For the first time, the Intellectual Property Court of China’s Supreme People’s Court has determined, based on the purpose of the sales contract, whether a foreign company’s export of products to Chinese customers constitutes a “sale within the territory of China.” Chao Zhang explains.
In recent years, Chinese courts have demonstrated an increasingly assertive approach in exercising jurisdiction over foreign-related intellectual property disputes. This trend is particularly evident in patent infringement cases involving foreign entities that sell products into the Chinese market through cross-border transactions. A recent patent infringement case handled by our firm – first before the Beijing Intellectual Property Court and subsequently on appeal before the Intellectual Property Court of the Supreme People’s Court (the SPC IP Court) – has established a landmark rule regarding the determination of sale acts in such cross-border transactions. On December 11, 2025, the SPC IP Court concluded the second-instance trial, affirming the first-instance judgment which granted an injunction and damages exceeding Rmb3 million (US$446,000). For the first time, a Chinese court determined, based on the purpose of the sales contract, whether a foreign company’s export of products to Chinese customers constitutes a “sale within the territory of China”. This article analyzes the court’s reasoning and explores the practical implications of this significant development.
The case: Facts and procedural background
In the case at issue, the plaintiff held a valid and enforceable Chinese invention patent and brought a patent infringement action against the defendant, a foreign entity with no domicile within China. The accused products were manufactured outside China and shipped to Beijing, where they were delivered to the Chinese purchaser under a contract that specified CIP Beijing (carriage and insurance paid to Beijing) as the delivery term. The sales contract was executed in Beijing and the contract contained provisions demonstrating that it was entered into for the purpose of selling the accused products into China.
The defendant raised two principal defence arguments. First, it challenged the jurisdiction of the Beijing Intellectual Property Court, arguing that as a foreign entity with no presence in China, it could not be sued in Chinese courts. Second, it contended that the sale act had been completed before the accused products entered China – since the products were manufactured and shipped from outside China – and therefore the sale did not occur within Chinese territory and did not infringe the Chinese patents in the suit.
The Beijing Intellectual Property Court rejected these arguments and held that it had jurisdiction. Under Article 29 of the Civil Procedure Law, “a lawsuit brought on account of tortious acts shall be under the jurisdiction of the people’s court of the place where the tortious act occurred or where the defendant has its domicile.” For foreign-related cases, Article 272 of the Civil Procedure Law (which was in force at the time of the proceedings) provides that where a defendant has no domicile within China, a lawsuit may be entertained by the court of the place where the contract was signed, where the contract was performed, or where the tortious act occurred. The court also relied on Article 5 of the Supreme People’s Court’s Provisions on Several Issues Concerning the Application of Law in the Trial of Patent Dispute Cases, which defines the place of infringement as including the place where the infringing act was committed, as well as the place where the infringement results occurred.
Applying these provisions, the Beijing Intellectual Property Court found that because the sales contract was signed and became effective in Beijing, the place of the sale act was located within China, and accordingly the court had jurisdiction as the court of the place where the tortious act occurred. The court further held that the defendant had committed the act of selling the accused products within China, based on multiple grounds including the place where the contract was executed, the actual importation and delivery of the products in China, and, most significantly, the purpose of the contract. The defendant appealed to the SPC IP Court.
The SPC IP Court’s landmark ruling
On December 11, 2025, the SPC IP Court concluded the second-instance trial, affirming the first-instance judgment and granting an injunction and damages exceeding Rmb3 million. In doing so, the court established a significant rule regarding the determination of sale acts in cross-border transactions.
The court held that the sales contract for the accused infringing products between the foreign company and the Chinese customer was duly established and had taken effect in accordance with law. As the seller, the foreign company bore the contractual obligation to deliver the products. The accused products were delivered in Beijing and were accompanied by inspection certificates issued by the Entry-Exit Inspection and Quarantine authorities of the People’s Republic of China. These facts were sufficient to establish that the purpose of the sales contract was to sell the accused products to customers in China. Accordingly, China constituted the place of performance of the seller’s delivery obligation, and the foreign company was deemed to have conducted the act of selling the accused infringing products within the territory of China.
