Jacob Schindler

China-based data provider IP House recently put together a fairly thorough analysis of all the rulings delivered by the Beijing IP Court during 2015. The information on damages from this first batch of patent disputes should prove a useful benchmark for monitoring whether Chinese policymakers’ goal of increasing award amounts is being realised. More recent developments surrounding evidence preservation and punitive damages suggest that higher damages is a priority as litigation numbers in the country continue to zoom.

Data on damages comes from a sample of 94 first instance patent disputes in which the Beijing court rendered a judgment (another 250 cases were settled or resolved through mediation). These include patent cases of all types, as well as trade secrets claims and other IP disputes with a significant technology element. The plaintiff succeeded at least partially 72% of the time – but only 54 of the winning parties claimed any damages at all. It’s likely that in many suits, damages are an afterthought compared to the strong potential to get a court order halting infringing activity across China.

Overall, winning plaintiffs had asked the court for a little less than 1 million RMB ($138,0000) on average; the average amount actually ordered was less than half of that – around 450,000 yuan. Restricting it to just invention patent disputes, complainants asked for slightly more, 1.2 million RMB, but the court actually granted just around half of that amount on average. Just a couple of outlier cases resulted in a payout of more than 3 million RMB, while about half of the rulings fell within the 100,000-500,000 yuan range. It will be interesting to watch the ratio of damages claimed to awarded, which IP House is tracking – an increase here would be one of the most straightforward ways for damages to increase.

Panasonic was the beneficiary of the biggest ruling in 2015, in a case which centered on a design patent for a cosmetic device. The Japanese company received the full amount claimed, 3.2 million yuan. Korean appliance maker Hurom was also among the handful of companies to net more than 1 million RMB in a patent judgment. We know that the figures on biggest award will look a lot different when IP House is able to do a deep dive into 2016. In December, the Beijing IP Court issued a 50 million RMB ($7.2 million) judgment to local company Watchdata. Significantly, it was also last year, 2016, when we started to see more mobile licensing oriented disputes wind up in Chinese courts. The first of these to make it to a judgment will provide an important benchmark.

There are also indications that some judges are becoming more assertive when it comes to compelling defendants to turn over evidence that can aid in calculating damages – a long-time point of frustration for patent plaintiffs. In a dispute between two Qingdao-based companies this month, the Beijing IP Court fined one party 1 million RMB for failure to financial records and product samples available. As the IP House data from 2015 shows, this amount would have been at the upper limit of actual damages awards in any invention patent case that year. If it becomes more widespread for uncooperative defendants to face steep financial costs, we’ll have a lot more opportunity to see how courts assess damages based on the infringer’s profits and other methods. Punitive damages for wilful infringement are also likely to be on the cards in the near future.

Even at relatively elevated levels, Chinese damage awards aren’t likely to be significant money-makers for NPEs or corporate IP departments any time soon. But the progress made in the area is a clear signal that the country’s policymakers seem intent on making patent rights stronger and even on ensuring that China becomes a key global venue for patent litigation. Amid some uncertainty over the future direction of IP policy in the US and Europe, that is an unmitigated positive for IP owners - especially when you throw in the possibility of getting injunctions..