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Evidence for assessing damages

Zhu Deqiang of CCPIT Patent and Trademark Law Office talks through the evidence needed to assess damages – and how to get it

For a patent right holder who has proved infringement of his rights, damages are often an important legal remedy.

Article 65 of the Chinese Patent Law provides four methods for determining the amount of damages to a claimant in a patent lawsuit: 1) on the basis of the actual losses incurred to the patentee as a result of the infringement; 2) on the basis of the gains which the infringer has obtained from the infringement; 3) on the basis of the royalties for the patent involved in the patent lawsuit; 4) on the basis of factors like the type of patent and the nature and particulars of the infringement, within a range of Rmb10,000 and Rmb1 million.

Two points should be noted regarding the determination of damages. One is that the four methods mentioned above should be considered in that order. In other words, if the first method is suitable for determining the damages, the others need not be considered. Another point is that the damages include the reasonable expenses that the patent right holder has paid to stop the infringement.

Methods of calculating damages

In a patent lawsuit, the claimant bears the burden of proof. This also applies to the determination of damages. For example, suppose a patent right holder encounters a drop in sales of their product due to competition with the infringing products, the patent right holder may submit the figure for this drop along with the profit per patented product as evidence to prove his losses due to the infringement. Sometimes a claimant is unwilling to provide the evidence to prove their actual losses, even if it can be collected. This may be because such evidence may include some secret business information.

An alternative method is to determine the patent right holder's losses by multiplying the sales figures of the infringing products by the profit per patented product. It has been used successfully in the case of Beijing Watch Data v Hengbao. In this case, the court issued a ruling for evidence preservation, ordering the defendant to provide financial documents on its products, to be used for calculating its profits. When the defendant refused to do so, the court accepted the plaintiff's figures on the defendant's profits, awarding the latter Rmb49 million in damages.

If it is difficult to determine the gains which the infringer has obtained from the infringement, the claimant may try to prove the amount of royalties relating to the patent. If the claimant once licensed the patent to a third party, the license fee may be referred to.

If none of these three methods are appropriate, the amount of damages can be selected from a range between Rmb10,000 and Rmb1 million. Even for this method, evidence is necessary.

Evidence may be used to prove things such as the nature and particulars of the infringement, the wilfulness of the infringer, the period of infringement, the recurrence of infringement, the amount of distributors or sellers and the locations in which the infringing products are sold. In the case of Abbot (Shanghai) Trading Company v, the court considered channels of selling the infringing products when deciding the amount of damages.

Help from the courts in collecting evidence

It's not rare for a patent right holder to have difficulty collecting evidence to prove infringement and damages. Two main special legal measures may be used to seek support from the court in doing so. The Civil Procedural Law provides for the court's responsibility and authority in collecting evidence if the evidence cannot be collected by a party and its legal representative and the evidence is deemed by the court as necessary in a case. In such a scenario, the relevant parties should not refuse to provide the evidence to the court. If they refuse, the court will deem the evidence unfavorable to them, and the plaintiff's allegation will be supported, like what happened in the Beijing Watch Data v Hengbao case.

There is also the court's procedure of evidence preservation, which may be applied for by a patent right holder if any evidence may be extinguished or may be hard to obtain at a later time. Under this procedure, the court may also take preservation measures on its own initiative.

Zhu Deqiang
  Zhu Deqiang holds a bachelor of engineering from Beijing University of Technology and a juris master from the University of International Business and Economics. He joined CCPIT Patent and Trademark Law Office in 2001, and has particular experience in patent litigation.


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