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HiTrend Technology (Shanghai) Co., Ltd. V. Renergy Micro-Technologies (Shenzhen) Co., Ltd. And Shanghai Yachuang Texin Electronics Co., Ltd. (2014) HGMS (Z) ZZ No. 12, Shanghai High People’s Court

Cause of action: Dispute over infringement of protected integrated circuit layout design

Collegial panel members: Ding Wenlian | Ma Jianfeng | Xu Zhuobin

Keywords: exclusive rights in an integrated circuit layout design, originality, reproduction, reverse engineering, substantial similarity

Relevant legal provisions: Regulations on Protection of Layout Designs of Integrated Circuits, articles 2, 3(1), 4, 7, 23, 30 and 33(1)

Basic facts: In the case of a dispute over infringement of an exclusive right to an integrated circuit (IC) layout design between claimant HiTrend Technology (Shanghai) Co., Ltd. (hereinafter “HiTrend Company”) and respondents Renergy Micro-Technologies (Shenzhen) Co., Ltd. (hereinafter “Renergy Company”) and Shanghai Yachuang Texin Electronics Co., Ltd. (hereinafter “Yachuang Company”), HiTrend Company had completed its IC layout design “ATT7021AU” on March 1, 2008, and registered the design in the same year. The registered IC layout design drawing indicated 16 layers. The “Brief Description of Structure, Technology and Functions of ATT7021AU IC Layout Design”, included among the registration documents, recorded that the design:

(a) satisfied the state-of-the-art bestof- breed layout design requirements of function/performance-optimized area (single-phase energy measurement);

(b) was a chip layout design with digital–analogue hybrid high anti interference high electrostatic protection; and

(c) applied circuit design technology and layout technology, such as rational layout of the metal layer, diffusion layer and signal flow, to achieve sensitive signal noise shielding and isolation of big and small signal interference.

A review conducted by the Patent Re-examination Board of the State Intellectual Property Office (hereinafter the “Patent Re-examination Board”) did not find any defect under the Regulations on the Protection of Layout Designs of Integrated Circuits (hereinafter “the Regulations”) that would warrant revocation of HiTrend Company’s exclusive right in the layout design; hence, Renergy Company’s application to the Patent Re-examination Board for its revocation was dismissed.

On January 20, 2010, HiTrend Company made a notarized purchase of 100 pieces of IC chips (model no. RN8209G) from Yachuang Company’s business site. Yachuang Company confirmed that it sold those chips; Renergy Company confirmed that it manufactured and sold RN8209 and RN8209G chips. Renergy Company’s website showed that, as of September 2010, the sales volume of RN8209 exceeded 10 million pieces. Some VAT special invoices seized from Renergy Company indicated that a total of 1,120 RN8209G chips were sold, at a unit price largely ranging between RMB4.80 and RMB5.50, with one invoice bearing a unit price of about RMB2; a total of 6,610 pieces of the RN8209 chips were sold, with the unit price ranging between RMB4.20 and RMB4.80.

Shanghai No. 1 Intermediate People’s Court commissioned Beijing Zitu Intellectual Property Judicial Appraisal Center (hereinafter the “Zitu Appraisal Center”) to carry out a judicial appraisal, which concluded as follows.

(a) RN8209 and RN8209G are identical to the Original Feature No. 5 in HiTrend Company’s claim (a layout for connection of digital ground rack and analogue ground rack).

(b) RN8209 and RN8209G are identical to the layout of independent booster circuit in the second section of the Original Feature No. 7 in HiTrend Company’s claim (a layout for the analogue-to-digital conversion circuit).

(c) Based on existing evidences, the two foregoing items were ascertained to be original and exclusive, and not conventional.

