Recent Articles on Damages in China

Two recent articles in the Queen Mary Journal of Intellectual Property may be of interest to readers who follow developments in Chinese patent/SEP litigation.

1. Zhang Guangliang and Geng Bang have published An Active Exploration of Global Licensing Rate Adjudication Methods for Standard Essential Patents:  The Chinese OPPO v. Nokia Case, 15 Queen Mary J. Intell. Prop. 238 (2025).  Here is the abstract:

The decision rendered by the Chongqing First Intermediate People’s Court in OPPO v Nokia represents a landmark moment in the adjudication of global licensing rates for SEPs within the Chinese judicial system. This ruling not only expedited a resolution between the parties, who had been entangled in over 100 global SEP litigations for two and a half years, but also made significant advancements in the methodologies employed for determining global SEP licensing rates. The case achieved three pivotal breakthroughs in the context of 5G SEPs across global jurisdictions: it established the first ruling on the cumulative industry rate for 5G standards, determined the inaugural generational technical value ratio for multimode devices spanning 2G-5G and rendered the first adjudication of a global licensing rate for 5G multimode devices. This case has substantially enriched the frameworks for adjudicating global fair, reasonable and non-discriminatory (FRAND) licensing rates and has further propelled the evolution of global adjudication rules governing FRAND licensing for SEPs.

2. Renjun Bian has published an article titled Explaining the ‘Low and Unexplainable’ Patent Damages in China:  An Empirical Analysis of 992 Judicial Opinions, 14 Queen Mary J. Intell. Prop. K. 405 (2024).  Here is the abstract:

Patent damages in China are commonly criticized as low and unexplainable, which raises concerns over the overall credibility of China’s patent system. This article describes and reports the results of a large-scale empirical analysis of 992 invention patent infringement lawsuits decided by Chinese courts between 2014 and 2018 with damages awarded. The results show that whether patent damages in China are low depends on the selection of standards. If compared with damages granted by courts in the United States or the expectations of patent holders, patent damages in China are undoubtedly low. However, if considering the patent holder’s actual losses – a more rational standard – the allegation of low patent damages does not stand. In addition, around 64.1% of the variations in patent damages in China can be explained by pre-selected ex ante factors, among which proxies for patent value and scale of infringement play an important role. These findings demonstrate that patent damages in China are not as low and unexplainable as commonly believed. Instead, the rather ‘low’ damages compared to their counterparts in the United States reflect the main body of patent infringement lawsuits between small entities over technology improvements on small widgets and goods in China. 

3. Also of interest, in regard to China and SEPs, is an essay by Michael Franzinger in today’s Law360, titled How WTO’s Anti-Suit Injunction Ruling Affects IP Stakeholders.  For my previous post on the recent ruling by a WTO arbitration panel, finding in favor of the E.U. in its case against China, see here.

China’s Supreme People’s Court Issues Decision on Damages for Infringement of Plant Variety Rights

The case is Shenzhen Jingu Meixiang Industrial Co. v.  Hefei Wanfeng Seed Co., Ltd. and Huoqiu Baofeng Seed Industry Co., Ltd., Case No. Zui Gao Fa Zhi Min Zhong No. 466, 2 Nov. 2021.  An English-language translation by Connie Kongkui Hubbard is now available in 54 IIC 1121-31 (2023)--the August 2023 issue of the Max Planck Institute’s International Review of Intellectual Property and Competition Law—under the heading “China:  ‘Huang Hua Zhan’ Rice Variety’.”  To summarize, the plaintiff Jingu is the exclusive licensee of plant variety rights owned by the Rice Research Institute of the Guangdong Academy of Agricultural Sciences.  Jingu filed suit against Wanfeng, a producer and seller of rice seeds, and Baofeng, a seller, alleging infringement of these rights.  The court of first instance concluded that the defendants infringed and awarded damages of only CNY 300,000 against Wanfeng and CNY 40,000 against Baofeng.  Both parties appeal from certain aspects of the lower court’s ruling.  The SPC affirms the judgment of liability, but awards greater damages against Wanfeng, in the amount of CNY 1,000,000, plus CNY 50,000 costs.

