Unclean Hands: A Prior Art Defense Exception

The prior art defense allows alleged patent infringers in China to avoid liability if they can prove that the technology or design in question was already publicly available before the filing of the patent. This defense aims to prevent improperly granted patents from being enforced and allows the public to freely use technology that is already in the public domain.

Article 67 of the Chinese Patent Law codifies the prior art defense. It states that “In a patent infringement dispute, where the alleged infringer has evidence to prove that the technology or design exploited forms part of prior art, such exploitation does not constitute infringement of patent right.” Prior art refers to anything that has been made available to the public anywhere in the world before the patent’s filing or priority date. This includes publications, public use, sales, and other events. If an alleged infringer can show that the technology was already public before the filing date, they are generally free to use it.

Confidential disclosures under nondisclosure agreements do not qualify as prior art because they are not public. But what if the receiving party breaches the confidentiality and publicly discloses the invention? In that case, the invention likely becomes prior art (although the discloser can still patent it within the 6-month grace period). Can an alleged infringer then assert a prior art defense based on the breaching party’s unauthorized disclosure?

The Supreme People’s Court (SPC) of China addressed this issue in Shanghai Huanxin Electronic v. Guangdong Farina Technology (2020)最高法知民终1568号. Shanghai Huanxin accused Guangdong Farina of infringing its patent on a connection handle for an automatic rental and sale terminal”. Guangdong Farina did not dispute that its product practiced the patented invention. However, it asserted that the invention had been publicly disclosed in an online article published prior to the filing date. Notably, Guangdong Farina itself authored and published the online article. Guangdong Farina was subject to a “Procurement contract” with Shanghai Huanxin, and its disclosure in the article breached the confidentiality obligation under that contract.

The SPC rejected Guangdong Farina’s prior art defense. It held that Guangdong Farina’s unauthorized disclosure could not support its defense because no one should benefit from their own illegal acts. Allowing an alleged infringer to benefit from a breach of confidentiality by claiming prior art would be unfair and contrary to fundamental legal principles. Therefore, an alleged infringer cannot claim that a technology is prior art based on its own unlawful public disclosure of it.

This case establishes an exception to the prior art defense in China, where the alleged prior art results from the defendant’s own breach of confidentiality. By refusing to allow Guangdong Farina to benefit from its own breach of confidentiality, the court upheld important moral and legal principles. At the same time, the decision provides guidance to lower courts on how to apply China’s prior art defense in a fair and just manner in future cases.