Judgment on infringement of exclusive right of integrated circuit layout design

——HiTrend Technology (Shanghai) Co., Ltd. Vs. Renergy Micro-Technologies (Shenzhen) Co., Ltd. and Shanghai Yachuang Texin Electronics Co., Ltd.: Dispute over Infringement of Exclusive Right of Integrated Circuit Layout Design

[Judicial Highlight]

Due to limited space for innovation in layout design of integrated circuits, stricter standards should be adopted to ascertain the same or to ascertain substantial similarity of two layout designs in the judgment on layout design infringement.

The plaintiff shall bear the burden of proof for the layout design of the integrated circuit that it claims for protection. As long as the evidence provided by the plaintiff and the explanations made can prove that the layout design that it claims for protection is not the conventional design, it will be deemed that the plaintiff has completed the preliminary burden of proof. Under this circumstance, if the defendant claims that the relevant layout design was the conventional design, it should provide evidence for the same.

Any original part of the protected layout design shall be protected by law, regardless of its size or role in the overall layout design. The act of reproducing all or any of the original parts of the protected layout design constitutes infringement.

The law does not prohibit the act of conducting reverse engineering by photographing the layout design of other people's chips and analyzing the principle behind the circuit design. However, the law does not allow direct copying of other people's layout designs based on reverse engineering.

[Case Number]

Shanghai Higher People's Court (2014) HGMS (Z) ZZ No. 12

[Cause of Action]

Dispute over infringement of exclusive rights of integrated circuit layout design

[Keywords]

Exclusive right of integrated circuits (IC) layout design, reproduction, substantial similarity, originality, reverse engineering, defense

[Relevant Laws]

Article 2, Clause 1 of Article 3, Article 4, Article 7, Article 30 and Clause 1 of Article 33 of Regulations on Protection of Integrated Circuit Layout Design

[Basic Facts]

In the case of dispute over infringement of exclusive right of integrated circuit layout design among the appellant (plaintiff in the court of first instance, HiTrend Technology (Shanghai) Co., Ltd., referred to as HiTrend Company), the respondent (the defendant in the court of first instance, Renergy Micro-Technologies(Shenzhen) Co., Ltd., referred to as Renergy Company) and the defendant in court of first instance (Shanghai Yachuang Texin Electronics Co., Ltd., referred to as Yachuang Company), and the case is referred to as dispute over infringement of exclusive right of integrated circuits layout design of HiTrend Company. HiTrend Company completed its IC layout design titled “ATT7021AU” on March 1^st, 2008 and registered the layout design in the same year. The IC layout design drawing indicates 16 layers. The “Brief Description on Structure, Technology and Function of ATT7021AU IC Layout Design” in the registration documents record that: 1. Satisfies the layout design requirement, wherein the function/performance of the same chip (single-phase energy metering) in the industry can be optimized; 2. Digital-analog hybrid high anti-interference/high-electrostatic protection chip layout design; 3. Use circuit design technology and layout technology, such as reasonable layout of metal layer, diffusion layer and signal flow, to achieve sensitive signal noise shielding and isolation of large and small signal interference.

The review by the Patent Reexamination Board of the State Intellectual Property Office did not find any defect in exclusive right of the layout design of HiTrend Company, due to which it can be revoked according to Regulations on the Protection of Layout Design of Integrated Circuits (the Regulations); hence, the revocation proposed by Renergy Company was terminated.  

On January 20^th, 2010, HiTrend Company purchased 100 pieces of integrated circuit chips at Yachuang Company’s operation site, and notarized the purchase. The model number shown on these chips is RN8209G. Yachuang Company confirmed that it sold this chip and Renergy Company confirmed that it manufactured and sold RN8209 and RN8209Gchips. The website of Renergy Company shows: In September 2010, the sales volume of RN8209 exceeded 10 million pieces. Some seized VAT special invoices of Renergy Company show that a total of 1,120 RN8209Gchips were sold, and the unit price was mostly between RMB4.80 and RMB5.50. One invoice indicated the unit price as about RMB2; a total of 6,610 pieces of RN8209 chips were sold, with the unit price between RMB4.20 and RMB4.80.