Focusing exclusively on the damages issues, the Seed Law of the People’s Republic of China contains a provision similar to what is found in China’s Patent, Copyright, and Trademark Acts, in that it lists the various types of monetary compensation awardable in order of preference.  Thus, under article 73 of the law in force at the time of the above decision, the court could award damages based on actual losses to the rightsholder; if this was difficult to calculate, then it could award damages based on the infringer’s financial gain from the infringement; if this was difficult to calculate, the court could award a license fee, which could be multiplied up to three times in the presence of aggravating factors; and if all else failed, it could award statutory damages of up to 3,000,000 CNY (equal to about $409,000 as of today).  (An amended version of the Seed Law became effective in 2022.  The damages provision is now found in article 72, under which courts can increase the amount of the license fee up to five times, and statutory damages of up to CNY 5,000,000.)

Anyway, in the present case the SPC rejects the defendants’ argument that Jingu is not entitled to damages because it has not suffered a financial loss, reasoning that the rightsholder suffers a loss even if it does not produce seeds itself, and that the defendants profited from their infringement.  In addition, the court notes that Wanfeng and Jingu entered into a mediation settlement agreement in 2019, under which Wanfeng agreed to pay “damages of no less than CNY 1 million if it violated the agreement,” which according to the court it did.  More generally, the court appears to endorse the use of such stipulated damages agreements, stating that although such a provision may be “simplistic,” the “law does not proscribe a rights owner and an infringer from reaching an agreement in advance regarding liability and the amount of damages.”  In addition, the court noted that the infringement was a re-offense, occurring after the signing of the agreement; that the scale was "rather large"; and that Wanfeng sold and produced seeds that were found to infringing in two other cases in which it was not named as a party.  The court therefore ordered Wanfeng to pay CNY 1 million, plus costs (“reasonable expenses" Jingu incurred "defending its rights”) in the amount of CNY 50,000.  The court also concludes that, although a seller is not liable in damages if it proves that it did not know the seeds it sold infringed, and that it obtained the seeds from a legal source, Baofeng did not prove these facts here (“it is difficult to determine if Baofeng Company either did not know or need not know that the seeds it sold infringed”).  Therefore, Baofeng is liable for Jingu’s losses from the sale of the infringing seeds, plus costs.  The court awards "CNY 40,000.00 damages.”

Cotter on Nominal Damages

The final version of my paper Standing, Nominal Damages, and Nominal Damages “Workarounds” in Intellectual Property Law After TransUnion, 56 UC Davis Law Rev. 1085-1163 (2023), is now available on the law review’s website and on ssrn.  Here is the abstract:

  

            In June 2021, the United States Supreme Court held, in TransUnion LLC v. Ramirez, that plaintiffs lack standing to assert claims for statutory damages under the Fair Credit Reporting Act unless they can demonstrate “concrete harm” arising from those violations. Although TransUnion was not a case involving intellectual property (“IP”) rights, if the rationale of the decision is that Congress cannot authorize federal courts to entertain claims for statutory damages unless the plaintiff shows that it has suffered actual harm, some common monetary awards for the infringement of IP rights — specifically, statutory damages, reasonable royalties, and (in design patent law) awards of the infringer’s total profit, all of which are intended to reduce the risk that IP owners otherwise would be left with nothing more than nominal damages — would appear to be in jeopardy. This Article argues, nonetheless, that these three remedies, which the Article refers to as nominal damages “workarounds,” rest on a sufficient footing to overcome the sort of jurisdictional objection at issue in TransUnion, for two reasons. The first is that, according to TransUnion itself, “history and tradition offer a meaningful guide to the types of cases that Article III empowers federal courts to consider”; and history and tradition show that for over a hundred years courts have presumed that violations of IP rights cause harm, sufficient to sustain (at least) an award of nominal damages (or in the case of copyright, statutory penalties). Second, because the value of IP rights (unlike the rights at issue in TransUnion) often lies in the owner’s ability to license those rights to others who can exploit them more efficiently, from a functional perspective it often makes sense to conceive of infringement as causing harm when it deprives the owner of an opportunity to license.

