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I. Preface Unmanned aerial vehicles (UAV, commonly known as drone) is a new technology and market field which has been welcomed and concerned by the society in recent years. In the past, this has been only a small number of model aircraft players engaged in remote control flight entertainment hobby. With the development of related technology in recent years, unmanned aerial vehicles (UAVs) with similar helicopter functions have become widely used commercial and entertainment tools. Whether it is a variety of aerial photography or express delivery, even disaster relief work can be widely used, statistics also show that the growth of the relevant market is quite amazing. Experience shows that when an emerging technology market appears and enters into a rapid growth period, it is almost inevitable that participants in this market will fight fiercely for competition. One of the common phenomena is to use patent as a weapon to try to kill competitors. The recent "death to death struggle" between Dajiang and daotong in the United States has witnessed such a development mode once again, and has attracted great attention from all walks of life. No matter what the future prospects are, the current events should have provided many lessons and references for the future development of science and technology industry. 2. Market conditions and Prospects Statistics show that by 2019, the global market size of commercial unmanned aerial vehicles is about US $4.14 billion, which is expected to grow at a compound annual growth rate of 19.9%, CAGP) will reach US $7.13 billion in 2022; as for the general consumer (or entertainment) UAV market, the scale will be about US $2.09 billion in 2018, and it is expected to reach US $4.05 billion by 2022, which is equivalent to an annual compound growth rate of 18.0%. However, due to the impact of the new coronavirus epidemic, the use of commercial use may fall to US $3.64 billion this year, equivalent to a compound annual decline of about - 12.0%. However, it is expected to recover to US $6.15 billion in 2023, or return to the annual compound growth of about 19.09%. It is difficult to determine the consumption use at present, because the relevant statistics are before the outbreak of the epidemic And there are many variables, such as the restrictions of local governments on flight range, the requirements of local people for privacy protection and so on. [1] The survey shows that the commercial demand is mainly reflected in the field of logistics, especially the transportation of online shopping, and the epidemic situation leads to greater demand. The demand for consumption or entertainment mainly comes from photography enthusiasts, especially those who love aerial photography. In any case, we can see that this market is still in the stage of rapid growth, even in the global economy seriously affected by the epidemic situation, it still shows strong growth strength (see figure below). ▲US commercial UAV market size (source: Grand View Research) At present, the largest unmanned aerial vehicle market in the world is in the United States. Among them, Shenzhen Dajiang Technology Co., Ltd. (hereinafter referred to as DJI) is the first manufacturer to develop this field (since 2006), and its market share in the United States in 2019 is 76.8%. None of the other top 10 manufacturers accounted for more than 4% (see chart below). ▲Top 10 market share of unmanned aerial vehicles (source: drone industry insights) 3.Disputes between the parties The company had patent disputes with DJI before it became an independent company, including a lawsuit dJI filed with the Shenzhen Intermediate People's Court in 2015 accusing dJI and its then-parent company, Tao Tong Technology, of infringing dJI's design patents, but the lawsuit was rejected by the Shenzhen court.[3] Litigation in the United States is nothing more than an extension of this series of disputes, and of course involves the fight for and protection of the "primary market" in the United States. Dji first filed a lawsuit in the US district Court in Delaware in August 2016, claiming that Daotong's X-Star infringed dJI's Phantom unmanned aerial vehicle on its design and three invention patents.In May 2017, DJI sued Daotong in the U.S. District Court for infringement of two of its invention patents in the Western District Court of Washington state (Seattle), but the district court has since ordered the case to be referred to the U.S. District Court of Delaware for trial.[4] In response to the lawsuit, Dow Jones bought the relevant patents as a "strategic reserve".[5] when both sides are still in the federal district court battle, the general aspects and on August 30, 2018 to the International Trade Commission (U.S. International Trade themselves, referred to as the USITC) filed a so-called "337 investigation" (because it is based on the United States in 1930, article 337 of the tariff act of the administrative proceedings) as a counter, is accused of what they buy large xinjiang this two invention patents and another independent research and development of invention patent infringement.[6] The three patents are obstacle avoidance and automatic speed regulation device (U.S. Patent No. 7,979,174), spiral blade fitting device (Patent No. 9,260,184, referred to as' 184), and removable reconfigurable box battery holder (Patent No. 10,044,013, referred to as' 013, developed by Daodong itself). Chief Administrative Law Judge Charles E. Bullock, the division's Chief Administrative Judge, is leading the case.[7] Dow Was represented by Steptoe & Johnson LLP, and the principal was represented by the partner Timothy C. Bickham, etc. Dji was represented by the partner Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. The principal was represented by the partner Smith R. Brittingham and Yin Qing Yu, etc. The FEDERAL International Trade Commission officially opened an investigation into the case on September 26, 2018.