For many foreign companies, after IP infringement is discovered in China, filing a lawsuit to order the infringer to stop infringement and pay damages is the best way to resolve the problem. However, in Chinese judicial practice, settlement negotiations, if used properly, can not only effectively resolve disputes, but can even achieve goals that litigation cannot.
There are a variety of reasons for settlements, including obtaining compensation in a timely manner, solving the dispute faster, turning the infringer into an agent or business partner and avoiding the uncertainty of judgement. Another advantage is that liquidated damages can be agreed on in the settlement, so that in case of anew infringement, the right holder will not need to once again collect all the evidence about sales volume of the infringer and scope of infringement to enable the court to calculate damages.
Settlement is by no means a bad thing, as long as it does not impede the main litigation goals. However, whether it is mediation under the court or settlement negotiations between the plaintiff and the defendant outside the court, there are usually several rounds of negotiations. It is necessary for the rights owner to prepare well in advance. Therefore, before considering settlement negotiations, it is recommended to draft a framework for settlement negotiations, especially to be clear about what are the non-waivable conditions or requirements.
But we also want to remind that settlement negotiation does not mean abandoning the legal process, the best solution is a combination of lawsuit and negotiation. If a settlement is advisable or not must be decided on a case by case basis, depending on different factors like the infringers attitude and intention, the scope of infringement, or the quality of evidences collected.