 

            The Article further argues three additional points: first, that reasonable royalties are generally superior to both statutory damages and total profit awards as a nominal damages workaround; second, that courts retain authority to award nominal damages, as opposed to awarding zero damages or dismissing a claim altogether, when IP owners fail to satisfy all of the necessary conditions to qualify for one of the workarounds; and third, that courts should award only nominal damages in two recurring situations, namely when the evidence shows that the IP in suit provided no advantage over the next-best available non-infringing alternative, or that the defendant manufactured or acquired the IP unlawfully but then failed to use it. The Article rejects the view, however, expressed by some scholars, that courts should award only nominal damages in patent infringement actions in cases brought by patent assertion entities.

I should also note that the final draft of my essay And Should I Then Presume?:  A Response to Carrier and Tushnet’s An Antitrust Framework for False Advertising, 108 Iowa L. Rev. Online 22-35, is also now available on the law review’s website and on ssrn.  Here is the abstract:

             Michael Carrier and Rebecca Tushnet’s Article, An Antitrust Framework for False Advertising, makes a convincing case that a “categorical immunity” approach, under which false advertising can never serve as the basis for a monopolization or attempted monopolization claim under § 2 of the Sherman Act, is unwarranted; and that an alternative approach, under which courts apply a rebuttable presumption that false advertising is insufficiently exclusionary to contribute to the willful acquisition or maintenance of monopoly power, is similarly unsound. Carrier and Tushnet’s further argument that rather than simply applying a case-by-case approach, courts should adopt a rebuttable presumption of antitrust liability whenever a monopolist engages in false advertising, is somewhat less convincing, though I suspect that in practice such a presumption would only rarely be outcome-determinative.

Zhang on Characteristics of LItigated Patents in China

Huiyan Zhang has posted a paper on ssrn titled Characteristics of litigated patents in weak intellectual property rights regimes: Evidence from China (link here).  This (very interesting) paper is relevant to damages law, as you can see by reading the abstract below.

 

            This paper investigates characteristics of patents involved in infringement lawsuits in weak intellectual property rights (IPR) regimes. Weak IPR regimes usually feature weak patent enforcement, such as relatively low level of compensation to infringement loss or damage awards being capped by an upper bound. I build a dynamic model to show how these low-enforcement features lead to patterns of litigated patents that are not documented in the Western countries. I compile a new dataset comprising 17,331 Chinese litigated patents and their counterparts- 306,898 non-litigated patents. I find that valuable patents are less likely to be litigated than patents with lower values among invention patents while this pattern does not hold among utility models- the type of patents inferior to invention patents. I also document that China’s patent infringement litigation rate is extremely low by international standards, and it has been decreasing sharply over time. Litigated patents tend to concentrate in technological areas and industries in which litigation rates are relatively low in Western countries. These empirical patterns suggest that weak IPR regimes might create a “lemon market” for patent protection in which truly valuable patents are “crowded out” by their counterparts with lower value. Enhancing patent enforcement by eliminating the cap to damage awards might be a feasible solution.

From Around the Blogs: Mostly Injunctions

1. Both the EPLaw Blog and JUVE Patent have published posts recently on a Belgian decision in which, according to these sources, a court ordered the owner of a (non-standard essential) telecommunications patent (Tunstall) to license two infringement defendants  (Victrix and Télé-Secours).  Although there was no finding of abuse of dominant position, the court held that Tunstall committed an "abuse of economic dependence," which EPLaw describes as a "relatively new addition" to the Belgian Economic Code, and JUVE Patent describes as an "exceptional provision."  EPLaw, which also links to the decision in French and English, states further that, according to the Code, "economic dependence" means "the position of dependence of an undertaking on one or more other undertakings, characterised by the absence of a reasonably equivalent alternative available within a reasonable time, on reasonable terms and at reasonable cost, which would enable the undertaking or each of them to impose obligations or conditions which could not be imposed under normal market circumstances.”  On its face, the doctrine strikes me as a bit odd, insofar as it is not uncommon for there be no reasonable noninfringing alternatives available to an infringement defendant.  And while I think courts should have discretion to deny injunctive relief in circumstances suggesting a risk of patent holdup, I'm not sure it makes sense to withhold injunctive relief in many other cases, particularly if  there was no impediment to preinfringement bargaining, simply to prevent the patentee from charging a monopoly price.  In any event, I need to learn more about this Belgian doctrine.