Beijing Zitu Intellectual Property Judicial Appraisal Center (referred to as Zitu Appraisal Center) was commissioned by Shanghai No. 1 Intermediate People's Court for carrying out judicial appraisal. The appraisal conclusions are shown as follows: 1. RN8209 and RN8209Gare the same as the Original Creation 5 (layout for connection of digital ground rack and analog ground rack) claimed by the plaintiff; 2. RN8209 and RN8209Gare the same with respect to the layout of independent booster circuit in the second section in Original Creation 7 (layout of the analog-to-digital conversion circuit) claimed by the plaintiff; 3. Based on existing evidence, Item 1 and Item 2 above are ascertained to be original and exclusive, and not conventional.

In 2006, HiTrend Company signed labor and confidentiality contracts with Chen Qiang and Zhao Cong. HiTrend Company hired Chen Qiang as the sales manager and Zhao Wei to engage in IC design work in the R&D department. Later on, Chen Qiang worked at Renergy Company as its General Manager and Zhao Wei also worked at Renergy Company. During the trial, Zhao Wei stated that he had seen the layout design of ATT7021AU IC chip of HiTrend Company while he was at HiTrend Company; Renergy Company did not reverse engineer HiTrend Company’s ATT7021AU IC chip.

The plaintiff held that the acts of the two defendants infringed on the exclusive right of IC layout design, and thus filed a lawsuit with the court, requiring the two defendants to cease the infringement, publicly apologize, and compensate RMB15 million for its economic losses.

[Judgment Results]

On December 24^th, 2013, the court of first instance, Shanghai No. 1 Intermediate People's Court ruled that Renergy Company should immediately cease the infringement of the exclusive right of ATT7021AU (registration no. of BS.08500145.7) IC layout design enjoyed by HiTrend Company; Renergy Company should compensate RMB3.2 million to HiTrend Company for its economic losses and reasonable expenses for stopping the infringement; the remaining litigation requests of HiTrend Company were rejected. Both, HiTrend Company [A1] and Renergy Company refused to accept the judgment of the court of first instance and appealed to Shanghai Higher People's Court. Shanghai Higher People's Court dismissed the appeal on September 23^rd, 2014 and upheld the original judgment.

[Judicial Opinions]

Shanghai Intermediate People’s Court held that:

I. Are the corresponding layout designs of RN8209 and RN8209Gchips involved in the case are the same as the “layout for connection of digital ground rack and analog ground rack” and the “independent booster circuit layout” in ATT7021AU IC layout design of HiTrend Company?

Due to limited space for innovation in layout design of integrated circuits, stricter standards should be adopted for the ascertainment of the same or substantial similarity of two layout designs in the ascertainment of layout design infringement. The main features of “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” of RN8209 and RN8209Gchips are corresponding and identical to the main features of “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” of HiTrend Company. Although the wiring in layout design of the parties differed when considering the M2 layer, the three-dimensional configuration of the combination between wiring and the interconnected components, had not changed substantially. 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 MOS tube in M1, M2, M3 and PL layers, all of these are subtle and minor, and do not substantially change the three-dimensional configuration of the combination between the wiring and the interconnected components. Difference in ST layer is caused by the parties using different processes. The above differences are not sufficient to change the judgment that the layout design of the two is substantially similar. Therefore, in this case, even in accordance with the more stringent judgement criteria, the corresponding layout design of RN8209 and RN8209Gchips of Renergy Company constitute a substantial similarity with the “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” in the ATT7021AU IC layout design of HiTrend Company.   

II. Is the “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” in ATT7021AU IC layout design of HiTrend Company original? 

According to the provisions of Article 4 of the Regulations, originality of layout design means that the layout design is the result of the inventor's own intellectual work, and 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 integrated circuit layout design that it claims for protection, but it is not necessary or possible for HiTrend Company to utilize all relevant conventional layout designs to prove that its layout design is an unconventional design. As long as the evidence provided and the explanations made by HiTrend Company can prove that the layout design it claimed for protection is not a conventional design, it should be considered that HiTrend Company has completed the preliminary burden of proof. Under this circumstance, Renergy Company claimed that the relevant layout design is a routine design, and Renergy Company can overthrow the non-conventional design claim of HiTrend Company, by providing a similar or substantially similar conventional layout design. In this case, with respect to the claim by HiTrend Company, that is, the “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” in ATT7021AU IC layout design is original, HiTrend Company has already provided the Registration Certificate for IC Layout Design, and the conclusion of the Review Board that there is no defect due to which the registration should be revoked, as well as the appraisal conclusion and other evidences, are sufficient to act as the preliminary burden of proof. Under this circumstance, the evidence provided by Renergy Company, or the circuit schematic diagram, or the layout design where the feature points differ from layout design of HiTrend Company, are insufficient to prove that “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” in ATT7021AU IC layout design are conventional. Therefore, it can be ascertained that the “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” of HiTrend Company are original.

