Monday, May 16, 2016

Hu on Patent Damages in China

Jingjing Hu has published an article titled Determining Damages for Patent Infringement in China, 47 IIC 5 (2016).  You can find the first few pages of the article on Springer's website, here.  Here is the abstract:
This article examines the determination of damages for patent infringement in China.  Based on empirical data, Chinese judicial precedence and judicial interpretations, this article depicts how the size of damages for patent infringement is determined through three methods (the patentee's actual loss, the infringer's profits and reasonable royalties) and statutory damages in China.  In particular, it makes a comparison between Chinese and German approaches.  The comparison finds that Chinese courts have insisted on unrealistic standards of proof on the part of patentees for entitlement to the three methods.  Therefore, this has relegated the patentees to statutory damages that are not designed to compensate their losses in most patent infringement trials.  This article suggests easing the burdens of proof for the patentees under the three methods while strictly observing the restriction on recourse to statutory damages.
I think this is a very good article, with lots of useful information and analysis.  As the author points out, Chinese courts award "statutory" damages far, far more often than they award lost profits, reasonable royalties, or infringer's profits.  (See also my book pp. 353-60 and previous blog posts here and here.)  As referenced in the abstract, Ms. Hu argues that one reason for this is that Chinese courts' evidentiary standards are too strict (though she suggests there are other reasons courts prefer to award statutory damages as well, see pp.21-22); and she contrasts this with the German courts' practice, under article 287 of the Civil Procedure Code, to make a rough estimate of damages when the parties' evidence is inadequate (see pp. 12, 13, 23, 26; on the German courts' practice, see also my book p.262 n.160, citing Markus Schönknecht, Determination of Patent Damages in Germany, 43 IIC 309, 311–13 (2012)). In addition, Ms. Hu states that Chinese courts do not award reasonable royalties unless the patentee can "prove an existing licensing agreement" that is "lodged and recorded by administrative authorities" (p.6; see also p.17).  This obviously makes it more difficult than it would be in Germany (or the U.S., for that matter) to award royalties.   Finally, Ms. Ju argues that statutory damages are often undercompensatory, given their low amount (at present, Chinese law caps them at an amount equal to about U.S. $160,000), though in some cases they may be overcompensatory because courts do not strictly require patentees to prove any loss as a precondition for awarding statutory damages.  She proposes that China should mitigate the plaintiff's burden of proof in a manner analogous to the German approach, and that they should award statutory damages only when the other methods of damages calculation are unavailing due to the patentee's failure to provide even "rough evidence of damages suffered" (p.27).

I'll probably cite this paper in some of my own forthcoming work.

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