CHINA Trends and Developments Contributed by: Feng Zheng, Xiaoyang Yang, Baihe Liu and Hongfeng Li, Wanhuida Intellectual Property
the payment of royalty. As such, the date on which the royalty should have been paid was derived by adding the period of the maximum 18 months for negotiation plus five days for royalty payment to the date on which the patent implementer first responded to the patentee’s written notification of infringement. Accordingly, the SPC awarded the patentee a royalty of approximately RMB15.4 million (USD0.008/unit x 272,109,806 units at issue x exchange rate 7.07 RMB/USD) plus its interest, with the interest to be calculated from the day when the royalty became overdue to the day of actual payment of the patent implementer. High damages in life sciences cases In China, it has long been acknowledged that it can be a challenge to obtain high damages in patent litigation, due to the high evidentiary hurdle the plaintiffs have to overcome in justify- ing the damages claimed. As such, many foreign patentees would aim for an injunction, rather than high damages, in patent litigation in China. In December of 2023, the SPC issued the sec- ond-instance decision on a patent infringement dispute between a US plaintiff and two domestic defendants ((2021) Zui Gao Fa Zhi Min Zhong No. 2480), awarding the US plaintiff damages of RMB18.5 million in total. The patent at issue related to a protein having a specific sequence and endoglucanase activ- ity and a preparation containing the same for washing use or fabric processing. The plaintiff, with an exclusive licence to exploit the patent at issue, sued two domestic defendants as per the authorisation of the patentee. The two defend- ants were the manufacturer and the vendor of the infringing product respectively.
In China the patentee may request that damages be determined by the following methods: • a patentee’s actual loss caused by infringe- ment; • if the patentee’s actual loss cannot be deter- mined, damages may be determined based on the infringer’s illegal gains generated through infringement; • if neither of the above can be ascertained, damages may be determined with reference to the reasonable multiple of royalty; and • if none of the above can be determined, statutory damages up to RMB5 million may be awarded. As is the case with most plaintiffs of patent infringement disputes under Chinese practice, the plaintiff in this case requested the court to award damages based on illegal gains, which the defendants generated out of infringement. First instance The plaintiff requested damages be awarded based on illegal profits yielded during 59 months of infringement and presented three models for calculating damages. The plaintiff only obtained limited evidence regarding the defendants’ sales of the infringing products, and hence all three calculation models of damages the plaintiff pre- sented were predicated on a number of assump- tions. Shanghai IP Court, the first-instance court, found these calculation models inadequate to substantiate the actual sales figure and profit of the defendants and thus adopted the method of reasonable multiples of royalty fees to calculate damages as follows. Damages = sales of infringing product of 11 months acknowledged by manufacturer/11 months x 2 x 59 months x royalty rate in licence agreement x 3
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