GOLDENGATE SHARING APPLICATION OF PUNITIVE COMPENSATION IN PATENT INFRINGEMENT LITIGATION
GOLDENGATE SHARING | APPLICATION OF PUNITIVE COMPENSATION IN PATENT INFRINGEMENT LITIGATION
Frank Chen
Different from the compensatory compensation system, the punitive compensation system is set up to contain and punish intentional and serious infringements of intellectual property rights in order to maintain a good market environment. In the field of patent infringement, the punitive compensation system is also established.
Legal Basis
The punitive compensation in the field of patent infringement originates from Article 71 of the Patent Law and the Interpretation of the Supreme People's Court on the Application of Punitive Compensation in Civil Cases Involving Infringement of Intellectual Property Rights. Article 71 of the Patent Law states: "The amount of compensation for infringement of a patent right shall be determined based on the actual loss suffered by the right holder due to the infringement or the profits obtained by the infringer from the infringement; where it is difficult to determine the loss of the right holder or the profits obtained by the infringer, the amount shall be reasonably determined by referring to multiples of the patent license fee. For intentional infringement of a patent right with serious circumstances, the amount of compensation may be determined at an amount not less than one time and not more than five times the amount determined by the above method". As stipulated in Article 1 of the Interpretation, "If the plaintiff alleges that the defendant intentionally infringed upon its intellectual property rights enjoyed in accordance with the law and the circumstances are serious, and requests the court to order the defendant to bear the liability for punitive compensation, the people's court shall examine and handle it according to the law". It can be seen that the statutory requirements for the application of punitive compensation are intentional infringement and serious circumstances, both of which are indispensable.
Application upon Request
The application of punitive compensation is not initiated by the court proactively but is predicated on the rights holder explicitly requesting it before the conclusion of the court debate in the first instance. When requesting punitive compensation, it is also necessary to clarify the base amount for punitive compensation, the method for determining the base amount, the calculation method, the multiple, and the total amount of compensation, along with providing corresponding evidence.
Proof of Infringement Intent
Proving the defendant's intentional infringement essentially involves demonstrating the defendant's access to and understanding of the subject matter of the patent right. When determining whether the infringement of the patent right is intentional, evidence can be presented from aspects such as the status of the right, the popularity of the patented product, and the relationship between the defendant and the plaintiff or interested parties. For example, one or more of the following angles of evidence can be collected and provided to show that the defendant has a subjective understanding of the patent right or interest, thus intentionally infringing upon the patent right:
- The patented product, which incorporates or corresponds to the technical solution or design of the patent, enjoys a high level of popularity within the industry;
- After becoming aware of the plaintiff's patent right subject matter through judicial, administrative, or arbitration proceedings, the defendant continues to commit the infringing act;
- After being notified or warned by the plaintiff or an interested party, the defendant continues to commit the infringing act;
- The defendant or its legal representative or manager is the legal representative, manager, or actual controller of the plaintiff or an interested party;
- There exists an employment, labor, cooperation, licensing, distribution, agency, representation, or other relationship between the defendant and the plaintiff or an interested party, and the defendant has had access to the infringed patent right;
- There have been business transactions or negotiations for contract formation between the defendant and the plaintiff or an interested party, and the defendant has had access to the infringed patent right;
- After the expiration of the license agreement, the defendant continues to use the previously licensed subject matter;
- After the defendant's improperly obtained patent right is declared invalid according to the law, the defendant continues to implement or use that patent right and the corresponding technical solution constitutes an infringement of the plaintiff's patent right.
