Special Commentary : Rethinking Patent Injunctions in China — Insights from U.S. and German Experiences

Source:IPRdaily

By David J. Kappos, Mark A. Cohen, and Judge Randall R. Rader

The Authors

David J. Kappos is co-chair of the intellectual property (IP) practice at Cravath, Swaine & Moore LLP and one of the world’s most influential leaders in IP policy.  From 2009 to 2013, Mr. Kappos served as Under Secretary of Commerce and Director of the U.S. Patent and Trademark Office (USPTO), and prior to that as IBM’s Chief Intellectual Property Lawyer.  

Mark A. Cohen (柯恒) is a preeminent American scholar of Chinese IP law.  Mr. Cohen has taught at Renmin University and previously served as Senior Counsel, China of the USPTO.  

Judge Randall R. Rader is a thought leader in the field of IP law. Judge Rader previously served as the Chief Judge of the U.S. Court of Appeals for the Federal Circuit and has taught at leading law schools around the world, including Tsinghua University. 

The authors previously all served on the former U.S.-China IP Cooperation Dialogue, which had been sponsored by Renmin University and the U.S. Chamber of Commerce.  As with prior publications made by the authors in connection with the Dialogue, they have co-authored this letter out of a deep commitment to supporting the further development of China’s commercial legal system and supporting bilateral dialogue and exchanges between China and the United States.  The authors have no commercial interest in any matter discussed in this letter and are sending this letter on their own account.  No person or entity has directed or made a monetary contribution intended to fund the preparation or submission of this letter.  

Overview

A recent report published by the Chinese Intellectual Property Society (CIPS) (中国知识产权研究会）recommends a policy shift from China’s current semi-automatic injunction regime to a proportionality-based injunction regime, citing inspiration from U.S. and German practices in this regard. 

While the U.S. and German courts have been grappling with proportionality considerations in patent injunctions in recent years, they are in fact in the midst of reducing reliance on judicial discretion in favor of stronger injunction regimes. This letter describes a converging pattern against proportionality—courts continuing to uphold or reverting to a strong injunction regime while reserving narrow exceptions in cases of disproportionate hardship or harm to the public interest in health and safety.

Overview of Patent Injunctions in the United States and Germany

In 2006, policy considerations similar to those outlined in the CIPS report drove the U.S. Supreme Court to establish the four-factor injunction test in eBay v MercExchange. Twenty years have gone by since then, and we have seen disappointing results demonstrated in the United States. EBay has weakened the innovation investment incentive of the U.S. patent system, which is marked by notable decreases in the number of requests and grants of permanent injunctions in patent infringement cases. 

To address this growing concern, the U.S. Congress introduced bipartisan legislation in 2025—the Realizing Engineering, Science, and Technology Opportunities by Restoring Exclusive (RESTORE) Patent Rights Act. To replace the eBay four-factor proportionality test, the bill endeavors to revitalize innovative incentives and confer on patent holders a rebuttable presumption to injunctive relief if infringement of a valid patent has been found. U.S. policymakers value the contributions of innovators to technological progress and intend to restore innovators’ faith in the U.S. patent system by offering robust patent protection with a reliable and strong injunction regime. 

In 2021, Germany codified a “proportionality defense” in the German Patent Act that gives patent infringers an opportunity to challenge injunctive relief by proving disproportionate hardship in extreme circumstances. While this formally introduces proportionality considerations, in practice, German courts have continued to grant permanent injunctions in virtually every case in the past 5 years where a permanent injunction has been requested and patent infringement has been established. While German courts are now legally permitted to take proportionality into consideration in theory, they have adhered to a semi-automatic injunction regime in practice.

Current State of the U.S. Injunction Regime

In the United States, the eBay four-factor test has made it significantly harder for patent holders to obtain permanent injunctions, which has also discouraged patent holders from seeking permanent injunctions in the first place. According to one recent study[1], this has resulted in a relative decrease in requests for permanent injunctions by 87.4% for non-practicing entities (NPE) and 65.0% for operating companies, as well as a relative decrease in grants of permanent injunctions by 91.2% for NPEs and 66.7% for operating companies.  

This has contributed to the increasing prevalence of “efficient infringement” as infringement becomes economically appealing in the absence of an imminent threat of injunction.  Without meaningful deterrence, infringers champion the model of “infringe now, pay later” and choose the risk of litigation over license negotiations with patent holders. In particular, many large multinational companies benefit tremendously from efficient infringement because it is more economically prudent to infringe if the ultimate penalty is merely monetary recovery if and when infringement is found and enforced. 

