Elements Determining a Malicious Lawsuit
Constitutive Elements Determining a Malicious Lawsuit
Co-Author: Mamie Mai
With the public’s gradual increasing appreciation of intellectual property rights, the new disputes arising related to intellectual property, the strengthening of the range of protection for intellectual property and the rising amount of compensation given for infringement, intellectual property lawsuits brought in bad faith as well as the phenomena upon the abuses of intellectual property rights have become more common and serious.
“Malicious lawsuit” generally refers to a lawsuit deliberately filed by a party without any factual or legal basis, for the purpose of obtaining illegal or improper interests, which has caused losses to the counterparty in the lawsuit. This article summarizes several constitutive elements that malicious lawsuit are made of in the context of Shenzhen Tencent Computer System Co., Ltd. v. TAN (individual) dispute over damage liability arising from a malicious intellectual property rights lawsuit [Case docket: (2017) Yue-03-Min-Chu No. 632; (2019) Yue-Min-Zhong No. 407].
The plaintiff, Tencent Computer System Co., Ltd. (hereinafter referred to as the “Tencent Company”), has been using a cartoon image of the QQ Penguin in an instant messaging app named QQ since 1999 and completed the copyright registration of the QQ Penguin in agraphic work on June 21, 2001. In 2010, Tencent Company found that a natural person, named TAN (hereinafter referred to as the “Defendant”) and Our Way Technology (Shenzhen) Co., Ltd produced, featured and sold the QQ Penguin on speakers via their websites and decided to sue both Defendants on the grounds of infringement upon copyrights and trademark rights. After that, the parties concerned reached a settlement, and TAN immediately ceased infringement and made compensation for its losses. On February 25, 2016, TAN sued Tencent Company and Shenzhen Zhong Ke Rui Cheng Intelligent Technology Co., Ltd. for infringing his design patent of the Xzeit Mini Penguin Speaker. In this regard, Tencent Company applied for the invalidation over the design patent of Xzeit Mini Penguin Speaker to the Patent Office. Finally, the design patent of Xzeit Mini Penguin Speaker was declared invalid and the court also ruled to dismiss the action filed by TAN. Tencent Company believed that TAN was malicious in bringing a lawsuit against it for infringement of the design patent with the intention of damaging its interests by means of the lawsuit while seeking illegal or improper interests. Moreover, due to the malicious lawsuit filed by TAN, Tencent Company requested TAN to make compensation for damages and extend a formal apology. Finally, the Judgment issued by the court was met with the requests by Tencent Company.
To determine if a specific lawsuit is a malicious intellectual property rights lawsuit, at least four constitutive elements of the liability for tort shall be met:
1. One of the parties makes a claim by filing an intellectual property rights lawsuit or threatens to make a claim; one of the parties who filed an intellectual property rights lawsuit would take the counterparty into a proceeding and into a disadvantageous position.
2. The party who makes the claim is malicious subjectively;
3. There is actual damage;
4. There are cause and effect between the act of filing an intellectual property rights lawsuit by the party who makes a claim and the damage.
In a word, determining the “malicious” intent shall be prioritized when a malicious intellectual property rights lawsuit is reviewed, mainly manifested in the party which files a lawsuit yet while knowingly lacking any legal and factual basis; and aims at interfering with competitors and causing damages to the lawful interests of the counterparty through legal proceedings. In regard to this case between Tencent Company and TAN, the court was in conjunction with the date of the copyright registration and the mediation content or materials bearing violating copyrights and trademark rights, for the purpose of examining whether TAN had subjective malice in the case. After the mediation, while knowing that the copyright of QQ Penguin was enjoyed by the Tencent Company, TAN continued paying the patent fees, which could establish that TAN filed the lawsuit short of the legal and factual basis, and thereby the court ruled that TAN had obviously subjective malice in this case.