Determination of Punitive compensation in Patent Infringement Cases from Typical Cases

In recent years, with the increasing emphasis on intellectual property protection, the number of patent infringement disputes has been on the rise. One issue that has always been a concern for all parties involved is the determination of compensation amounts. In particular, the amended Patent Law in 2020 introduced a punitive compensation system which provides that, for willful patent infringement with severe circumstances, punitive compensation may be determined at more than one time but less than five times the amount of the actual losses suffered by the rights holder, the profits earned by the infringer, or multiple times of the patent license fee.

Therefore, for the right holder, if punitive compensation can be applied in an infringement lawsuit, it not only has a greater deterrent effect on the infringing behavior but may also lead to greater compensation. So regarding the conditions for applying punitive compensation and obtaining the court’s support for punitive compensation, this article explores the determination of punitive compensation in patent infringement cases by examining relevant legal provisions and a typical case. It aims to provide insights for right holders in terms of providing evidence for claiming punitive compensation in patent infringement lawsuits.

I. Conditions for Applying Punitive Compensation

According to the punitive compensation system, two factors are required for claiming punitive compensation: willful infringement of intellectual property rights by the defendant and severe circumstances. Therefore, in patent infringement litigation, when the plaintiff requests the application of punitive compensation, it is not only necessary to prove that the defendant willfully infringes on the plaintiff's patent rights, but also to prove that the defendant's infringing behavior is objectively severe.

1. Determination of Subjective Willfulness

According to the relevant judicial interpretations of the Supreme People's Court, for the determination of willfulness in intellectual property infringement, the court shall comprehensively consider factors such as the type of the infringed intellectual property object, the status of the rights, the fame of relevant products, and the relationship between the defendant and the plaintiff or interested parties.
Under the following circumstances, the people's court may preliminarily determine that the defendant has the willfulness in the intellectual property infringement:
(1) The defendant continues to commit infringing acts after being notified or warned by the plaintiff or interested parties;
(2) The defendant or its legal representative or manager is the legal representative, manager, or actual controller of the plaintiff or interested parties;
(3) The defendant has a labor, service, cooperative, licensing, distribution, agency, representative relationship or other relation with the plaintiff or interested parties, and had access to the infringed intellectual property;
(4) The defendant has business dealings, or has negotiated for reaching a contract, etc., with the plaintiff or interested parties, and had access to the infringed intellectual property;
(5) The defendant engages in piracy or counterfeit trademark registration;
(6) Other circumstances that can be determined as willfulness.

2. Determination of Severe Circumstance

According to the relevant judicial interpretations of the Supreme People's Court, for the determination of severe circumstances in the infringement of intellectual property, the court shall comprehensively consider factors such as the means and frequency of infringement, the duration, geographical scope, scale and consequences of the infringing act, and the behavior of the infringer during the litigation.
The court may determine that the circumstance is severe if the defendant has any of the following circumstances:
 (1) Committing the same or similar infringement again after being administratively punished or being held liable by a court;
 (2) Committing infringement of intellectual property rights as a business;
 (3) Forging, destroying or concealing evidence of infringement;
 (4) Refusing to fulfill a preservation ruling;
 (5) Making huge gains due to the infringement or causing the right holder to suffer huge losses;
 (6) Endangering national security, public interests or personal health with the infringing act;
 (7) Other circumstances that can be determined as severe.

II. Case Analysis

Punitive compensation case:  a series of disputes over infringement of utility model patents between LeDiamond Optoelectronic Co., Ltd. and Zhongshan Meigao Lighting Co., Ltd. [(2020) Yue 73 Zhi Min Chu 57].
Basic case information:
LeDiamond Optoelectronic Co., Ltd. (hereinafter referred to as LeDiamon) is the patentee of a utility model patent named "Structure Improvement for LED Bulbs", with patent number ZL201420776830.9. In the case of (2018) Yue 73 Min Chu 200, LeDiamond claimed that Zhongshan Meigao Lighting Co., Ltd. (hereinafter referred to as Meigao) had infringed on its utility model patent, and the judgment has determined Meigao's actions as infringing on the patent and ordered Meigao to stop manufacturing, selling, or offering for sell products that infringe on LeDiamond's involved patent, and compensate for economic losses and reasonable expenses for safeguarding rights, totaling 60,000 yuan. However, Meigao did not initiatively execute the judgment, and the executing court did not find any property information that could be executed, resulting in the executing court making a civil ruling to terminate the execution in case (2019) Yue 20 Zhi 3. Later, LeDiamond found that Meigao had once again committed actions suspected of infringing on the utility model patent for "Structure Improvement for LED Bulbs" with patent number ZL201420776830.9 and filed this case.
After trial, the court held that Meigao had the subjective willfulness to infringe on the involved patent. Not only did it refuse to execute the patent infringement responsibility determined by the effective judgment of the previous case, but it also repeated the behavior of infringing the involved patent. And Further, the infringement has been going on for a long time, and it has not provided evidence to prove that the adjudicated infringement has been stopped, which constitutes severe circumstances. Therefore, LeDiamond's claim that Meigao's involved infringing behavior was malicious and should be severely punished by law is reasonable, and punitive compensation should be applied to the infringing behavior. Accordingly, the court fully supported LeDiamond's claim for 250,000 yuan in compensation for economic losses and reasonable expenses for safeguarding rights from Meigao.

Summary:
In this case, the defendant Meigao had a clear understanding of the technical solution of the involved patent. More than a year after the previous infringement case was adjudicated, the plaintiff purchased and obtained the accused infringing products through notarization, which still infringed on the same patent. Therefore, it can be determined that Meigao willfully committed the adjudicated infringing behavior. In addition, Meigao not only refused to execute the effective judgment of the previous case objectively but also repeated the behaviors of manufacturing, selling, and offering for sell the adjudicated infringing products, which infringed on the same patent of the plaintiff again. And the infringement has been going on for a long time. These meet the requirements of severe circumstances.

III. Discussion and Suggestions

In the typical cases published, the determination of willfulness and severe circumstances in applying punitive compensation in patent infringement cases mainly involves situations where the defendant has not executed or not fully executed the previously effective judgment, and repeated the infringing behavior. The cases not only provide practical examples from exploration to actual implementation for similar cases, protect the legitimate rights and interests of the plaintiffs and technological innovation, but also provide reference and guidance for the parties to claim and present evidence for punitive compensation.

When facing a patent infringement situation, it is important for the rights holder to gather evidence to demonstrate that the infringer had prior knowledge of the existence of the patent right and therefore acted with subjective willfulness to infringe. It is also necessary to collect evidence of the severity of the infringement circumstances in order to seek the court's determination of punitive compensation, thereby protecting their legitimate rights and effectively combating infringement.


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