Introducing proportionality into the injunction regime disproportionately prejudices individual inventors, universities, startups, and small or medium-sized enterprises because they lack the resources to litigate against large companies engaging in efficient infringement. This is a problem that policymakers in the United States have been trying to resolve for years. The RESTORE Patent Rights Act culminated years of efforts and was formulated to address the chilling effect of the eBay four-factor test on innovation investment. If passed, the patent holder will have a rebuttable presumption in favor of injunctive relief, while the infringer will have a right to rebut the presumption by proving disproportionate economic or public impact. Many policymakers and industry participants, including the authors of this letter, firmly believe in the power of a strong injunction regime, which will in turn strengthen the U.S. innovation system and incentivize investments in technological progress.

Proportionality is a slippery slope. Judicial discretion in determining proportionality in every patent infringement case would be a mistake. Rather, injunctive relief should be the default remedy absent extreme extenuating circumstances such as where granting an injunction could endanger national or public health and safety. In the United States, this narrow exception had been programmed into the patent law at the outset in 15 U.S.C. §283 (“courts . . . may grant injunctions in accordance with the principles of equity to prevent violation of any right”), predating the eBay four-factor test. In the 1934 landmark case of City of Milwaukee v. Activated Sludge, Inc. involving a wastewater treatment plant, the Seventh Circuit vacated a permanent injunction issued by the district court to ensure that the city would not shut down the infringing plant and dump its waste into Lake Michigan, citing endangerment to public safety. 

Similarly, China adopted Article 26 of Interpretation (II) of the Supreme People’s Court in 2016 which established a narrow exception to injunctive relief in the event of endangerment to national and public interest in health and safety.  China’s landmark case of Zhuhai Jingyi Glass Engineering Co., Ltd. v. Guangzhou Baiyun International Airport in 2004 demonstrates this principle in practice even prior to the adoption of Article 26.  In the same vein as City of Milwaukee, the court denied the request for permanent injunction, finding that dismantling the airport’s glass curtain wall would severely disrupt international transport even though it had infringed a utility model patent.  

Notably, while U.S. courts grant fewer permanent injunctions post-eBay, they counteract some of the negative impact of a weaker injunction regime with by far the strongest regime for monetary recovery. This allows patent holders to recoup some if not all of their losses and investments in their innovation, thereby preserving the essence of the innovation incentive system despite issuing fewer injunctions. As further discussed later in this letter, this would be challenging to replicate in China where courts have historically granted weak monetary recovery under a semi-automatic injunction regime. Given these differences, if Chinese courts significantly scale back on injunctions without a drastic shift in their monetary recovery policy and implementation, there would be virtually no incentive to respect Chinese patent rights.

Current State of the German Injunction Regime

As noted earlier, Germany adopted the proportionality defense into its permanent injunction framework, but courts have continued to grant permanent injunctions with little practical impact from the proportionality rule. Nevertheless, the proportionality defense now allows defendants to challenge injunctive relief by proving disproportionate hardship in extreme circumstances. If sufficient evidence is presented, German courts have the discretion to balance factors such as: the proportionality between the harm of a permanent injunction to the implementer and the harm of infringement to the patent holder; the impact of halting production of a complex product over a relatively insignificant patented component; the identity of patent holders as practicing or nonpracticing entities; the implementer’s intent to infringe; and harms to third-party interests such as consumers and patients or the public at large.  Similar to the eBay four-factor test, this introduces significant subjectivity in the application of judicial discretion in ways that could jeopardize Germany’s innovation incentive system in the same manner as eBay. 

However, German courts have not made the same mistake as U.S. courts following eBay. In practice, the proportionality defense has not resulted in meaningful difference in how German courts approach and grant permanent injunctions. In fact, according to an article from 2023[2], not a single patent injunction request has been denied by German courts in the two years following the codification of the proportionality defense. Since very few defendants are able to succeed under this high burden of proof, Germany effectively maintains a strong injunction regime while reserving a very narrow defense for defendants in extreme circumstances. This ensures that Germany will continue to offer robust protection to patent holders who will be incentivized to drive investment in risky and expensive innovation.

