An International Guide to
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4.4 Civil liabilities for patent infringement

Patent rights are a subset of the intellectual property rights stipulated in Article 123 of the Civil Code, which are property rights. Any person who infringes patent rights assumes civil liabilities in accordance with the laws. Article 179 of the Civil Code stipulates the following:

The main forms of civil liabilities include:

  1. (1) cessation of infringement;
  2. (2) removal of nuisance;
  3. (3) elimination of the danger;
  4. (4) restitution;
  5. (5) restoration;
  6. (6) repair, redoing, or replacement;
  7. (7) continuation of performance;
  8. (8) compensation for losses;
  9. (9) payment of liquidated damages;
  10. (10) elimination of adverse effects and rehabilitation of reputation; and
  11. (11) extension of apologies.
  12.   […]

The forms of civil liabilities provided in this Article may be applied separately or concurrently.

In civil cases involving patent infringement, the main forms of civil liabilities are cessation of infringement and compensation for losses.

According to Article 1185 of the Civil Code and Article 71 paragraph 1 of the Patent Law, in a case of intentional infringement of patent rights, and where the circumstances are serious, the right holder has the right to request corresponding punitive damages.

4.4.1 Cessation of infringement

Where an alleged infringer has implemented any of the acts of infringement stipulated in Article 11 of the Patent Law, the people’s courts will generally, based on the allegations of the right holder and in accordance with the laws, rule that the alleged infringer assume the civil liability of cessation of infringement so as to stop the acts of infringement.

However, under the following three circumstances, people’s courts may not order the cessation of infringement:

  • According to Article 26 of the Interpretation (II) of Patent Infringement Dispute Cases, “[c]onsidering national or public interests, the people’s court may not order cessation of infringement, and instead order the defendant to pay corresponding reasonable fees.”
  • According to Article 25 paragraph 1 of the Interpretation (II) of Patent Infringement Dispute Cases, where the user of an alleged infringing product does not know the product was made and sold without authorization of the patentee, can produce evidence to prove that the product was obtained from a legitimate source, and a reasonable consideration has been paid for the product, the people’s courts shall not support the right holder’s assertion for cessation of said use.
  • According to the provision on relevant issues concerning standard-essential patents in Article 24 paragraph 2 of the Interpretation (II) of Patent Infringement Dispute Cases (see Section 4.5.4.1 for further detail).

4.4.2 Compensation for losses

4.4.2.1 Calculation method of compensation

According to Article 71 of the Patent Law, in trials of civil cases involving patent infringement, the people’s courts shall determine the amount of compensation in one of the following four ways.

The first is a determination based on the actual losses suffered by the right holder due to the infringement. According to Article 14 paragraph 1 of the Provisions on the Trial of Patent Disputes, actual losses can be calculated by multiplying the total reduction in the sales volume of the patented product of the patentee due to the infringement by the reasonable profit of each piece of the patented product. Where it is difficult to determine the total reduction in the sales volume of the right holder, the product of multiplying the total sales volume of the infringing product in the market by the reasonable profit of each piece of the patented product is deemed to be the actual loss suffered by the right holder due to the infringement.

The second is a determination based on the profits earned by the infringer from the infringement. According to Article 14 paragraph 2 of the Provisions on the Trial of Patent Disputes, such profits can be calculated by multiplying the total sales volume of the infringing product in the market by the reasonable profit of each piece of the infringing product. The “reasonable profit” is generally calculated based on the operating profit of the infringer. For an infringer completely using infringement as its business, the reasonable profit can be calculated based on the sales profit.