JUVE Patent also published a post titled Düsseldorf Regional Court rejects PI in fingolimod case, according to which a German court held that a preliminary injunction cannot issue based on a pending patent application.  This issue has come up elsewhere in Europe in recent months, in other cases involving the same drug, fingolimod (see previous discussion on this blog here).  Yet another post discusses a Dutch court's granting of a cross-border preliminary injunction in a case involving the drug Okrodin. 

2.On SpicyIP, Aparajita Lath published a post titled Bye,  bye quia timet patent injunctions?  According to the post, a recent decision of the Indian Supreme Court held that "mediation prior to institution of a suit is mandatory unless the suit contemplates urgent interim relief."  The author believes that "suits praying for patent injunctions based on a mere fear of infringement (called ‘quia timet’ injunctions) will not qualify as suits for ‘urgent interim relief,’" because "such cases are based on mere apprehensions of infringement – nothing is urgent, clear or imminent."  The author approves of the mediation requirement, though for reasons I suggested the other day I think the question of mandatory presuit mediation or other ADR needs some careful study.

3.  On IP Watchdog, Marie McKiernan published a post titled An Exercise in Restraint:  Seeking and Combatting Injunctive Relief.  The post compiles statistics gathered from Lex Machina on permanent and preliminary injunction grant rates in the U.S. since from January 2, 2014 through December 31, 2020.  According to the post, during that time U.S. courts have awarded prevailing patent owners permanent injunctions in 87% of cases in which such relief was requested, and have granted 41% of motions for preliminary injunctive relief.  The post also discusses case law addressing the four eBay factors, e.g., what counts as irreparable injury, etc. 

4. Enrico Bonadio and Rishabh Mohnot published a post on the Kluwer Patent Blog titled Standard Essential Patents, Global Licensing Approach and the Principle of Territoriality.  The authors argue that the "‘global licensing approach’ adopted by the [UK] Supreme Court [in Unwired Planet] may not be consistent with the principle of territoriality," in that "[a]lthough the injunction granted in Unwired Planet does not extend to jurisdictions beyond the UK, it is based on the court’s assessment of royalty payable for a patent portfolio which includes patents held in jurisdictions beyond the UK."  The authors raise the question whether "the global licence approach is going to be challenged at the WTO for an alleged violation of Article 4bis of the Paris Convention," as incorporated into TRIPS.

5. On Bloomberg Law, Bobby McGill and Kelsee Griffis published an article titled GE Turbine Block a Setback, Not Death Knell, for New Wind Energy.  The article discusses a recent U.S. district court judgment granting an injunction against GE's construction of offshore wind turbines, with a carve-out for two turbines that are already under construction.  The article quotes Professor Elizabeth Winston as stating that the carve-out "represents an interesting balance between strong patent protections and public environmental concerns."  It reminds me a bit of Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302 (Fed. Cir. 2002), although in that case the oil platform at issue had been fully constructed.  I wonder if the German courts would consider a case like this one to be an appropriate one for denying or staying injunctive relief?

6. Finally, with regard to a case having nothing to do with injunctions, Norman Siebrasse published a post on Sufficient Description discussing a decision of the Ontario Court of Appeals affirming a judgment that "statutory stay damages" are the exclusive remedy for generic competitors who are kept off the market during the time the patent owner enjoyed market exclusivity based on a patent later held invalid--even if the patent is declared invalid later on, in proceedings to which the generic firm was not a party (and therefore was ineligible for statutory stay damages).  Professor Siebrasse likens the result to what would happen in the U.S. under the Noerr-Pennington doctrine.