", the cases of applying the obstruction of evidence production rule in patent infringement disputes are gradually increasing. The obstruction of evidence production rule is conducive to reducing the right holder’s burden of proof. However, under the fundamental civil evidence production principle of "who claims who produces evidence", the obstruction of evidence production rule cannot be abused. This paper will analyze the conditions and consequences of application of the obstruction of evidence production rule in patent infringement cases in combination with judicial practice, and provides some practical suggestions for the right holders who have difficulties in producing evidence.

1. Legal basis of the obstruction of evidence production rule

The obstruction of evidence production rule generally refers to the provision of Article 95 of the Several Provisions of the Supreme People's Court on Evidence in Civil Procedure, where a party refuses to submit the evidence under his control without justified reasons, and the party having burden of proof to the facts claims that the content of the evidence is not conducive to the party who controls the evidence, the people's court may determine that the claim is established.

In intellectual property litigation, in order to ensure the implementation of the relevant provisions of the "evidence discovery system", Article 25 of the Several Provisions of the Supreme People's Court on Evidence in Civil Litigation of Intellectual Property Rights (Court Interpretation [2020] No. 12) (hereinafter referred to as the "Provisions on Intellectual Property Evidence") also provides for the obstruction of evidence production rule, that is, if a people's court requires a party to submit relevant evidence according to law, the party refuses to submit, submit false evidence, destroy evidence or commit other acts that render evidence unusable without justified reasons, the people's court may presume that the other party's claim of facts to be proved involved in the evidence is established. If a party commits any of the acts listed in the preceding paragraph, which constitutes a circumstance specified in Article 111 of the Civil Procedure Law, the people's court shall handle it according to law.

In patent infringement litigation, the obstruction of evidence production rule may be applied in the determination of two facts, infringement determination and damages determination, and in current judicial practice, it is more used in the determination of damages.

2. Application of the Obstruction of Evidence Production Rule in Determining Patent Infringement Damages

In the practice of patent infringement litigation, the main reason for the application of the obstruction of evidence production rule in determining damages is that the right holder voluntarily applies the court to order the infringer to produce evidence, or the court orders the infringer to product evidence ex officio during the trial of the case.

1. Conditions of application

1. Whether it is crucial to the facts to be proved and the outcome of judgment

It is commonly known the fundamental civil evidence production principle in China is "who claims who produces evidence". Therefore, when determining the amount of compensation, the court will firstly and mainly adopt the general evidence rules of "who claims who produces evidence", and only when necessary, apply the special rules of "documentary evidence discovery order, obstruction of evidence production system", that is, when the court can determine the amount of compensation through the evidence on the record without the defendant having to submit information related to infringement profits, the court can directly determine the amount of compensation in accordance with the general rules of evidence, however, if it is difficult to determine the defendant's infringement profits or judge whether the plaintiff's claim for compensation is legitimate and reasonable through the evidence on the record, and the information held by the defendant is crucial to the facts to be proved and the outcome of judgment, the court may order the defendant to submit evidence related to infringement profits.

For instance, in the case (2020) Yue 03 Civil First No. 5611 represented by our firm, the court believed that if the defendant did not submit the documentary evidence involved in the case, it would be difficult to find out the sales and profits of the accused infringing products, and whether the infringement profits exceeded the statutory compensation limit, under the circumstance that the infringement profits calculated by the plaintiff according to the records of the complaints filed in 2018 were significantly different from the infringement profits shown in the sales records in recent three years obtained by the court from Alibaba. Therefore, the court believed that defendant’s production of evidence related to infringement profits is crucial to the facts to be proved and the outcome of judgment.

2. Whether the right holder has exhausted every means to produce evidence

The obstruction of evidence production system is set up to reduce the burden of proof of the right holder, but it does not mean that the burden of proof of the right holder is directly transferred to the infringer. The premise of applying the obstruction of evidence production rule is still that the right holder produces preliminary evidence according to the fundamental principle of "who claims who produces evidence" in civil cases. The author found that in many cases, the court did not apply the obstruction of evidence production rule on the grounds that the right holder did not fulfill its obligation of "exhausting every means to produce evidence".

According to current judicial practice, the right holder "exhausting every means to produce evidence" may not reach the standard of proof of "high probability", but the right holder should at least exhaust various means, such as producing evidence and calculate the infringement profit based on the infringer's annual report, official website, sales data on e-commerce platforms, publicity content in industry magazines or news, etc., and when necessary, further explain to the court the objective reasons why the key evidence related to the infringement profit cannot be collected.