Third, where it is difficult to determine the losses suffered by the right holder or the profits earned by the infringer, the amount of compensation can reasonably be determined by reference to a multiple of the royalties for the patent license. According to Article 15 of the Provisions on the Trial of Patent Disputes, the people’s courts may consider factors like the category of patent, the nature and circumstance of the acts of infringement, and the nature, scope and duration of patent licensing. Article 32 of the Provisions on Evidence in Civil Procedures involving Intellectual Property Rights states the following:

Where the concerned party asserts to determine the amount of compensation with reference to a reasonable multiple of the royalties for the patent license, the people’s courts may consider the following factors to examine and determine evidence related to the royalties for the patent license:
  1. (1) whether the royalties have been paid and method of payment, and whether the licensing contract has been performed or recorded;
  2. (2) the rights that have been licensed, and the manner, scope, and duration of license;
  3. (3) whether the licensee has an interest with the licensor; and
  4. (4) customary licensing standard in the industry.

Thus, the key factors include whether the royalties referred to were actually paid, whether the customary standard was met and whether the rights being licensed – and the manner, scope and duration of license – are comparable.

The fourth method for determining compensation is statutory compensation. According to Article 71 paragraph 2 of the Patent Law, where it is difficult to determine the losses suffered by the right holder, the profits earned by the infringer and the royalties for the patent license, the people’s courts may, based on the type of the patent right, and the nature and circumstances of the infringement act, determine a compensation amount between RMB 30,000 and RMB 5 million. The nature and circumstances of acts of infringement refer primarily to the subjective fault of the infringer, the means of infringement, the duration of acts of infringement, the damaging consequences to the right holder and so on.

4.4.2.2 Compensation should have a causal relationship with and be proportional to the act of infringement

Article 16 of the Interpretation of Patent Infringement Dispute Cases stipulates the following:

In determining the profits earned by the infringer as a result of the infringement, the profits shall be confined to those acquired by the infringer from the acts of infringement, while profits earned from other rights shall be reasonably deducted.

Where the product infringing upon an invention or a utility model patent right is a component of another product, the people’s courts shall reasonably determine the amount of compensation based on factors such as the value of the component itself and its role in achieving the profit of the final product.

The main consideration for this provision is that, if an alleged infringing product involves several patent rights or simultaneously involves a patent right and trademark right, then, in a lawsuit over infringement of one or part of the patent rights thereof, the profits earned by the infringer should be determined based on the profits earned as a result of the infringement of the involved patent, rather than the full profit of the product. In Article 16, “other rights” refers primarily to intellectual property rights. The profits earned from other rights can be reasonably determined based on the specific facts and overall circumstances of the case.

In an appeal of a dispute over patent infringement, Hua Jiping v. Shanghai Oxylane Trade Co.,106 the Supreme People’s Court held that, when considering relevant factors for determining the compensation, the focus is the reasonability and the proportionality thereof. In determining the amount of compensation for intellectual property infringement, the degree of subjective fault of the concerned party may be considered in determining the compensation liability, especially when it is necessary to use discretion to determine the specific calculation criterion.

In a retrial of a dispute over utility model patent infringement, Wuxi Guowei Ceramic Electrical Appliances Co. v. Chagnshu Linzhi Electrical Heating Components Co.,107 the Supreme People’s Court held that, in calculating the amount of compensation for patent infringement based on the profits earned by the infringer as a result of the infringement, for an alleged infringing product involving several components or several patents, the profits should, in principle, not be calculated by simply multiplying the total sales amount of the infringing product by the profit margin thereof. Instead, the involved patent’s ratio of contribution to the profit of the infringing product should be considered, and profits as a result of the infringement may be calculated based on the following formula: total sales amount of the infringing product × profit margin × contribution ratio of the patented technology to the product value. The contribution ratio of the patented technology to the product’s value can be determined with discretion by considering the importance of the involved patent to the product.

Where the acts of infringement are severable, in calculating the amount of compensation for the infringement, if a part of the losses suffered by the right holder or profits earned by the infringer can be relatively accurately calculated and a part thereof is difficult to calculate, then compensation for the former may be calculated based on the losses or profits, statutory compensation applies for the latter, and the sum of the two is used to determine the final amount of compensation.

4.4.2.3 Agreement on the amount or calculation method of compensation for patent infringement in accordance with the law

Article 28 of the Interpretation (II) of Patent Infringement Dispute Cases stipulates the following:

Where the right holder and the infringer agree, according to law, on the amount or the calculation method of compensation for patent infringement and assert during a patent infringement lawsuit that the compensation amount shall be determined in accordance with such an agreement, the people’s courts shall support such an assertion.