Impact on China’s Domestic Civil Law and IP Enforcement Environment

While the CIPS report draws on comparative experience in the United States and Germany, its recommendations should be evaluated in light of China’s domestic civil-law and IP enforcement environment, where injunctive relief plays a central deterrent function. Under Chinese law, orders to cease infringement (停止侵害) are treated as a standard form of civil liability rather than an extraordinary equitable remedy, and they operate as the primary mechanism for protecting exclusive rights across patents, trade secrets, unfair competition, and other civil causes of action.

As discussed earlier, this deterrent function is especially important in China’s patent system because monetary damages have historically been low and unevenly applied. In the absence of reliable compensatory damages, cessation of infringement has functioned as the principal means of preventing ongoing and repeat infringement and of encouraging good-faith licensing behavior. Weakening access to injunctive relief through proportionality-based limitations risks reducing the overall deterrent effect of patent enforcement unless accompanied by a fundamental recalibration of damages—something not contemplated by the CIPS report.

The proposed reform must also be assessed against the scale and structure of China’s administrative patent enforcement system. In 2024, administrative authorities handled substantially more patent infringement disputes than the civil courts, underscoring the continued importance of administrative cessation orders as an enforcement tool. If access to injunctive relief in civil litigation becomes more uncertain or discretionary, it is foreseeable that patent disputes will be further diverted from the civil courts to administrative channels, reshaping the balance between civil and administrative enforcement in ways not addressed by the CIPS proposal.

These concerns are amplified for foreign patent holders. Foreign firms have long made comparatively limited use of China’s civil patent litigation system, with notable exceptions largely confined to appeals from administrative validity decisions. At the same time, procedural rules governing foreign-related civil cases permit longer adjudication timelines, which may provide courts with greater opportunity to engage in discretionary proportionality analysis. In an environment of declining publication of judgments, increasing anonymization, and limited transparency of administrative outcomes, this added discretion may be disproportionately applied to foreign litigants, increasing uncertainty and enforcement risk relative to domestic parties and thereby raising increased concerns of differential treatment from Chinese patent holders.

Moreover, unlike some other areas of IP enforcement, China’s patent system lacks a criminal enforcement pathway capable of issuing binding orders to stop infringement, particularly against bad faith infringement. As a result, civil and administrative cessation orders carry heightened importance as the primary deterrent against patent infringement. 

Finally, experience in the United States following the Supreme Court’s decision in eBay v. MercExchange demonstrates that proportionality-based injunction regimes tend to disproportionately affect small businesses and individual inventors. This concern is especially salient in China, where a far larger cohort of small and medium-sized enterprises, universities, and individual inventors rely on utility model and design patents to protect incremental innovation. Introducing proportionality analysis into China’s patent injunction framework risks disadvantaging precisely those innovators who depend most heavily on predictable cessation remedies to protect their rights.

For these reasons, CIPS’s proposal to introduce proportionality-based limitations on patent injunctions should be avoided given China’s domestic reliance on injunctive relief as a core deterrent, the structure of its administrative enforcement system, and the characteristics of its innovation ecosystem. 

Conclusion

Both the U.S. RESTORE Patent Rights Act and the reformed German Patent Act seek to protect the exclusive rights of patent holders through the reinforcement of a strong injunction regime. The preservation of a strong patent system, including serious legal and economic consequences for infringing IP, is essential to incentivize investment in innovation and technological progress. Injunctive relief backstops the patent holder’s exclusive rights to its inventions. Weakening the injunctive regime will diminish the value of patents, as patent holders will lose their most effective remedy against infringers. The United States became a global innovation leader by having a very strong IP system. For China to continue on its innovation path, it will be best-served by further strengthening its IP system, and that requires avoiding backsliding into a proportionality-based framework and continuing to maintain strong injunctive rights. Drawing on the proportionality defense codified in Germany, Chinese courts should carefully consider the actual state of affairs in the U.S. and German patent injunction space before shifting away from China’s current strong injunction regime.

[1] https://www.coons.senate.gov/wp-content/uploads/media/doc/restore_act_one-pager.pdf
  Injunctive Relief in Patent Cases: the Impact of eBay by Kristina M.L. Acri Née Lybecker :: SSRN
[2] FOSS Patents: Not a single patent injunction has been denied or tailored by German courts based on two-year-old 'reform' statute, but plaintiffs need to adjust to new reality of preliminary invalidity opinions

Source:IPRdaily

By David J. Kappos, Mark A. Cohen, and Judge Randall R. Rader