Historically, China has been viewed as a country where patent damages are low.
However, two recent rulings by the Beijing IP court, one of three courts recently created for the sole purpose of handling disputes involving intellectual property, may foretell of a greater recognition of patent value by China’s specialized IP courts. In the first case, decided in December of 2016, the Beijing IP court ordered Defendant Hengbao Co. Ltd. to pay a damages award of 49 million Chinese yuan to Plaintiff Watchdata Data Systems Co. Ltd. for infringement of a patent covering a USB key. In addition to damages, Watchdata was also awarded 1 million yuan in legal fees, bringing the total to 50 million yuan, or approximately $7.5 million U.S. dollars. In connection with arriving at the damages award, the Court considered the actual sales of the Defendant’s products multiplied by the profit of each infringing product, or what is typically known as profit disgorgement. This is notable because, although profit disgorgement is an available remedy for copyright, trademark and trade secret actions in U.S. courts, it is not an available remedy for matters involving claims of patent infringement in the United States. It is also notable because an award based on profit disgorgement has the potential to be significantly greater than an award based on a reasonable royalty, the form of damages typically awarded to U.S. plaintiffs who cannot prove they lost sales as a direct result of the infringement.
More recently, in March of 2017, the Beijing IP court ordered Defendant Sony Mobile Communications (China) to pay a damages award of 9.2 million Chinese yuan to Plaintiff Xidian Jietong for infringement of a standard-essential patent covering wireless communication, or approximately $1.3 million U.S. dollars. In the course of the trial, Xidian Jietong presented evidence to the court in the form of licenses showing it received a royalty of 1 yuan for each item sold. Ultimately, the court awarded damages equal to three time that rate. Reportedly, factors such as “the technical contribution of the patent, the fact of being adopted into national mandatory standard and the bad faith of the defendant during the communication” were all considerations influencing the damage award handed down by the Court. The fact that the technical contribution of the patents and their standard-essential nature were considered seems to further underscore a focus by China’s Specialized IP Courts on assessing the value provided through the use of the asserted patents in connection with determining the proper amount of damages to be awarded.
In summary, although plaintiff’s involved in Chinese patent litigation have historically held modest expectations regarding the amount of monetary damages they may hope to recover, two recent rulings by the Beijing IP court reflect the continued maturation of the intellectual property market in China and illustrate an increasing focus on the importance protecting IP rights, and the value associated with doing so.