China: New Development Of Patent Infringement Compensation In China

Last Updated: 12 January 2018
Article by Chuanliang Lu

I. Attention received for low patent infringement compensation

In recent years, China's intellectual property legislation has been continuously improved, and protection of intellectual property rights has been constantly strengthened, which is particularly evident in patenting system that is most closely related to national policy for the promotion of innovation. At the legislative level, the State Intellectual Property Office of China is promoting the fourth revision of the Patent Law of the People's Republic of China. At the judicial level, the Supreme People's Court issued two judicial interpretations of patent infringement disputes in 2015 and 2016 respectively and related judicial guidance documents in response to the long-standing issue of "low compensation" in patent litigation.

II. Changes in legal norms for patent infringement compensation

Provisions for patent infringement compensation are set forth in Article 65 in the latest amendments to the patent law (draft). On the basis of the initial provisions, a punitive compensation system for intentional patent infringement is introduced. It is provided in Article 65 of the draft amendments that, "for the intentional Patent Infringement, the people's court may, according to such factors as the circumstances, scale and consequence of the infringement, the amount of compensation determined according to the previous two paragraphs shall be increased to two to three times". The punitive compensation to intentional infringement will serve as a further deterrent to such acts of intentional infringement as repeated infringement or the like.

In the "Regulations on the Application of Law in the Trial of Patent Dispute Cases" promulgated by the Supreme People's Court of the People's Republic of China in 2015, limitation over the amount of statutory compensation for patent infringement is deleted, and "generally from RMB5,000 to RMB300,000,with a maximum not exceeding RMB500,000" in the initial provisions of determining the amount of compensation was amended to "determining the amount of compensation in accordance with the provisions of Paragraph 2 of Article 65 of the Patent Law on the basis of such factors as the type of patent right, the nature and circumstances of the infringement".

The "Interpretation (II) on a number of Issues Regarding the Application of Law in the Trial of Patent Infringement Cases" promulgated by the Supreme People's Court in 2016 provides solution for difficult proof in patent infringement litigation as well as for low compensation. Article 27 of this judicial interpretation makes some improvement to the rules of proof for the amount of compensation in patent infringement litigation. According to the preliminary proof of the patentee and the relevant evidence possessed by the infringer, the burden of proof on profits obtained by the infringer is assigned to the infringer, and this shall be in line with the order of calculation of the amount of compensation provided in Article 65 of the Patent Law.

It is particularly indicated in the Outline of China's Intellectual Property Protection (2016-2020) issued by the Supreme People's Court in 2017 that, a scientific and rational intellectual property infringement compensation system shall be established, and a compensation system compatible with the value of the intellectual property shall be established, taking into consideration of the loss of the patentee, the profit obtained by the infringer, the license fee, the statutory compensation and costs in safeguarding the rights and interests.

III. Continuously increased amount of patent infringement compensation in judicial practice

By making a statistical analysis on the winning cases in patent infringement litigation in the past three years, it is found that the amount of compensation obtained by the patentees has shown a significant rising trend. The average amounts of compensation ruled in 2015, 2016 and the first half of 2017 are RMB350,000, RMB1,024,000 and RMB1,103,000, respectively.

The percentage of the amount of compensation ruled by the court to the amount of compensation claimed by the patentee is also increased year on year. The average percentages in 2015, 2016 and the first half of 2017 are 44.6%, 57.6% and 87.7%, respectively. In terms of the amount of compensation, the average amount of compensation obtained by patentees from abroad or from Hong Kong, Macao and Taiwan is RMB1,022,000, significantly more than the average amount of compensation of RMB757,000 obtained by patentees from the mainland China over the same period (Data Source: Beijing Intellectual Property Court official WeChat "Intellectual Property Beijing").