III. Does the behavior of Renergy in producing and selling RN8209 and RN8209Gchips violate the exclusive rights of ATT7021AU IC layout design enjoyed by HiTrend Company?

According to Article 30 of the Regulations, the reproduction of all or any of the original parts of the protected layout design constitutes an infringement. It can be seen that any original part of the protected layout design is protected by law, regardless of its size or role in the overall layout design. There are conventional designs available for “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” in this case, and Renergy Company can use these conventional designs completely, or develop different layout designs on its own with originality. However, Renergy Company did not take the above approach, but directly copied the “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” in ATT7021AU IC layout design of HiTrend Company, to manufacture and sell RN8209 and RN8209Gchips. Its behavior has already constituted infringement.

Chips that achieve the same or similar functions must have similarities in circuit principles, and the circuit principle does not belong to the part as stipulated in the Regulations that can be granted with exclusive rights. Therefore, the law does not prohibit the act of conducting reverse engineering by photographing the layout design of other people's chips and analyzing the circuit principle. However, the law does not allow the direct copying of other people's layout designs on the basis of reverse engineering, as it will greatly reduce the investment by competitors with respect to time and cost, thus greatly weakening the competitive advantage of the enterprise that created the original design, and ultimately reduce the enthusiasm for innovation in the entire integrated circuit industry. In this case, the reason why Renergy Company partially copied the HiTrend Company’s ATT7021AU IC layout design was neither for personal purpose, nor for the purpose of evaluation, analysis, research, teaching, etc., but for developing a new IC for commercial use. Renergy Company recognized that it did not obtain HiTrend Company’s ATT7021AU IC layout design through reverse engineering; Renergy Company directly copied the original “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” in HiTrend Company’s ATT7021AU IC layout design, to manufacture and sell RN8209 and RN8209Gchips. Therefore, regardless of whether or not Renergy Company’s RN8209 and RN8209Gchip layout design are original, its behavior does not apply to the provisions of Article 23 of the Regulations.

In summary, Renergy Company recognized that it accessed HighTrend Company’s ATT7021AU IC layout design. Now, Renergy Company, without the permission of HiTrend Company, incorporated the original “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” of ATT7021AU IC layout design into RN8209 and RN8209Gchips that it produced and sold. Its behavior violated the exclusive right of HiTrend Company in ATT7021AU IC layout design and should thus bear the corresponding civil liability.

IV. Is the amount of compensation determined by the court of first instance reasonable?

As Renergy Company refused to provide its financial information, the information of sales of 10 million pieces displayed on its website, could be used as the basis for calculating the amount of compensation in this case. In this case, neither party submitted evidence to prove the profit from the sales of the alleged infringing product; the appraisal report clarifies that the remaining original parts claimed by HiTrend Company are not identical or substantially similar with that of Renergy Company, so there is absence of evidence on the part of HiTrend Company to claim compensation on the full profits of Renergy Company on the ground that there is similarity in other modules. The “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout” don't play a core and important role in the alleged infringing chip, and the layout occupies a really small area. By directly copying HiTrend Company’s “layout for connection of digital ground rack and analog ground rack” and “independent booster circuit layout”, Renergy Company saved on investment in research and development, shortened chip development time, and accordingly, obtained a competitive advantage in the market. Therefore, the amount of compensation cannot be determined completely in line with the ratio of the two layouts in the chip. In summary, it was not inappropriate for Shanghai No. 1 Intermediate People's Court to rule that Renergy Company compensate RMB3.2 million to HiTrend Company for economic losses, including reasonable expenses according to the actual situation of the case.