This is a typical civil patent infringement case published by the Supreme People’s Court Intellectual Property Tribunal in 2025, arising from mechanical equipment patent infringement in East China’s manufacturing cluster The defendant adopted a sophisticated risk‑isolation strategy widely used in domestic manufacturing sectors: setting up multiple independent sales‑oriented shell companies, while the actual manufacturing factory remained legally unconnected on paper. The real‑world controller deliberately separated production, order receiving, invoicing and after‑sales services across different corporate entities, to avoid being identified as a unified infringer. All corporate names involved are anonymized for privacy protection.
The patent right‑holder held a valid utility‑model patent for core mechanical assembly components, widely applied in automated processing equipment. After discovering large‑scale infringing products circulating on domestic B2B platforms and industry exhibitions, the patent owner collected 公证‑preserved purchase evidence against three different trading entities. Surface‑level industrial‑commerce information showed three separate limited‑liability companies, each with different legal representatives, registered addresses and business scopes. One entity was displayed as the online‑platform store operator, the second issued sales invoices, and the third signed formal sales contracts with end‑customers. None of these three shell companies held manufacturing workshops, production equipment or technical research‑and‑development capabilities. All shell entities maintained low registered capital and thin liquid assets.
The initial litigation attempt encountered major obstacles. If the patentee only sued these three nominal shell companies, even obtaining favourable judgements would yield limited compensation. Once facing large‑sum compensation rulings, the shell entities could apply for bankruptcy liquidation, leaving almost no enforceable property. The real manufacturing factory, which produced all infringing goods, did not appear on sales contracts, e‑commerce webpages or invoice records. On public documents, the factory operated as an independent legal entity seemingly unrelated to sales activities. The actual controller’s name was not listed as shareholder or legal representative for any of the sales‑focused shell firms; he used relatives and former employees as nominal shareholders and legal representatives.
The plaintiff applied to the people’s court for evidence preservation and order for production of financial books, sales records, internal chat logs and supply‑chain documents. Under Chinese civil procedure rules, when material evidence is controlled by opposing parties, courts can compel submission of internal corporate documents. Judicial accounting and electronic forensics exposed strong factual connections among these seemingly disconnected enterprises. Bank flow records demonstrated that payments from end‑customers flowing into shell‑company accounts would quickly be transferred to the manufacturing factory’s corporate account, after deducting small‑amount handling fees. Internal WeChat and enterprise‑instant‑message records showed unified pricing strategies, unified product technical guidance and unified after‑sales instruction issued by the same group of core management personnel. Production‑order worksheets proved that sales orders received by any shell company would be directly forwarded to the manufacturing factory for production scheduling. Nominal shareholders and legal representatives testified that they only provided identity documents for registration and never participated in daily operation or made business decisions.
After comprehensive evidence hearing, the court delivered its first‑instance judgment. The court explicitly pointed out that these three sales‑oriented shell companies and the manufacturing factory were under unified actual control, constituting functional division of labour for one integrated infringing operation. Each corporate entity only undertook partial segments including online display, contract signing, invoicing and physical production. The separate corporate registrations were merely structural arrangements adopted for the purpose of evading patent‑infringement liabilities. Pursuant to the Company Law of the People’s Republic of China regarding disregard of corporate personality, the court pierced the corporate‑veil formal separation. The manufacturing factory, three shell sales companies and the hidden natural‑person actual controller were ruled to bear joint and several liability for stopping infringement and paying compensation totalling 2.16 million RMB. The full compensation covered economic losses calculated by infringer’s profit plus reasonable rights‑protection expenses including attorney fees, notarization fees and product‑appraisal costs. The defendant group appealed, and the Supreme People’s Court Intellectual Property Tribunal upheld the original judgement in the second‑instance proceeding
This case delivers critical practical guidance for patent owners handling Chinese manufacturing‑sector infringement. Relying merely on information printed on product packaging, web pages or sales invoices cannot fully identify all responsible parties. When you encounter multiple seemingly‑unrelated corporations participating in one continuous infringement chain, you should file applications for court‑ordered evidence production targeting capital settlement records, internal operation documents and supply‑chain order records. Plaintiffs ought to add suspected actual‑controlling factories and natural‑person controllers as co‑defendants, instead of only suing visible sales‑subject shell companies. Applying for property preservation at an early procedural stage effectively prevents defendants from transferring funds or dissolving shell companies to evade enforcement.
Manufacturing‑sector enterprises should also draw compliance lessons. Simply splitting business links into multiple independently‑registered legal persons cannot isolate patent‑infringement civil liabilities. Chinese courts will comprehensively evaluate factors including capital correlation, personnel mixing, business‑decision unification and supply‑chain connections, to judge whether multiple companies are substantially controlled by the same party for illegal purposes. Formal corporate separation will not shield infringers from joint‑and‑several compensation obligations.
1. Supreme People’s Court Intellectual Property Tribunal official case release page: https://ipc.court.gov.cn/zh‑cn/index.html
2. China Judgements Online patent infringement typical judgement database: https://wenshu.court.gov.cn/
3. CNIPA official website patent protection practical guidance: https://www.cnipa.gov.cn/col/col1083/index.html
4. Supreme People’s Procuratorate intellectual property typical case bulletin: https://www.spp.gov.cn/zdgz/zsjz/
