In 2017, Cleveron AS discovered that a Chinese company had registered under its name an invention previously already invented by Cleveron. In 2018, Cleveron filed an application for invalidation of the patent with the China National Intellectual Property Administration (CNIPA). As the initial application was denied, Cleveron challenged the decision in the Beijing Intellectual Property Court.
Trial of Cleveron AS in China
The events first started in 2015 at the Paris Post Expo. At this event, Cleveron presented its newest and most innovative product, the Cleveron 401, which was then known under the name PackRobot. The unique solution attracted a great deal of attention at the fair – especially thanks to its innovative technology. Hangzhou Dongcheng Electronic Co., Ltd (hereinafter HDE) was one of several companies that approached Cleveron to discuss future cooperation. Negotiations with the Chinese company proved unsuccessful, and no robotic parcel terminals were sold.
After some time had passed, Cleveron discovered that the Chinese company HDE was trying to invent an identical robotic parcel terminal. Initially, the situation did not seem harmful as Cleveron had filed for industrial property rights in Europe and the United States and had acquired worldwide copyright. However, the situation proved to be serious in 2017 when it was revealed that the Chinese company had successfully registered in China a unique invention that had previously been created and published by Cleveron, limiting Cleveron's ability to sell patented products on the Chinese market. Cleveron decided to defend its rights and in 2018 filed an application for invalidation of patent No. 201620761322.2 for an identical HDE device.
According to Cleveron CEO Arti Kütt, taking a Chinese company to court in China was seen as a challenge. Firstly, because it is known that evidence originating outside China can be lightly abandoned in China. Secondly, Cleveron is a small company on a global scale, not a global corporation seeking to invalidate a local company's patent in China. ‘From the outset, our standpoint was that nothing was impossible in this dispute and we were prepared to defend our rights. Although Cleveron’s products can be found in 51 countries around the world, our solutions are not sold in China and commercially it is not a very important market for us. However, we wanted to protect our patent to avoid confusion in the future if we were to expand our footprint to China,’ Kütt said, adding that anything is possible with people as good as those in Cleveron.
‘A situation where a Chinese company acquires undue legal protection for an invention is very harmful, as it limits Cleveron's ability to enter the Chinese market and to order components from China, and could mislead customers and partners regarding authorship. HDE's invention was able to receive patent protection in China because, in China, a utility model is also referred to as a patent and for that, substantive examination is not carried out, meaning that the novelty of the invention is not assessed,’ explained Siim Timpson, Intellectual Property and Patent Specialist at Cleveron.
The trial that turned out to be longer than expected
In May 2018, Cleveron filed an application for invalidation of the HDE patent with the China National Intellectual Property Administration's Patent Reexamination Board (PRB) based on lack of novelty of the patented invention. Although Cleveron's representative in China was optimistic about a favourable outcome, in December 2018 the Patent Reexamination Board (PRB) denied Cleveron's application and maintained the HDE patent, finding that the evidence provided by Cleveron was insufficient to prove the lack of novelty. Regarding the Patent Reexamination Board’s decision, the most surprising position for Cleveron was that product videos by Cleveron demonstrating Cleveron's invention on YouTube prior to the filing of the patent application by HDE would not be taken into account as evidence in determining novelty on the grounds that YouTube was not a reliable place of publication, as the Board had doubts as to whether the date of publication on YouTube could be freely changed. Another fact that was not in Cleveron’s favour was that the patent applications filed by Cleveron, although filed significantly earlier than the HDE patent application, were only published after the publication of the HDE patent, and could therefore not be used to prove lack of novelty of the HDE invention. Cleveron was not satisfied with the unfair decision of the China National Intellectual Property Administration's Patent Reexamination Board and decided to challenge the decision in the Beijing Intellectual Property Court.
In December 2020, Cleveron received the good news that the court had annulled the decision of the China National Intellectual Property Administration’s Patent Reexamination Board and that the Board would have to adopt a new decision. Among other things, the court found that YouTube videos are indeed reliable and can be used as evidence in China. The final victory was achieved in the second half of 2022, more than four years after the request for invalidation was filed, when the Patent Reexamination Board satisfied Cleveron's application for invalidation and HDE's patent was fully cancelled.
What does this victory mean for Cleveron?
Cleveron successfully challenged the patent registration decision by the China National Intellectual Property Administration (CNIPA) infringing Cleveron's rights, won in the Beijing Intellectual Property Court, and fully invalidated the HDE patent restricting Cleveron's activities. The Beijing Intellectual Property Court ruling confirmed that Cleveron 401 existed prior to HDE's identical invention.
‘It is good to see that the global fundamental principles of intellectual property still apply. This case taught us to be extremely careful when dealing with Chinese companies. We should consider registering intellectual property in China as soon as possible, since it is much cheaper than dealing with the aftermath,’ noted Timpson. ‘As patent systems vary greatly and offer much faster publication/registration options for one party, it is quite logical to assume that the number of Chinese patents will continue to grow at a high rate.’
According to Siim Kinnas, Head of Technology Transfer Unit at the joint organisation of Enterprise Estonia and KredEx, Cleveron's victory is highly significant. ‘The very fact that an Estonian company won a case against the China National Intellectual Property Administration is a good example of how the intellectual property system functions in China. For some time, we have seen that Chinese courts do not tend to favour domestic companies in disputes, relying instead on law, rules, and evidence. Chinese companies have also become quite proficient and skilled at using this system, so anyone doing business globally needs to be aware of this,’ Kinnas explained, recommending using competent patent attorneys and local specialists when applying for legal protection in China to ensure that the protection is correct, robust, and relevant. ‘We also offer strategic advice on intellectual property at Enterprise Estonia,’ Kinnas added.
Cleveron AS is an Estonian technology company developing parcel robots and terminals with more than 15 years of experience in parcel delivery technology. Cleveron's solutions are used in 51 countries around the world and the company's customers include world-renowned retail and logistics companies. Among others, its solutions are used by Inditex/Zara, H&M, Falabella, UPS, and DHL.