For such an agreement, the people’s courts will, in accordance with the provisions of the Civil Code and the assertion of the concerned parties, examine whether there is any circumstance that may render the agreement invalid or revocable.

In a retrial of a dispute over utility model patent infringement, Zhongshan Longcheng Daily Products Co. v. Hubei Tongba Children’s Appliances Co.,108 the Supreme People’s Court held that the Tort Liability Law and Patent Law do not prohibit an infringed person and the corresponding infringer from making prior agreements on the form of tort liability and amount of compensation. The substance of such agreements is a previously agreed simple method for calculating and determining the losses of the right holder or the profits of the infringer with respect to an infringement that has not yet occurred. Such agreements include agreements made either after or before the acts of infringement.

4.4.2.4 Reasonable expenses of the right holder

Article 71 paragraph 3 of the Patent Law stipulates the following: “The amount of compensation shall also include the reasonable expenses of the right holder paid for putting an end to the infringement.” According to Article 16 of the Provisions on the Trial of Patent Disputes, if a right holder asserts the reasonable expenses they paid for putting an end to the infringement, the people’s courts may calculate such costs in addition to the compensation determined in accordance with Article 65 of the Patent Law.

In an appeal of a dispute over patent infringement, Hua Jiping v. Shanghai Oxylane Trade Co.,109 the Supreme People’s Court held that the costs of the right holder for investigating and putting an end to the infringement – so long as they are reasonable – can be incorporated into the amount of compensation. Such reasonable expenses do not necessarily need to be proved individually by vouchers. According to the specific circumstances of the case, the people’s courts may consider the amount of reasonable expenses that can be proved by vouchers and other reasonable factors of expenditure to determine the amount of reasonable expenses but not exceeding the amount asserted by the right holder.

In judicial practice, circumstances also exist where right holders abuse their rights to bring infringement lawsuits, while alleged infringers require the right holders to compensate for reasonable expenses. In this respect, the Reply on Compensation for a Plaintiff’s Abuse of Rights stipulates that, in an intellectual property infringement lawsuit, where the defendant submits evidence to prove the lawsuit filed by the plaintiff constitutes an abuse of rights according to law, which has damaged the defendant’s legitimate rights and interests, and requests the plaintiff to compensate for the defendant’s reasonable expenses (e.g., attorney’s fees, travel expenses, and boarding and lodging expenses) arising from the lawsuit, the people’s courts shall support such a request. The defendant may also file a separate lawsuit to request the plaintiff to compensate for the above reasonable expenses.

4.4.2.5 Rules of evidence related to compensation

Compensation is determined based on evidence. In judicial practice, evidence related to the nature and circumstances of acts of infringement and the profits earned by the infringer is usually held by the infringer and difficult for the right holder to obtain. To reduce right holders’ difficulty in producing evidence, the Patent Law and related judicial interpretations have stipulated rules of evidence that are related to compensation and in compliance with the characteristics of civil cases involving intellectual property infringement generally.

Article 71 paragraph 4 of the Patent Law stipulates that, where a right holder has tried their best to provide evidence, but the account books or materials related to the patent infringement are mainly in the possession of the infringer, then, to determine the amount of compensation, the people’s court may order the infringer to provide those account books or materials. Where the infringer refuses to provide the account books or materials or provides false account books or materials, the people’s court may determine the amount of compensation by reference to the right holder’s claims and the evidence provided.

According to Article 31 of the Provisions on Evidence in Civil Procedures involving Intellectual Property Rights, account books and documents, sales contracts, documents on the inflow and outflow of goods, annual reports of listed companies, prospectuses, websites or promotion catalogs, trading data stored in equipment and systems, commodity circulation data accounted by third-party platforms, assessment reports, intellectual property right licensing contracts, and records on market supervision, taxation and finance departments may be produced as evidence to prove the amount of compensation for intellectual property infringement asserted by the plaintiff.

