Statutory damages for patent infringement in China and Russia, Part 1

This is the first of two posts by Nadia Wood and me on statutory damages in patent law.  Ms. Wood is an attorney in St. Paul and a legal writing instructor at the University of Minnesota (as well as one of my former students).  She is also a native speaker of Russian.  We’ll begin with a brief introduction to the topic by me, including some remarks on statutory damages in China, followed by Ms. Wood’s analysis of the recent Russian legislation.  Her analysis will conclude in the second part of this series, followed by some closing remarks by me.

Cotter:  As many readers are probably aware, a small number of countries award "statutory" damages for copyright infringement.  See, e.g., Pamela Samuelson, Phil Hill, & Tara Wheatland, Statutory Damages:  A Rarity in Copyright Laws Internationally, But for How Long?, 60 J. Copyright Off. Soc’y USA 529, 534 (2014) (reporting that, of 179 WIPO member states surveyed, only 24—Azerbaijan, Bahamas, Bahrain, Belarus, Bulgaria, Canada, China, Costa Rica, Dominican Republican, Israel, Kazakhstan, Kyrgyzstan, Liberia, Lithuania, Malaysia, Morocco, Republic of Korea, Republic of Moldova, Russian Federation, Singapore, Sri Lanka, Ukraine, the United States, and Vietnam—awarded statutory damages for copyright infringement), available at http://ssrn.com/abstract=2240569.  In the United States, for example, a copyright owner who has timely registered her claim to copyright may opt for statutory damages, in lieu of actual damages or the infringer’s profits, in an amount ranging from $750 to $30,000 for each worked infringed.  See 17 U.S.C. § 504(c).

I don’t know how many countries provide statutory damages for patent infringement, but of all the countries whose patent systems I have studied the only one of which I was aware (until recently) that did so was China.  See China Patent Act art. 65 (“If the losses of the patentee, benefits of the infringer, or royalties of the patent are all hard to determine, the people's court may, on the basis of the factors such as the type of patent right, nature of the infringement, and seriousness of the case, determine the amount of compensation within the range from 10,000 yuan to 1,000,000 yuan.”) (SIPO translation, available here); Thomas F. Cotter, Comparative Patent Remedies:  A Legal and Economic Analysis 353–60 (2013).  As discussed in my book, statutory damages appear to the most popular damages remedy for patent infringement in China, even though the amounts that can be awarded are relatively low; 1,000,000 yuan equals only about $160,000 (U.S.).  Among the relevant factors that Chinese courts take into account are “the infringer’s state of mind; the effect, manner, and duration of the use; the value, function, and materiality of the patent, including the availability of competing products; and the cost incurred in responding to the infringement.”  Id. at 359 (citing Jingjing Cao, Die Durchsetzung von Patenten in China 178–80 (2010); Cheng Miao et al., Theory and Practice Related to Patent Infringement Damages, China Pats. & Trademarks, 2009, no. 4, at 17–18).

I was therefore quite interested when I read in Sergei Blagov’s recent article Russia Amends Civil Code to Introduce “Significant” Changes to IP Protection, 28 Bloomberg BNA World Intell. Prop. Rep. 20 (Mar. 17, 2014) (article behind a paywall), that Russia too has now authorized awards of statutory damages for patent infringement.   The article quotes Baker & McKenzie partner Denis Khabarov as stating that the relevant amendments (part of an overall package of amendments to the Civil Code) as “entitl[ing] the patent owner to the full range of enforcement remedies provided by the Civil Code as well as statutory infringement compensation from 10,000 ($273) to 5 million rubles ($136,463), or double the royalty rate.”  Ms. Wood’s analysis of the statutory text (available here, in Russian), follows. 

Wood:  The relevant portion of the new Russian law is found in article 1406 of the new law (page 128 of the text) and reads as follows:

Статья 1406. Ответственность за нарушение исключительного права на изобретение, полезную модель или промышленный образец

 В случае нарушения исключительного права на изобретение, полезную модель или промышленный образец автор или иной правообладатель наряду с использованием других применимых способов защиты и мер ответственности, установленных настояним Кодексом (статьи 1250, 1252 и 1253), вправе требовать по своему выбору от нарушителя вместо возмещения убытков выплаты компенсации:

1)      в размере от десяти тысяч рублей до пяти миллионов рублей, определяемом по усмотрению суда исходя из характера нарушения;

2)      в двукратном размере стоимости права использования изобретения, полезной модели или промышленного образца, определяемой исходя из цены, которая при сравнимых обстоятельствах обычно взимается за правомерное использование соответствующих изобретения, полезной модели, промышленного образца тем способом, который использовал нарушитель.

My unofficial translation reads as follows.  The bracketed portions have been added for clarity but are not in the statutory text:

Article 1406.1. Liability for violation of exclusive rights to an invention, utility model or commercial sample.

In case of infringement of exclusive rights to an invention, utility model or commercial sample[,] author [inventor] or other rightsholder [owner of rights to the invention,] along with using other applicable methods of protection and liability measures established by the present Code (articles 1250, 1252 and 1253), has the right at their option to demand from the offender instead of [actual] damages [the following] compensation:

1)      in the amount of ten thousand to five million rubles determined at the discretion of the court based on the nature of the violation;

2)      twice the value of the right to use an invention [royalty rate], utility model or commercial sample determined based on the rate usually charged under comparable circumstances for the lawful use of corresponding invention, utility model, commercial sample in a manner utilized by the offender.

One thing that stands out is that, although it would seem to make sense to require the patent owner to choose one compensation option or the other, and not award both, there is no explicit word “or” in between subparagraphs (1) and (2).  Perhaps this is implicit, however, or expressly stated in the legislative history; Mr. Khabarov appears to assume the owner may recover only one or the other, according to his quote in the BNA publication cited above.

To be continued.