Significantly, although the foreign company had established a sales office and designated sales representatives in China, the court expressly held that “Even without taking into account the fact that the foreign company maintained a sales office and sales personnel in China, and promoted the accused infringing products in China through such office and personnel by providing quotations, responding to inquiries, supplying contracts, assisting with execution and payment, and other commercial services to Chinese customers,” it was still sufficient to conclude that the foreign company had conducted the act of selling the accused infringing products within the territory of China. This holding is particularly noteworthy because it establishes that the determination of a sale act does not depend on whether the foreign entity has a physical presence in China – the contractual purpose and place of performance are independently sufficient.
Broader trends in Chinese foreign-related IP litigation
The SPC IP Court’s ruling is part of a broader trend of expanding Chinese court jurisdiction over foreign-related IP cases and strengthening IP protection for both domestic and foreign rights holders. According to the Annual Report of the Intellectual Property Court of the Supreme People’s Court (2025), released on January 28, 2026, the SPC IP Court has accepted a total of 24,602 technology-related IP and antitrust cases since its establishment on January 1, 2019, and has concluded 23,069 cases. In 2025 alone, the court received 449 new cases involving foreign parties and parties from Hong Kong, Macau and Taiwan, accounting for 16.9 percent of all new cases.
Nationwide, Chinese courts accepted 11,066 first-instance foreign-related intellectual property cases in 2025, a year-on-year increase of 34.1 percent. The SPC IP Court has reported that foreign-related cases have grown at an average annual rate of 18.7 percent between 2019 and 2025. The court’s vice president, Zhonglin He, has stated that “Chinese courts adhere to the principle of equal protection for both domestic and foreign parties, and the number of foreign-related IP cases is growing rapidly, with China gradually becoming a preferred forum for resolving international IP disputes”.
These statistics underscore a fundamental shift: China is no longer merely a jurisdiction where foreign entities enforce their rights, but increasingly a forum where foreign entities are held accountable for infringing activities. The SPC IP Court’s ruling in the present case exemplifies this trend, demonstrating Chinese courts’ willingness to exercise jurisdiction over foreign entities that direct commercial activities at the Chinese market.
Significance and practical implications
For rights holders
This case offers a powerful strategic tool for rights holders seeking to enforce their Chinese patents against foreign competitors. Historically, rights holders often faced a difficult choice: either create an artificial jurisdictional connection point within China (for example, by naming a Chinese subsidiary or distributor as a co-defendant), or sue the Chinese end-user, who was often also the rights holder’s customer – an approach that was commercially unpalatable and economically inefficient.
The SPC IP Court’s decision now provides a clearer path. Rights holders may directly assert their rights against foreign entities that sell infringing products into China, without the need to join a Chinese entity as a co-defendant. In terms of litigation strategy, rights holders should pay close attention to the contracting process for the purchase of infringing products. By ensuring that the sales contract is signed and becomes effective within China, and that the contract’s terms reflect an intention to sell products into the Chinese market, rights holders can strengthen both their jurisdictional arguments and their substantive case that the sale act occurred within China.
For foreign entities
Conversely, this case serves as a clear warning to foreign entities engaged in economic activities with China. The court’s ruling establishes that the combination of a product’s entry into the Chinese customs territory and its delivery to a Chinese customer may be deemed to constitute a sale conducted within China. Contractual provisions designating an offshore place of execution, or stipulating that the seller’s obligations terminate upon shipment (e.g., FOB arrangements), may not suffice to preclude a finding of infringement where the court determines – based on the purpose and place of performance of the contract – that the transaction was directed at the Chinese market. Whether a foreign company maintains a subsidiary in China or formally executes contracts within China is not, in itself, determinative.
Foreign entities should therefore conduct thorough freedom-to-operate analyses before selling products into China. This is particularly important where the sales contract is executed in China, or where the contract terms demonstrate an intention to supply the Chinese market. When structuring cross-border transactions, companies should carefully assess the substantive elements of performance, including the ultimate recipient of the goods, the place of delivery, and the point at which title transfers. Where products are ultimately delivered within China, the transaction may be regarded as entering the Chinese market and thereby fall within the scope of Chinese law and judicial jurisdiction. Proactive risk assessment, including investigation of whether the products infringe any Chinese intellectual property rights, is essential to avoid costly litigation and potential liability.