[8] DJI has opened up another battleground by filing a "post-grant review" of the three patents involved with the Patent Trial and Appeal Board (PTAB) of the US Patent and Trademark Office.Judge Block announced the "Initial determination" of this case on March 2, 2020, holding that the uav imported from overseas by DJI into the U.S. market constitutes infringement on the patent of spiral blade Mosaic device (patent 184), while the other two patents do not constitute infringement.Judge Block also recommended to the committee that a limited injunction be issued against certain DJI products being imported into the United States, or that those already in the U.S. market should be removed immediately.His suggestion, also to the committee to ensure that the commission ruled out making (exclusionary order, refers to rule out any involvement of infringing products imported into the United States market) and injunction (cease and desist order, means to have imported to infringing content shall be immediately removed from the shelves in the United States) to get effective implementation, in the President's review of the case during the 60 days waiting for the answer to the big xinjiang to impose a 9.9% deposit.If the FTC accepts Judge Block's recommendation, dJI's best-selling lines, such as the Mavic and Phantom, could face the fate of having to pull out of the U.S. market.But dJI's latest "Royal" Mini aerial photography plane is not affected because it USES a different blade Mosaic design.And since DJI had already stopped selling the Royal Air and Dawn drones in the United States, they would not be affected. However, by the middle of May 2020, the whole case has turned round again, and it has gone down sharply. On May 13, 2020, the US Patent Reexamination Board first ruled that the '174 patent was not patentable, and the whole patent was revoked; [9] the next day, based on factors such as non progressiveness and uncertain scope, the U.S. Patent Reexamination Board ruled that the' 174 patent was not patentable, and the whole '013 patent was invalid. On May 21, it was announced that eight of the '184' patents were not patentable (claims 1, 2, 5-9, and claim 11) because they did not meet the requirements of novelty and non obvious (progressive). [10] As for the '013 patent, it has been ruled by judge block that it does not constitute infringement, so it has no impact on the final result of the whole case. In the final analysis, there are only claims 3 and 4 of the '184 patent claims that can pose a threat to Dajiang products. Even so, Dajiang filed an administrative lawsuit for invalidation of these two rights to the Patent Reexamination Board on March 19, 2019, and a trial hearing has been tentatively held at the end of August. 4. Possible follow-up development According to the laws and judicial precedents, the FTC should transfer to the White House after making the "preliminary determination", and the president will make the final administrative punishment. The president has 60 days to decide whether to overturn the "preliminary determination" after receiving it. In the vast majority of cases, the president will not take any action, that is to maintain the original "preliminary determination". As long as the president does not veto it, the "preliminary determination" will become the "final determination" from the 61st day. At this time, the party who has been adversely identified can appeal to the Federal Circuit Court of appeals against the unfavorable division within 60 days from the publication of the "final determination" by the Federal International Trade Commission. [11] At the same time, the appellant usually requests the court to grant a temporary stay, at least during the period of appeal, to stop the enforcement of the exclusion or injunction order of the Federal International Trade Commission. As long as the proof is reasonable, the court will allow it. In addition, after issuing the "final determination" and before the parties appeal, the FTC may review and amend or even cancel the previous orders (exclusion or injunction) either voluntarily or on the basis of any party's claim. [12] The most common situation is due to "change of circumstances", for example, the patent in dispute is revoked or ruled invalid by the patent and Trademark Office, which is the case in this case. The opposite party may raise objection within 10 days after receiving the service. It usually takes more than a year to two years for the court to make an appeal to the court. As for the decision of the Patent Reexamination Board, the party who is not satisfied with the decision may, within 30 days after the board makes the final decision, request the reexamination board for a rehearing, or appeal to the Federal Circuit of the court of Appeals for the federal circuit within 63 days from the date of the final decision. [13] These two procedures can be carried out at the same time and do not conflict with each other. It can be expected that Dajiang will apply to the Federal International Trade Commission for substantial amendment or direct cancellation of the previous orders in the near future. On the other hand, it is also prepared to appeal to the court in case there are still decisions against it. On the other hand, daotong will apply to the Patent Reexamination Board for retrial, appeal to the court or both. Therefore, in any case, all proceedings in this case have not been completed, and Dajiang's sales in the United States will not be affected by these legal proceedings. As for the sales of daotong in the United States, because the court litigation is still in progress, it involves patents different from the "337 investigation procedure". Unless the court gives an interim injunction, it will not be affected for the time being. So it can be said that both sides have temporarily returned to the origin. On the other hand, the development so far has also provided an opportunity for both parties to carry out license negotiation, and there is no need to let these lawsuits continue to tangle. It is not only time-consuming, but also will more or less affect their subsequent R & D, supply and other aspects of demand. What's more, we should pay attention to the general climate affecting the whole market: the trade friction between China and the United States and the deteriorating bilateral relations in recent years have made the trump administration and many members of Congress adopt an increasingly hostile attitude towards Chinese manufacturers. That's the only thing we've seen in the last 40 years. Some of the development in the pipeline, if it takes shape, will have a serious impact on all Chinese manufacturers, and we must pay high attention to it (see the following for details). 