High Damages in Patent Infringement Case and How to Get it ... · High Damages in Patent Infringement Case and How to Get it in China In a recent ruling in the case of Wuxi Guowei

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.

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IP UPDATE

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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