Used by Chinese courts for calculating damages in patent infringement cases | Rare Techy

Background

The Supreme People’s Court of China (SPC) issued a final judgment upholding the original judgment issued by the Guangzhou Intellectual Property Court (Guangzhou IP Court), which revealed the impact of patent royalty on in the amount of damages. .

In November 2020, the Guangzhou IP Court issued a preliminary ruling on a patent infringement lawsuit initiated by TCL Air-Conditioner (Zhongshan) Co., Ltd. (TCL) to Guangdong MBO Refrigeration Equipment Co. Ltd. (Guangdong MBO). The Guangzhou IP Court held that, after comparison, the technical features of the alleged patent infringement are similar to the patent in question, and therefore patent infringement is found.

Regarding compensation, the Guangzhou IP Court said that TCL did not provide the amount of its losses or illegal profits that it received from Guangdong MBO as a result of the infringement, nor did it provide the amount of kingdom can be used as a reference.

The Guangzhou IP court, as a first step, determined the amount of production of infringing products based on its opinion, taking into account the annual planning data of TCL’s patented products, the use the machines to replace, the volume of production, and some the market share of the infringing products.

In this regard, the Court adopted a 10% industry profit margin and a 3%-5% marginal tax rate as the basis for the calculation. After weighing the type of patent, the nature and circumstances of Guangdong MBO’s infringement, and the profit obtained from the infringement, the Court awarded Guangdong MBO RMB 1.68 million in damages for economic losses and TCL.

Both sides later appealed to the SPC.

The SPC stated in its decision that Guangdong MBO’s failure to provide evidence of its infringing products should be subject to the adverse consequences of its failure to provide evidence, and concluded that the patent infringement and the amount of compensation awarded by the IP Court of Guangzhou was not satisfactory. wrong.

Key takeaways

As a common electronic device, there are many patented technologies in air conditioners, and it is not uncommon for intellectual property rights (IPR) disputes to arise between manufacturers over a technical solution in any product.

The facts of this case are not complicated, but they explain the following implications for determining damages in copyright infringement cases:

1. Chinese courts have been dedicated in recent years to solving the challenges of calculating IPR losses

In recent years, courts at all levels are increasingly applying the principle of evidence suppression, as the defendant may face serious consequences if he does not provide the data. violation results where he can do so.

Several recent IP cases have shown that it is common for courts to accept plaintiffs’ claims because the defendant refuses to provide evidence of its infringing products.

Based on the above, it is said to the accused, even if he is a suspect, that one should be able to give evidence rather than waiting for luck.

2. The patent contribution rate is a critical factor in determining damages in patent infringement cases.

The total cost of the infringing product is not entirely borne by the patent technology; however, there are many factors that can affect the product’s success, including the impact of the brand, the level of technology, sales strategies, and so on. , that is, the ratio of the contribution of the technology found to be infringing to the total revenue of the infringing product.

It can be seen that the amount of compensation awarded in a patent infringement case, in general, depends on the level of judicial skill and the ability of the parties to produce evidence.

In addition, it also depends a lot on the ability of the parties to explain to the court and help the judge (and sometimes the technical examiner) to fully understand the patent and the industry to reach a certain rate. patent contribution in their. kindness

3. An extension question: the law used for calculating damages (based on the profits of the defendant obtained from the infringement)

There are many cases that hold that in patent infringement cases like the present one, the law on injunctive relief can be summarized as follows:

‘(Total infringing profits) x (unit price of the products) x (the reasonable profit margin, i.e. the operating profit margin of the company) x (the contribution rate of the patent in question)’.

The contribution rate of the patent will be weighed as described in the second section above, and will be left to the judge on a case-by-case basis.

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