5. Experience and lessons (substitute for conclusion) At least the following observations can be used for reference in the course of the two Chinese enterprises' use of patent rights as weapons to fight in the United States Attack the West with a bluff Science and technology have no national boundaries, and patents have regions. Behind "innovation", there is often a cruel and tragic reality: the patent war in shopping malls is bound to be at all costs, to see blood, step by step. Although the "337 investigation procedure" in the United States is ostensibly designed to protect the intellectual property rights and corresponding economic interests of the United States, it is used to block the infringing goods imported from abroad, but it has never restricted the nationality of the right owner. As long as the legal requirements (especially the requirements of "domestic enterprises") are met, anyone (usually a corporate enterprise) can sue in the Federal International Trade Commission. [14] As the United States is still the world's most important and largest technology and product market, it has strong protection for related intellectual property rights, and there are quite stable systems and precedents to follow. Therefore, it is not necessary to see two Chinese enterprises choose the United States as the battlefield and try to use the sharp edge of the US patent protection system to kill each other People are surprised, even inevitable. From a certain point of view, this is also a "gratifying" phenomenon: it means that Chinese manufacturers not only have a high sense of rights protection and precise strategic and tactical layout ability, but also have sufficient human and material resources to launch and carry out such a large-scale consumption war. In particular, it is no longer just the role of the defendant, or is completely passive, but can flexibly use the litigation procedure to strive for the maximum rights and interests for itself. In addition, we can also see that the defense lawyers of both sides in this lawsuit are Chinese, and they are the first generation of Chinese Americans. This also shows that, after years of refining, even new immigrants, who are not native speakers of English, can squeeze themselves into the top legal firms in the United States through their own continuous efforts, and even become the principal counsel of such highly targeted and extremely complex litigation. This is a very commendable and admirable achievement! To save Zhao from Wei Wei The "337 investigation procedure" is a huge and costly procedure, and it is extremely fast. It usually takes no more than 15 months from the beginning of the prosecution to close the case. This is tantamount to the fact that a tort lawsuit which usually takes three to four years in court must be completed in less than half of the time. Because the litigation in the United States adopts the so-called adversarial procedure The discovery of all relevant evidence is "carried out by the parties", and the trial court or the court is basically not involved. Therefore, lawyers of both sides will try to find all kinds of available evidence through discovery procedure, including all e-mails and various documents collected from the other party's computer. Take the case of Broadcom suing Qualcomm with the "337 investigation procedure" in 2007 as an example. The then Attorney General of Qualcomm later recalled that they had collected about 3TB of electronic documents from the other party, but they had only three weeks to read them all and select the relevant documents as the evidence of defense. What is the concept? If you print out all the 3TB data, you have to rent a warehouse as big as two and a half basketball courts to stack them! So a lawsuit is bound to exhaust all the participants. For litigants, it also means extremely high attorney and litigation costs (at least US $6-8 million). In the face of such a thunderous blitz, if the defendant does not have the ability and strategy of rapid response, it is easy to fall into a passive position everywhere, and it will seriously affect not only itself, but also the whole upstream and downstream manufacturers. In fact, this is what the plaintiff (obligee) wants. Even if the lawsuit is still in progress, it should at least cause a serious blow to the whole supply chain, investors and internal morale of the defendant, and completely disrupt the pace of the defendant. Judging from the performance of the two sides this time, it is obvious that both sides are very clear about the situation they are facing, and they have sufficient knowledge and practical experience in the international game rules, especially the litigation procedures of the United States, and know how to engage in attack and defense. Therefore, from the very beginning, they all clearly knew how to attack, defend, deploy and defend. As a defendant, daotong not only filed counterclaim in court proceedings, but also opened up a new battlefield. Through the "337 investigation procedure", daotong countercharged Dajiang and constituted patent infringement. When Dajiang became the defendant, he went to the Patent Reexamination Board to open up a third battlefield, trying to get paid. It shows that both sides can react quickly in the first time and adopt the