IV. Statutory compensation is still the mainstream in judicial practice, but the number of cases exceeding the amount of statutory compensation is gradually increased

According to the provisions of the Chinese Patent Law, the amount of patent infringement compensation shall be calculated by using the following methods, and these methods are in an applicable consecutive sequence as the following: (1) the losses suffered by patentee due to infringement; (2)the profits obtained by the infringer from the infringement; (3) a reasonable multiple of the patent license fee shall be referred to; (4) statutory compensation (RMB10,000-1,000,000). In judicial practice, the losses suffered by the patentee in the first consecutive place are often difficult to prove and rarely used. Submission of evidence of the profits of the infringer obtained from the infringement in the second consecutive place is usually necessary for obtaining a large amount of compensation. A reasonable multiple of patent license fee in the third consecutive place is not commonly seen in judicial practice. Where the specific amounts in the preceding three consecutive places cannot be proved according to the evidences of the case, the court may apply the statutory compensation according to the circumstances of the case. If the evidences provided by the parties concerned or the evidences collected in investigation can prove that the applicable statutory compensation is obviously unfair, an amount may be ruled by breaking the upper limit of the statutory compensation.

Evidence is obtained by preservation of evidence for the profits obtained by the alleged infringer. In the patent infringement case of Zhengtai Company v. Schneider Electric Low Voltage (Tianjin) Co., Ltd., Wenzhou City Intermediate People's Court of Zhejiang Province, determines a profit of RMB355 million obtained from the infringement by calculating an average operating profit of Schneider according to the financial material from the industrial and commercial administration and tax department, by preserving as evidence, sales documents of the allegedly infringing products.

Sales data for publicity on websites or other media, sales data from E-business platforms can be used as the preliminary basis for the amount of infringing sales. The industry's average profit margins can be used as the profit margins of the accused product. The alleged infringer's turnover for publicity can also be used as the preliminary evidence of the profits obtained from the infringement. Submission of these evidences are conducive to the judge to rule an amount of compensation within or beyond the amount of statutory compensation. In the patent infringement cases such as Stricker v. Fada, the court ruled that the defendant's financial account and so on shall be preserved as evidences, but the defendant refused to perform the ruling. However, the patentee submitted evidence to prove that the defendant's website proclaims an annual turnover of the infringing product of RMB50 Million to 100 million, and a monthly output of the infringing product of 600,000 sets. Thus, the court ruled on this basis that the defendant shall pay an amount of compensation of RMB2 million.

V. Conclusion

China's patent infringement compensation system is gradually established. Patent infringement costs increase year by year. Costs for safeguarding the patent rights are decreased. In the judicial practice, the patentee attaches importance to provide evidence to the infringement, but ignores provision of evidence for the infringement compensation, which leads to the application of the statutory compensation when the judge makes a judgment, i.e., ruling an amount of compensation from RMB10000 to RMB1,000,000, by considering comprehensively such factors as the type of patent right, the infringing circumstances and the infringing duration. However, regarding such cases for which the exact amount of losses or profits from the infringement is difficult to be proved, in order to break the amount of statutory compensation, the patentee may submit evidence to prove that the applied statuary compensation is obviously unfair, in which case, the court may synthesize all the evidences of the case, so as to determine an appropriate amount of compensation over the limit of the statuary compensation. Where it is impossible to obtain evidence for the infringement of the defendant, on the basis of submission of preliminary evidence to prove that the infringer obtains far more profits than the statuary compensation, the patentee may request the court to collect evidence for the profits obtained by the defendant from the infringement by making investigation as entitled. If the infringer refuses to provide the evidence, it or he shall bear unfavorable legal consequences. The system of punitive compensation for intentional infringement is currently only embodied in the draft legislation of the patent law, it still needs to be observed whether or not it can become a formal legal provision.

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 Mondaq.com.

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

Authors
 
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
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
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 you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (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 www.mondaq.com

    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 Mondaq.com’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.

    Disclaimer

    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.

    Registration

    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.

    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 unsubscribe@mondaq.com 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.

    Cookies

    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.

    Links

    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.

    Mail-A-Friend

    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.

    Emails

    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 .

    Security

    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 webmaster@mondaq.com.

    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 EditorialAdvisor@mondaq.com.

    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 enquiries@mondaq.com.

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

    By clicking Register you state you have read and agree to our Terms and Conditions