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High Damages in Patent Infringement Case and How to Get it in ChinaIn a recent ruling in the case of Wuxi Guowei v. Changshu Linzhi, China's Supreme Court awarded a total of RMB 9.4 m i l l i o n (US$1.4 million) in damages to the plaintiff, reversing Jiangsu High Court’s decision to dismiss Wuxi Guowei’s patent infringement claim.
The patent at issue is ZL200920230829.5, a utility model relating to a PTC (Positive Temperature Coefficient) heater. The Supreme Court ruling is another example of China’s increased damage awards in patent infringement suits, echoing the increased willingness of the Chinese judicial system to enforce IP rights. This decision also makes ZL200920230829.5 one of the most successfully asserted utility models in China (The RMB 335 million (US$45 million) record set in Chint v. Schneider back in 2007 remains unbroken).
H O N G K O N G | B E I J I N G
Y O U R G R E A T E R C H I N A L A W Y E R S
issue 15 . 2018NEWSLETTER
KEY TAKEWAYS
I. APPLY FOR AN INVESTIGATION ORDER AND MAKE FULL USE OF IT
An investigation order, according to the civil procedure laws
and regulations in China, is a legal document issued by the
court to an attorney representing a party that is unable to
obtain evidence necessary for the suit, requesting someone
who is not a party in the suit to provide the necessary
evidence.
The investigation order in a way mitigates the lack of a
discovery process in China. In Wuxi Guowei v. Changshu
Linzhi, Wuxi Guowei’s attorney managed to collect
abundant amount of evidence from the defendant’s
customer Hisense, including model numbers, delivery times,
and the structure, quantity and price of the goods sold. The
defendant failed to provide contradictory evidence, and the
court admitted and relied upon the evidence to reach its decision.
II. DAMAGES ASSESSMENT BASED ON PROFIT PERCENTAGE AND CONTRIBUTION RATE
Article 65 of the PRC Trademark Law provides that the
amount of damages for patent right infringement shall be
determined according to (i) the patent right holder’s actual
losses caused by the infringement; (ii) the profits gained by
the infringer through the infringement; or (iii) a reasonable
royalties for that patent. If there is difficulty in determining (i)
to (iii), then the Chinese Court may, by considering factors
such as the type of patent right, the nature of the
infringement, and seriousness of the case, determine the
amount of damages in the sum of RMB 10,000 to RMB 1 million
(~USD 6,700 to USD 150,000). If the damages cannot be easily
assessed, statutory damages will be imposed.
IP UPDATE
Martin Lo ASSOCIATE
BSc (Hong Kong University of Science and Technology)JD (Chinese University of Hong Kong)
• Asialaw Rising Star Lawyer in Intellectual Property 2018• Techstars Mentor 2015• IP Rising Star (Euromoney Women in Business Law Awards) 2013• Litigation Committee Member, International Bar Association• Anti-Counterfeiting Committee (2018), Internet Committee (2014-2016), INTA
Anna Mae Koo PARTNERMA (Law) (Hons), University of Cambridge (Prince Philip Scholar)
Ellen Li PATENT ATTORNEY
BSc (Tsinghua University)MSc (KAIST)
In the case, the Supreme Court chose to use assessment of
profits for the damages and based its calculation on the
following formula:
Infringer’s profit = Sales of the infringing product × Profit percentage × Level of contribution of the patented technology due to the profitability of the infringing product
The Court considered (1) a report from an accounting firm
showing the infringing product has, among 12 different
modules, a lowest profit percentage of 16.5% and a highest
profit percentage of 32.4%, and (2) the defendant’s
statement during trial that its profit percentage ranges from
10% to 15%, and found the profit percentage to be 15%.
The Court also found that the patented technology made
significant contribution to the marketing appeal of the
product, and determined a contribution rate of 50%. The
Court did not explain how it reached the number, and
neither party produced evidence on this particular matter.
We expect future court decisions to bring more clarity on the
standard for determining the patent contribution rate.
2
IP UPDATE
All Rights Reserved.
Please note that the information and opinions contained in this newsletter are intended to provide a general overview only, and should not be treated as a substitute for proper legal advice concerning an individual situation. We disclaim all liability to any person in respect of the consequences of anything done or omitted to be done wholly or partly in reliance upon the contents of this newsletter. Readers should make their own enquiries and seek appropriate legal advice on the particular facts and circumstances at issue.
© Vivien Chan & Co., Newsletter issue 15, October 2018