strategy of "encircling Wei to save Zhao and attacking it must be saved". It should be noted that most patent applications have more or less weaknesses, especially in the mechanical field of unmanned aerial vehicles (UAVs), various existing patents stack together to form a complex sandwich like a thousand layer cake, and the probability of non novelty or progress is relatively high. At present, it does show that this counter strategy has almost completely worked, causing a major reversal in the whole case. [15] In view of the fact that a considerable number of Chinese manufacturers are still subject to patent infringement lawsuits from the United States (whether it is a "337 investigation procedure" or a general lawsuit), Dajiang's corresponding plan can be regarded as a classic, which is worthy of further understanding and research by other Chinese manufacturers. Enterprises should also take precautions for themselves. Although the patent fight between DJI and Daodong has not completely ceased, and the long-term market demand in the future is still promising, the major climate change in the unmanned aerial vehicle market and outside shows that both sides have faced unprecedented grim prospects in the American market, with a lot of worries. The first is a trade conflict between China and the United States. From July 6, 2018, when the Trump administration began imposing punitive tariffs on 818 imports from China, to December 13, 2019, when the two sides announced the first phase of the economic and trade agreement, the 526 days of economic and trade conflict between China and the United States have left both sides badly weakened. Each side has experienced three waves of import tariffs. In particular, the third wave of U.S. taxes, which came into effect on Sept. 24, 2018, hit almost all consumer products, estimated to be worth $200 billion, and Chinese companies' drone sales in the United States also took a hit. Followed by the novel Coronavirus epidemic worldwide. The novel Coronavirus (COVID-19) outbreak in the world (especially in the United States) completely disrupted the layout of everything and dealt a blow to the whole unmanned vehicle industry. Although the United States is still in the process of gradually reopening to resume its internal economic activities, the novel Coronavirus epidemic has not yet been brought under control, and it is unclear whether or not a second or more subsequent wave of viral infections will occur. It is even more difficult to predict whether or how quickly an economy that has fallen into severe depression will recover. This naturally makes the mix of supply and demand more challenging. The third is government industry regulation. In recent years, there have been many incidents of remote-controlled drones intruding into sensitive airspace, including interfering with the takeoff and landing of civilian airliners near the airport, nearly causing major aviation safety accidents, and even entering the airspace of the White House, forming national security issues and so on. Federal and state regulations on such devices are already in place, and will only get tougher. The United States, for example, the civil aeronautics board (Federal Aviation Administration) in 2019 with new rules that require all of unmanned aerial vehicles beginning January 1, 2020 must be equipped with the "automatic dependent related monitor" (automatic dependent surveillance - broadcast, ads-b) - a system or device, induction and avoid let all unmanned aerial vehicles are automatically position tracking and monitoring, And to enable its controllers to identify and avoid other flying objects in the vicinity, especially commercial airliners. [17] These new rules will naturally bring more technical challenges to manufacturers, as well as increased costs and delays in shipments. In addition, although big jiang made unmanned aerial vehicles into the forest fire in California once events such as disaster relief, the United States in 2019 ordered a uav formation the department of the ministry of the interior of made in China or contain chinese-made components of unmanned aerial vehicle (uav) suspend flights, until the department to develop a new unmanned aerial vehicle (uav) use plan, other government departments are expected to follow. [18] The fourth is potential future legislation. Because of the political climate in the United States and changing attitudes toward the Chinese government, several members of Congress are pushing for more restrictions on unmanned aerial vehicles. The most noteworthy is the draft legislation sponsored by Senator Richard L. Scott, Republican of Florida, known as the American Security Drone Act of 2019. [19] Section 5 of this article states that any manufacturer receiving a federal contract or funding may not purchase or use any system or component such as an unmanned aerial vehicle or counter-unmanned aerial vehicle manufactured by a Chinese manufacturer. [20] As this year coincides with the election year of the President and Vice President of the United States, the session of the Congress has already been shortened. Coupled with the novel Coronavirus outbreak, the agenda of the Congress has been completely disrupted. Therefore, it is difficult to anticipate the possibility of the adoption of the draft legislation. But the bill has the support of several Democrats and Republicans, and the original sponsor, a former governor of Florida, a crucial battleground state in every presidential election, apparently has more leverage. In any case, the bill shows at least one attitude in Congress. Because the case has elevated the issue to a national security level, it could end up being bundled into an annual defence budget bill, even if it does not pass on its own (similar to the restrictive "Huawei and ZTE clauses" that were eventually passed last year). So you have to keep tracking attention as well. *Source: Nanshan intellectual property protection center.
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