Proof of Severe Circumstances
When determining the severity of infringement, evidence can be presented from aspects such as the means of infringement, frequency, scale, consequences, duration of the infringing act, geographical scope, and the infringer's conduct during litigation. For example, the following evidence, from one or more angles, can be collected and presented to demonstrate that the defendant's infringing act involves a large number of unauthorized uses of the plaintiff's patented subject matter, represents a significant value in the infringing product, employs egregious means, has a widespread social impact, and has caused significant losses and negative effects on the plaintiff:
- After being found liable for infringement by an administrative penalty or ruling, a voluntary settlement agreement acknowledging infringement, or a final judgment, mediation agreement, or arbitration award recognizing infringement, the defendant continues to commit the same infringing act or persists in the infringement;
- The defendant adopts measures such as establishing new enterprises, changing the business name, replacing the legal representative, or utilizing affiliated enterprises to continue or repeat the same infringing act;
- The defendant's infringement is large in scale and has persisted for an extended period;
- The defendant's infringing products have been sold in vast quantities, causing significant damage to the plaintiff's market share;
- The infringing act committed by the defendant is its primary business and constitutes a major source of profit;
- The defendant falsifies, destroys, or conceals evidence of infringement;
- The defendant employs illegal or improper means such as violence or coercion to obstruct national staff from lawfully investigating and collecting evidence;
- The defendant refuses to comply with a behavioral preservation ruling without justification;
- The defendant refuses to comply with a final judgment, ruling, or award that finds the defendant to have committed infringement.
Determination of Compensation Base
When applying punitive compensation, the total compensation amount is the sum of the base amount and the product of the base amount and the multiplier, with reasonable expenses incurred to stop the infringing acts calculated separately.
According to Article 71 of the Patent Law, the compensation base is generally determined first based on the plaintiff's actual losses or the defendant's profits from infringement. If both the plaintiff's actual losses and the defendant's profits from infringement are difficult to calculate, the compensation base can be determined by reference to a reasonable multiple of the patent license fee.
Determination of the Compensation Multiplier
The multiplier for punitive compensation is generally commensurate with the infringer's intentional infringement and the severity of the circumstances. The multiplier for punitive compensation can be determined within the range of 1 to 5 times based on the evidence of intentional infringement and severe circumstances mentioned above, combined with one or more of the following factors:
- The degree of intentional infringement;
- Whether the infringer has repeatedly infringed upon the patent right;
- Whether the infringer has truthfully submitted evidence of profits from infringement;
- The duration of the infringement;
- The number of patented technologies infringed in the infringing products;
- The type of patent;
- The remaining validity period of the patent;
- The level of innovation of the patent;
- Whether the patent is a high-value invention patent recognized by the Patent Administration Department of the State Council;
- Whether the patented technology belongs to key core technology, technology in key areas or emerging industries, or high-tech supported by the state;
- The harm caused by the infringement to the industry;
- Whether the infringer has previously borne liability for damages for infringing upon the same patent right and the specific circumstances of such liability.
In summary, when requesting the application of punitive compensation in a patent infringement lawsuit, the plaintiff needs to prepare sufficient evidence in advance to prove the following:
1. The defendant's act constitutes infringement;
2. The defendant has the intention of infringement;
3. The defendant's infringement is severe;
4. The plaintiff's actual losses, the defendant's profits from infringement, or the referable patent license fee;
5. The rationality of determining the compensation multiplier, etc.
The plaintiff must expressly request the application of punitive compensation and present corresponding evidence before the conclusion of the first-instance court debate, to secure the court's support for the claim of punitive compensation and effectively protect the plaintiff's legitimate rights and interests.
Introduction
Frank Chen, Attorney at Law, Patent Attorney
Practice Areas: Patents, Computer Software Copyrights
Personal Profile:
Mr. Frank Chen has extensive experience in handling domestic and foreign patent cases, and excels in patent infringement litigation, patent invalidation, patent administrative litigation, protection of key technology patent applications, patent infringement analysis, and evasion design.
Mr. Frank Chen has established long-term cooperative relationships with law firms and patent lawyers in the United States, major European countries, Japan, Singapore, India, and other countries, which enables him to efficiently and effectively assist domestic enterprises in patent applications and patent protection overseas.
