China: Patent Infringement In China: Finding The Source

Last Updated: 9 November 2017
Article by Yuanyuan Tian

Article 70 of the Chinese Patent Law, which came into effect on October 1, 2009, reads: "Any person who, for production and business purpose uses, offers to sell or sells a patent-infringing product without knowing that it was made and sold without the authorisation of the patentee, shall not be liable to compensate for the damage of the patentee if he can prove that he obtained the product from a legitimate channel."

Article 25 of the Interpretation (II) of the Supreme People's Court on Patent Infringement Disputes, which came into effect on April 1, 2016, clarifies that:

"Where a party uses, offers for sale, or sells infringing products which have been manufactured and sold without the authorisation of the patent holder, not being aware of this and for production and business purposes and proves the legitimate source of the products with evidence, shall be supported by the People's Court if the patent holder requests the party to stop the acts of use, offer for sale or sale, with the exception that the user of the allegedly infringing products can prove he had paid a reasonable amount for the products.

'Not being aware' refers to actually not being aware and should not be aware1.

The 'legitimate source' refers to the situation that the products were obtained through normal means of business including legitimate sales channels, normal sales contracts, etc. Regarding the legitimate source, the user, the party offering for sale, or the seller should provide relevant evidence in conformity with the trading habits. "

"Not being aware" is opposite to "actually know". "Should not be aware" refers to a presumption of awareness of infringement based on evidence. In practice, it usually requires a patentee to prove that an opposing party actually knows about the infringement. For example, if the party has received a notice from a patentee, or been given an administration punishment, or even filed an invalidation request against the patent, it proves that the party actually knew this.

To summarise: (i) a person who infringes a patent by offering for sale and/or selling an infringing product from a legitimate source with no knowledge that his acts constitute patent infringement is not liable for damages but should stop the infringement acts; and (ii) a person who infringes a patent by using an infringing product from a legitimate source with no knowledge that his act constitutes patent infringement is not liable for damages and may continue to use the accused product.

The source of infringement

In Sun Junyi v Zheng Ning (2014), the Chinese Supreme Court elaborated on the intention of the legitimate source defence and held that "the legitimate source defence is prescribed in article 70 of the Patent Law in order to maintain the normal order of the market and to encourage the fight against the source of infringement".

Obviously, the legislators believe that tracing the source of the infringing product is very important to restrain infringement. And in practice, investigating the act of making the infringing product is rather difficult compared to the acts of offering for sale or selling. The legitimate defence encourages the defendant to confess to the maker of the infringing products.

The above provisions, however, might dramatically reduce the value of a patent in some instances. For example: a patent claims a special machine for manufacturing a disposable package. The patentee operates in the markets for the machine and for the packages. The patentee sold only three such machines in China. The patentee uses its machines to manufacture the packages and its profit mainly relies on the selling of the packages. A party buys several infringing machines from an infringer through a normal channel and uses them to manufacture the packages.

If the party is sued by the patentee for infringement, it could assert the legitimate defence against the patentee to continue to use the accused machines. The damages collected from the manufacturer of the machines are generally calculated from the sale price of the machines. It normally will not cover the losses caused by continuous use of the machines by the party, because the market share of the patentee's packages may be significantly reduced and the patentee may suffer substantial profit losses on the sale of the packages.

In this circumstance, denying the patentee a damage remedy from the party would undermine the value of the patent monopoly and lead to unjust enrichment of the party. In an extremely serious circumstance, the party might instruct the manufacturer to commit a contributory infringement in order to seize the market for the packages. It is usually very difficult for the patentee to obtain adequate evidence for prepared contributory infringement. The awarded damages from the machine maker cannot compensate the losses of the patentee in this case.

In the above example, the total exemption from patent infringement liability of the user of the accused manufacturing machine is quite arguable. There may be a compromise. In 2005 the Guangdong Higher People's court mediated two parties in a patent infringement dispute to reach a settlement that the defendant continues to use the infringing products by paying reasonable royalties. Likewise, the financial interests of the patentee in the above example may be adequately protected by awarding reasonable royalties which are calculated based on, for example, the licensing fee minus the damage remedy from the machine maker to avoid double rewards. The innocent party held liable for the reasonable royalties may have a contractual cause of action for breach of warranty to get some protection.

In summary, the courts should be cautious and take a "total circumstance" consideration in applying the legitimate source defence in practice, especially the consequence of granting a total exemption from the liability of infringement act of use under the legitimate source defence, although there is no literal exception to the defence prescribed in the articles. ( published on WIPR Septemble/October issue, 2017)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.