The Intellectual Property Court of the Supreme People's Court: Upholding Equal Protection in Accordance with the Law to Promote Win-Win Cooperation Between Chinese and Foreign Businesses

Case Brief

Company N, a European enterprise, is one of the world's leading providers of computer numerical control (CNC) systems. N Computer Software is a comprehensive software package developed by Company N, used to produce and sharpen precision cutting tools. Company N has obtained a computer software copyright registration certificate in China and is the copyright holder of N Computer Software. In 2021, Company N filed a lawsuit alleging that XXX Grinding Machine Co., Ltd. (Grinding Machine Company A) installed N Computer Software on its machine tool equipment without permission, and XXX Precision Tool Technology Co., Ltd. (Precision Tool Technology Company B) used the machine tool equipment produced by Grinding Machine Company A, which was equipped with the infringing software, for production and operation purposes. The two companies were identified as the producer and the user of the infringing product, respectively. Company N requested a ruling that the two defendants immediately cease infringement and jointly compensate for economic losses of 5 million yuan and reasonable expenses for rights protection amounting to 172,000 yuan. Upon the application submitted by Company N, the court of first instance conducted evidence preservation measures on a total of 14 machine tools of different models in the workshop of Precision Tool Technology Company B, and secured the software alleged to infringe on some of the randomly inspected machine tools. The court of first instance rendered a ruling holding that Precision Tool Technology Company B had committed infringement and ordered it to cease the infringement and compensate for economic losses amounting to 500,000 yuan. Both Company N and Precision Tool Technology Company B were dissatisfied with the ruling and filed appeals. The collegial panel of the second instance of the Intellectual Property Court of the Supreme People's Court, after carefully reviewing the case files and conducting several inquiries with the parties, found that the two sides were highly confrontational and had significant disputes over the factual findings and the amount of compensation. To thoroughly resolve the conflict between the two parties and equally protect the legitimate rights and interests of both Chinese and foreign litigants, the collegial panel precisely identified the focal points of the dispute, reconstructed the facts of the case to the greatest extent possible, and engaged in communication with both parties after each court session or inquiry to alleviate their confrontational stance. After months of persistent efforts, the collegial panel ultimately guided the parties to understand and voluntarily accept a settlement solution of "compensation and legalization" that better aligned with their fundamental interests. Under this settlement, both defendants should cease infringement, pay a lump-sum compensation to Company N, and enter into a five-year procurement agreement with Company N for the computer software and hardware involved. Furthermore, they reached a consensus on future dispute resolution procedures and on collaboration to combat piracy in the Chinese market. The two parties ultimately signed a settlement agreement, bringing the case to a close through mediation.

Typical Significance

The mediation in this case not only completely resolved the existing disputes between the two parties in a package, but also leveraged China's super-large market to facilitate follow-up cooperation between Chinese and foreign businesses over the next five years. Furthermore, the mediation transformed the litigation entanglement between the two parties into a cooperation bond and turned them from "adversaries" to "partners", fully reflecting the judicial concept of Chinese courts of valuing harmony and pursuing mutual benefits and win-win results, and highlighting the good legal environment underpinning China's high-level opening-up to the outside world.

(Case source: the Supreme People's Court)