To date, many foreign companies are hesitant in bringing IP disputes before the Chinese courts, expecting low damage compensations. Now, these companies should take notice of a recent development in China.
On December 8, the Beijing IP Court has granted 50 million RMB (approx. 7.2 million USD) in damages to the Chinese company Watchdata in the course of patent infringement proceedings against another Chinese company, Hengbao. Watchdata’s invention patent for authentication technology for Chinese banks per USB was subject of the proceedings.
The so called hybrid calculation method was used as a basis for determining damage compensation, namely “sales figures of defendant x profit margin of the plaintiff’s patented product”. In order to conduct the calculation, the Court demanded 15 customers of the defendant to disclose the number of purchased USB dongles. Twelve banks complied with this request. Three banks and the defendant refused to reveal the numbers. For these four cases the Court accepted the plaintiff’s estimations.
Another noteworthy development here is that the IP Court for the first time accepted the calculation of legal fees on a time basis. This is likely to result in citations of this decision in future proceedings and this case becoming a precedent.
We expect this case to gain international attention and to encourage more foreign companies to enforce their IP rights before Chinese courts. However, it cannot be assumed that such high compensations will now become very common in China. To actually obtain compensation payments of this level, convincing evidence that will stand up in court as well as meticulous preparation are necessary.