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 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.