4.4.3 Punitive damages

According to Article 1185 of the Civil Code and Article 71 of the Patent Law, in a case of intentional infringement of patent rights, and where the circumstances are serious, the people’s courts may apply one to five times the punitive damages. In March 2021, the Interpretation of Punitive Damages in Intellectual Property Civil Cases was implemented. This judicial interpretation specifies the application scope of punitive damages, the contents and time of the request, the determination of intentional infringement and serious circumstances, the calculation basis and multiples, and so on. In civil cases involving patent infringement, the determination of punitive damages primarily involves the issues in the following sections.

4.4.3.1 Time limit for requesting punitive damages

Where a plaintiff requests punitive damages, they must clearly state the amount of the damages, the calculation method, and the facts and grounds serving as the basis thereof when filing the lawsuit. Where a plaintiff adds a request for punitive damages before the end of oral arguments in the court of first instance, the people’s courts shall permit such an addition. Where a plaintiff adds a request for punitive damages during the trial of second instance, the people’s courts may conduct mediation in the principle of voluntariness of the parties and, if the mediation fails, notify the concerned party to file a separate lawsuit.

4.4.3.2 Determination of intentional patent infringement

The people’s courts need to consider the specific category of a patent right being infringed, the status of the right, the popularity of the relevant product, the relation between the defendant and the plaintiff or an interested party, and so on. According to Article 3 of the Interpretation of Punitive Damages in Intellectual Property Civil Cases, under the following circumstances, the people’s courts may preliminarily determine that the defendant has intentionally infringed the intellectual property right:

  1. (1) the defendant continues the infringing act after being notified or warned by the plaintiff or an interested party;
  2. (2) the defendant or the legal representative or administrator thereof is the legal representative, administrator, or actual controller of the plaintiff or an interested party;
  3. (3) the defendant has a labor relation, service relation, cooperation relation, licensing relation, distribution relation, agency relation, representation relation, etc. with the plaintiff or an interested party, and had access to the infringed intellectual property;
  4. (4) the defendant and the plaintiff or an interested party have business dealings or have previously negotiated with each other to conclude a contract, and had access to the infringed intellectual property.
4.4.3.3 Identification of serious circumstances of patent infringement

The people’s courts shall comprehensively consider the means and times of infringement; the duration, geological coverage, scale and consequences of the acts of infringement; and the acts of the infringer during litigation. According to Article 4 of the Interpretation of Punitive Damages in Intellectual Property Civil Cases, the defendant can be identified as having serious circumstances in case of the following:

  1. (1) conducting the same or similar acts of infringement after being subject to administrative punishment or being ordered by a court to assume liability for infringement;
  2. (2) taking the infringement as occupation (business);
  3. (3) falsifying, destroying, or concealing evidence of infringement;
  4. (4) refusing to enforce preservation rulings;
  5. (5) acquiring huge profits or causing huge losses to the right holder due to the infringement;
  6. (6) national security, public interest, or personal health are possibly damaged because of the acts of infringement.
4.4.3.4 Basis for the calculation of punitive damages

The people’s courts shall take the amount of losses actually suffered by the plaintiff, or the amount of illegal gains or profits earned by the infringer as a result of the infringement, as the basis for calculating punitive damages. This calculation basis does not include the reasonable expenses of the right holder paid in putting an end to the infringement. Where it is difficult to calculate the amount of actual losses, amount of illegal gains or amount of profits, these amounts shall be reasonably determined with reference to a multiple of the royalties for the license, which will then be taken as the calculation basis for punitive damages.

4.4.3.5 Determination of the multiple of punitive damages

To determine the multiple of punitive damages, the people’s courts comprehensively consider the degree of subjective fault of the defendant, the severity of circumstances of infringement and so on. Where the defendant has been subject to administrative punishment or criminal penalty due to the same act of infringement, and this has been fully enforced, the defendant’s assertion of reducing or exempting the liability for punitive damages will not be supported by the people’s courts but may be considered in determining the multiple.