Zhuhai Gree Electric Appliances Co., Ltd. is a home appliance sales company established in 1991, which owns brands like Gree and is mainly engaged in household air conditioning, mobile phones, central air conditioners and other products. In 2016, Gree Electric Appliances achieved a total operating income of RMB 110.113 billion, a net profit of RMB 15.421 billion, and a tax payment of RMB 13.075 billion, ranking first in China's home appliance industry for 15 consecutive years, with a cumulative tax payment of RMB 81.413 billion, and making the list of the U.S. Fortune Magazine's "China's Top 100 Listed Companies" for 9 consecutive years. "Gree" air conditioners under Gree Electric Appliances are the "world famous brand" products in China's air conditioning industry, with business extended to more than 100 countries and regions around the world.
Background of the Case:
In December 2018, AUX Air Conditioning Co.,Ltd. purchased a compressor patent ZL00811303.3, filed in 2000, from Toshiba Carrier Corporation, and then, with the patent as the basis for its rights, it sued GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI for infringement in Ningbo (2020 Zhe 02 Min Chu No. 265, 2020 Zhe 02 Min Chu No. 183), Nanchang (2019 Gan 01 Zhi Min Chu No. 59, 2019 Gan 01 Zhi Min Chu No. 60) and Hangzhou (2020 Zhe 01 Zhi Min Chu No. 654, 2020 Zhe 01 Zhi Min Chu No. 655), respectively. Among them, the target amount of the two infringement lawsuits in Nanchang Intermediate People’s Court reached RMB 80 million.
Lawyer Meihua ZHOU's team was commissioned by Gree to respond to the lawsuits around the two cases in Nanchang. By finding evidence of public use, making reasonable use of the appraisal process and guiding the experimental design, the team made the judicial appraisal agency commissioned by the Nanchang Intermediate People’s Court believe that what used by Gree was a common technology in the industry, which did not constitute an infringement. In June2022, AUX took the initiative to apply to the Nanchang Intermediate People’s Court for the withdrawal of the lawsuit.
It is worth mentioning that at the time of the conclusion of the two cases in Nanchang, there were still other cases around the same patent that had not yet been concluded. Gree proceeded to entrust Lawyer Meihua ZHOU's team to initiate an invalidation request against the patent. After the trial, China National Intellectual Property Administration issued an examination decision, and declared the patent partially invalid. Gree disagreed with the review decision and filed an administrative lawsuit with the Beijing Intellectual Property Court. On December 28, 2022, Beijing Intellectual Property Court ruled that the appealed decision should be revoked and a new review decision should be requested. Gree, AUX and China National Intellectual Property Administration all appealed against the first instance judgment to the Supreme People's Court of China. On April 23, 2023, the Supreme People’s Court of China formed a panel to hear the case.
As the organizing lawyer for both the infringement lawsuit and invalidation proceedings, Meihua ZHOU planned and led the synergistic strategy for the lawsuit and invalidation.
Difficulties and Solutions:
The case is complex and controversial:
1. Whether AUX has standing as a plaintiff: Gree argued that AUX was not the inventor of the compressor patent in question on the grounds that Toshiba Air Conditioning had been absorbed and merged by Toshiba Carrier in 2008 and had not proved the transfer of the relevant property. In 2018, Toshiba Air Conditioning transferred this patent to Toshiba Carrier, which in turn sold it to AUX, but by that time Toshiba Air Conditioning no longer existed, so AUX did not have the standing as a plaintiff. However, AUX claimed that Toshiba Air Conditioning is only renamed as Toshiba Carrier, and AUX has legally obtained the patent rights from Toshiba Carrier, so has the right to claim third-party infringement liability.
2. Whether Gree is guilty of manufacturing infringement: Gree argued that the product in question was a compressor, not an air conditioner, and it was produced by Zhuhai Landa, which could not constitute a conclusion that Gree Electric Appliances was the manufacturer, and that AUX Air Conditioning also purchased compressors from Landa; Gree Air Conditioning also purchased compressors from Daikin, HIGHLY, and other companies at the same time.
3. Method of calculating the amount of compensation: Gree argued that even if Gree constitutes an infringement, the amount of compensation claimed by the plaintiff is too high, and that the contribution of the patent in question should be calculated on the basis of the selling price of the compressor, not the air-conditioner, which only accounts for about 10% of the total cost of the air-conditioner.
4. Prior adverse judgment: AUX initiated infringement lawsuits in multiple places against Gree for infringement of the same patent by Gree's products of the same model. Among them, Ningbo Intermediate People's Court made a first instance judgment in December 2021, held that Gree's products infringed the patent right of the patent in question, and required Gree to compensate AUX for economic losses of up to RMB 70 million. How to construct a new logic of argumentation and get rid of the influence of the judgment of the cases in Ningbo on the two cases in Nanchang became the primary proposition of the team at that time.
After thorough communication with the client, the team decided to focus on the prior art defense. The team concluded that the compressors equipped in some of the air-conditioners sold by Gree before the date of the patent application had already disclosed the technical features of Claim 1 of the patent in question, and therefore, it recommended Gree to purchase a number of air-conditioners sold in the prior period as evidence of their use and to test the technical parameters of the compressors therein. The team also constructed a rigorous logic of evidence through the innovative use of two testing and identification methods, and ultimately succeeded in convincing the panel to accept our point of view.
Highlights and Significance:
Using extensive litigation strategies, the team overcame the impact of the client's other cases with unfavorable outcomes, saved the client from a huge financial compensation of RMB 80 million, and helped the client to maintain the competitive initiative and further consolidate its market position.