In 2006, HiTrend Company signed employment contracts and confidentiality agreements with Chen Qiang and Zhao Cong. HiTrend Company hired Chen Qiang as its sales manager; Zhao Cong was to engage in IC design work in its research and development department. Later, Chen Qiang worked at Renergy Company as its general manager and Zhao Cong also went to work at Renergy Company. During proceedings, Zhao Cong stated that he had seen the layout design of HiTrend Company’s ATT7021AU IC chip while he was working at that company; Renergy Company did not reverse engineer HiTrend Company’s ATT7021AU IC chip.

HiTrend Company claimed that the acts of Renergy Company and Yachuang Company infringed on its exclusive rights in the IC layout design, and it filed a lawsuit with the court, asking that it order the two to cease the infringement, to make public apology and to compensate HiTrend Company RMB15 million for its economic losses.

Held: On December 24, 2013, the Shanghai No. 1 Intermediate People’s Court ruled that:

(a) Renergy Company should immediately cease the infringement on HiTrend Company’s exclusive right in the IC layout design ATT7021AU (Registration No. BS.08500145.7);

(b) Renergy Company should compensate HiTrend Company RMB3.2 million for its economic losses and reasonable expenses for stopping the infringement; and

(c) HiTrend Company’s remaining claims were to be rejected.

Both HiTrend Company and Renergy Company were dissatisfied with the decision, and each appealed to Shanghai High People’s Court. Shanghai High People’s Court dismissed the appeals on September 23, 2014, and affirmed the first-instance judgment.

Reasoning: Shanghai Higher Intermediate People’s Court held as follows.

 I. On whether the corresponding layout designs of RN8209 and RN8209G chips were the same as the “layout for connection of digital ground rack and analogue ground rack” and the “independent booster circuit layout” in HiTrend Company’s ATT7021AU IC layout design

Because there is limited scope for innovation in IC layout design, strict standards should be adopted when assessing whether two designs are identical or substantially similar in instances alleging infringement. The main features of the “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” of the RN8209 and RN8209G chips were found to correspond and be identical to the main features of HiTrend Company’s “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout”. Although the wiring in the two parties’ layout designs differed in terms of the M2 layer, the three-dimensional configuration of the combination between the wiring and the interconnected components was not substantially altered. As for the difference claimed by Renergy Company with respect to connection position, rack width, arrangement of specific layout, size and shape, and the difference in size of the MOS tube in M1, M2, M3 and PL layers, all of these were found to be minor and insignificant, and not to substantially change the three-dimensional configuration of the combination between the wiring and the interconnected components. The difference in the ST layer was caused by the parties using different processes. These differences were held, on appeal, not to be sufficient to change the first-instance judgment that the two layout designs were substantially similar. Therefore, in this case, even in accordance with the more stringent judgment criteria, the corresponding layout designs of Renergy Company’s RN8209 and RN8209G chips were found to display a substantial similarity to the “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” in HiTrend Company’s ATT7021AU IC layout design.

II. On whether there is originality in the “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” in HiTrend Company’s ATT7021AU IC layout design According to the provisions of article 4 of the Regulations, “originality” of a layout design means that the layout design is the result of the inventor’s own intellectual work and that, at the time of its creation, the layout design is not a standard design generally accepted by layout design inventors and integrated circuit manufacturers. Moreover, HiTrend Company should bear the burden of proof for the originality of the IC layout design for which it claims protection, but it was neither necessary nor possible for HiTrend Company to exhaust all relevant conventional layout designs to prove that its layout design was an unconventional design. As long as the evidence it provided and the explanations it offered could prove that the layout design for which it claimed protection was not a conventional design, HiTrend Company was to be deemed to have satisfied the preliminary burden of proof. In this context, Renergy Company argued that the relevant layout design was a conventional design and that it should be able to overturn HiTrend Company’s claim by providing only one identical or substantially similar conventional layout design. In this case, to substantiate its claim that its “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” in the ATT7021AU IC layout design were original, HiTrend Company had already provided the relevant Registration Certificate for IC Layout Design and the Patent Re-examination Board’s conclusion that there was no defect that warranted revocation of the registration, as well as the conclusions of the Zitu Appraisal Center and other such evidence. These actions were found to be sufficient to meet the requirements of preliminary burden of proof. In this context, the evidence provided by Renergy Company, or the circuit schematic diagram, or the layout design in which the feature points differed from HiTrend Company’s layout design were all insufficient to prove that its “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” in the ATT7021AU IC layout design were conventional. It could therefore be affirmed that HiTrend Company’s “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” had originality.