For instance, in the case (2020) Yue 03 Civil First No. 5611 represented by our firm as above mentioned, our firm accepted entrustment of the right holder and exhausted every means to produce evidence of the infringement profits in the early stage of the litigation, the infringer's infringement profits was estimated higher than the claimed amount according to the monthly sales volume of the right holder in 2018. We also explained to the court that due to the infringement complaints of the rights holder, many infringing links were deleted and thus could not be collected as evidence. Besides, we applied to the court to retrieve the sales data of the e-commerce platform. However, since the e-commerce platform only retains store sales data for the past two years, it cannot provide all the sales records of the infringing products, but the sales records can be fully displayed in the backend of the defendant's store. In the end, the court comprehensively considered the foregoing circumstances and supported our request, requiring the defendant to submit financial books and other evidence related to the profits of infringement.

3. Where the account books or materials related to the infringing act are mainly in the possession of the infringer, the infringer refuses to provide or provides false account books or materials without justifiable reasons.

For this condition, in the infringement case when the infringer of the alleged infringing product is identified, generally the evidence related to the profits from infringement is in the possession of the infringer, unless the infringer has other evidence sufficient to refute it. Under the circumstance that the infringer possesses the evidence of the infringement profits, whether it constitutes refusal to submit evidence is mainly considered based on whether it has a legitimate reason not to submit. In judicial practice, the infringer generally possesses the account books and materials related to the infringement, and even if the infringer claims that the account books and materials related to infringement have been destroyed before the infringement dispute occurred, or that the enterprise has not kept them properly or due to other reasons that they cannot be submitted, the court will generally not consider it to be "a justifiable reason not to submit".

For the alleged infringing products sold online on the e-commerce platform, since the sales records in the backend of the store cannot be deleted or edited, the infringer must hold the evidence, and the claim that the records are unable to be provided on the grounds that they have been deleted or the products have been removed from the shelves all belong to a situation of "refusal to submit without justifiable reasons". For example, in the case (2018) Yue Civil Final No. 682 that we represented, the court of second instance found that our evidence was able to preliminarily prove the infringement profits of the defendant from selling of the alleged infringing products, and thus issued an evidence discovery ruling requiring the defendant to provide online sales data, account books and materials of the allegedly infringing products. However, after receiving the ruling, the defendant submitted to the court an "Explanation on the Discovery of Electronic Data and Account Books of Online Sales", declaring that the product links of the alleged infringing products had been removed and cannot be retrieved and the relevant records likewise cannot be retrieved due to infringement complaints against the alleged infringing products and poor sales, so the relevant records could not be provided. Moreover, the defendant was a micro-enterprise that was unable to establish a complete financial system, thus the account books of records of the allegedly infringing products did not exist. In this regard, we submitted the relevant rules of the e-commerce platform to prove that even if the link is removed, all transaction records and data can be retrieved from the store backend, and the court also verified this and found that the reasons claimed by the defendant were not true. Therefore, it was found that the conduct of the defendant constituted obstruction of evidence production.

2. Consequences of the application of the obstruction of evidence production rule.

According to Article 27 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Patent Infringement Disputes (II), the consequence of the court's application of the obstruction of evidence production rule in determining the amount of compensation is that "the interests obtained by the infringer from infringement can be determined according to the claims of the right holder and the evidence provided", and Article 71 of the amended Patent Law which came into force in 2021, stipulates that "the amount of compensation may be determined by reference to the claims and evidence provided by the right holder".

In practice, both of the above circumstances may be applied. For example, in the above two cases represented by our firm, the court fully supported our claim for millions of compensation because the defendant refused to submit evidence related to infringement profits without justified reasons. In the case (2017) Hu 73 Civil First No. 56 represented by our firm, while applying for evidence discovery, we claimed full support of damages of 3 million yuan if the defendant refused to produce evidence. After hearing, the court held that in this case, through the evidence on record submitted by the plaintiff, it could not be determined that the defendant’s infringement profits were equal to or higher than the amount of compensation claimed, so it should not fully support the plaintiff's claim for damages. However, an important fact of this case was that the defendant provided the financial account books in the pre-court meeting, but refused to submit them during the audit process, which constituted obstruction of evidence production. The defendant refused to submit evidence to refute the plaintiff’s claim of damages, knowing that once it did not submit the financial account books, it was likely that it would be determined to bear the consequences of compensation of less than 1 million yuan only based on the plaintiff's evidence. Therefore, on the basis of respecting the evidence on record and the objective fact, the court made an unfavorable presumption against the defendant, and determined the amount of compensation from a high level within the compensation limit of 1 million yuan, so it finally determined 990,000 yuan as the amount of damages in the case.

Therefore, whether the court will fully support the right holder's compensation claim or refer to the right holder's calculation method when applying the obstruction of evidence production rule depends on the specific circumstances of the case, and the most important factor is the adequacy of the basis for the infringement profits claimed by the right holder. In either case, however, it should be an adverse consequence for the defendant who has obstructed evidence production.