CHINA Trends and Developments Contributed by: Feng Zheng, Xiaoyang Yang, Baihe Liu and Hongfeng Li, Wanhuida Intellectual Property
Patent Litigation in China in 2025 Throughout 2024, China’s patent litigation remained active. The IP Tribunal of the Supreme People’s Court (SPC) has issued decisions pro- viding further guidance on damages calculation in the SEP/FRAND and life sciences sectors. The SPC has also leveraged pertinent decisions outlining the liabilities of patentees acting in bad faith. These decisions showcase the cur- rent juridical practice of Chinese courts relating to the said issues, yet it remains to be seen how the jurisprudence will evolve in 2025. SEP/FRAND In 2024, one of the key issues in Chinese SEP lit- igation was the determination of royalty rate. Into 2025, the current Chinese practice aligns with that of other jurisdictions in using the compara- ble licence method and the top-down method in assessing royalty rate. In December of 2023, the SPC issued the sec- ond-instance decision (2022) Zui Gao Fa Zhi Min Zhong Nos. 907, 910, 911, 916, 917 and 918 on disputes over infringement of six SEP patents and royalty determination thereof between, inter alia, a US company (“plaintiff”) and a Chinese domestic cell phone manufacturer (“defend- ant”). The SPC’s decision provides a framework of reference as to how Chinese courts could approach royalty determination and calculation of damages. The SPC held that damages awarded to a pat- entee of a SEP patent should be the royalty the implementer of the SEP patent should have paid plus the patentee’s loss of interest the royalty should have yielded. To calculate damages, the SPC followed a four-step approach, namely: • determination of the number of infringing cell phones sold;
• determination of royalty rate per unit; • determination of liability of culpa in contra- hendo for both patentee and patent imple- menter (whether they follow FRAND princi- ple); and • determination of damages. In determining the royalty rate per unit, the SPC commented that both the comparable licence method and the top-down method were com- monly used, and in a given case which method is to be adopted would hinge on the evidence produced. In this decision, the SPC followed the comparable licence method. The rationale behind this is: such method was specifically requested by the plaintiff and only comparable licence agreements were adduced as evidence. In identifying the comparable licence agreement for comparison, the SPC factored in the negotia- tion background of the licence agreement, the resemblance in licensor and licensee, in the SEP patent at issue and in the content of the licence agreement. Accordingly, the SPC selected a comparable licence that concerned the licens- ing of the same SEP patents within China for a comparable number of cell phones, with the licensee being another major domestic player in telecommunication. The comparable licence set forth an aggregate royalty for all six SEP patents. On that basis, the SPC calculated the royalty rate per unit to be USD0.008 for all the six SEP patents. Regarding the determination of liability of culpa in contrahendo, the SPC stated that the liabil- ity was only relevant to determining how the patentee’s loss caused by the non-payment of royalty of the patent implementer should be apportioned between the parties. To determine whether a party followed the FRAND principle, the test was whether a party had displayed a genuine intent to reach a licence agreement. In
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