III. On whether Renergy Company’s conduct in producing and selling RN8209 and RN8209G chips violated HiTrend Company’s exclusive rights in the ATT7021AU IC layout design According to article 30 of the Regulations, reproduction of all or any of the original parts of a protected layout design constitutes an infringement. It is apparent that any original part of the protected layout design is protected under law, regardless of its size or role in the overall layout design. In this case, there were conventional designs readily available for “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout”. Renergy Company had the choice of either adopting these conventional designs or independently developing different layout designs with originality. Renergy Company did not take either approach, but instead directly copied the “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” in HiTrend Company’s ATT7021AU IC layout design, so as to manufacture and sell the RN8209 and RN8209G chips involved in this case. Such practice therefore straightforwardly constituted infringement.

Chips that achieve the same or similar functions will inevitably have similar circuit work mechanisms and these do not meet the criteria granting the designer exclusive rights as stipulated in the Regulations. The law therefore does not prohibit the act of reverse engineering other designers’ chips by photographing their layout design and analyzing the circuit work mechanisms. However, the law does not allow the direct copying of other people’s layout designs through reverse engineering, because such copying will massively reduce the time and costs invested by the imitators and hence severely weaken the competitive advantage of the business that created the original design, which will ultimately lower the incentives for innovation in the entire IC industry. In this case, Renergy Company’s motivation in partially copying HiTrend Company’s ATT7021AU IC layout design was neither for a personal purpose nor for the purpose of evaluation, analysis, research, teaching and so on, but for developing a new IC for commercial exploitation. Renergy Company admitted that it did not obtain HiTrend Company’s ATT7021AU IC layout design through reverse engineering; instead, it directly copied the original “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” in HiTrend Company’s ATT7021AU IC layout design, using it to manufacture and sell the RN8209 and RN8209G chips involved in this case. Regardless of whether Renergy Company’s RN8209 and RN8209G chip layout designs were original, therefore, article 23 of the Regulations should not apply to any of its practices.

In summary, Renergy Company admitted that it had accessed HiTrend Company’s ATT7021AU IC layout design. Without HiTrend Company’s permission, Renergy Company had incorporated the original “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” of the ATT7021AU IC layout design into the RN8209 and RN8209G chips that it produced and sold. Such practices violated HiTrend Company’s exclusive right to the ATT7021AU IC layout design and Renergy Company was therefore to bear the relevant civil liabilities.

IV. On whether the amount of compensation decided by the court of first instance was reasonable

Because Renergy Company refused to provide its financial information, it was apt to use the information on the sale of 10 million pieces, as displayed on its website, as the basis for calculating the amount of compensation due in this case. In this case, neither party had submitted evidence to prove the profit from the sales of the alleged infringing products; the appraisal report clarified that the other original parts claimed by HiTrend Company were not identical with or substantially similar to those of Renergy Company, so there was no basis on which HiTrend Company could claim compensation on the full profits of Renergy Company on the ground that there was similarity in other modules. The “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout” did not play a core and important role in the allegedly infringing chip, and they took up only a very small area. By directly copying HiTrend Company’s “layout for connection of digital ground rack and analogue ground rack” and “independent booster circuit layout”, Renergy Company saved on its investment in research and development, shortened its chip development time and, accordingly, obtained a competitive advantage in the market. The amount of compensation therefore could not be determined solely on the basis of the proportion of the two layouts in the whole chip. In summary, it was not appropriate for Shanghai No. 1 Intermediate People’s Court to rule, based on the facts of the case, that Renergy Company compensate HiTrend Company RMB3.2 million for its economic losses and reasonable expenses.