The people’s court may, based on case circumstances, support the patentee’s claim of requesting the user of infringing products, whose legitimate sources defense is established, to bear reasonable expenses for safeguarding rights. If the user of infringing products whose legitimate sources defense is established and other infringement act conductors are joint defendants, the allocation of reasonable expenses for safeguarding rights among them can be determined after comprehensively considering the damage caused by their infringement acts respectively, the causal relationship or degree of correlation between their behaviors and the patentee's rights protection behavior, whether they hindered the smooth development of the patentee's rights protection behaviors and whether they increased expenses for right safeguarding.
In the patent infringement dispute between the Appellants Juxian A Factory and Rizhao B Company and the Appellee Rui’an C Company, an invention patent related to plastic granulator (hereinafter referred to as the patent involved) is involved.
Rui’an C Company believed that the technical solution of the plastic granulator manufactured by Juxian A Factory (hereinafter referred to as the accused infringing products) falls within the scope of protection of the patent involved. Juxian A Factory provided such plastic granulators to Rizhao B Company for free use, and Rizhao B Company, while aware of such granulators being infringing products, used such granulators. Thus, Rui’an C Company believed that Juxian A Factory and Rizhao B Company constituted infringement and caused economic losses to it, so Rui’an C Company filed a lawsuit within the court of first instance, requesting to order Juxian A Factory and Rizhao B Company to compensate for its losses, and commonly afford its reasonable expenses for safeguarding rights.
The court of first instance held that the accused infringement was established and that Rizhao B Company's legitimate source defense could not be established. It ruled Juxian A Factory and Rizhao B Company to stop the infringement and to compensate for economic losses and reasonable expenses for safeguarding rights.
Juxian A Factory and Rizhao B Company were dissatisfied and appealed to the Supreme People's Court, claiming that the accused infringing products used existing technology, and that the accused infringing products used by Rizhao B Company were purchased from Juxian A Factory. In this case, Rizhao B Company should also bear the reasonable expenses for safeguarding rights.
On June 6, 2022, the Supreme People's Court ordered Juxian A Factory to compensate Ruian C Company for economic losses and reasonable expenses for safeguarding rights and Rizhao B Company to bear joint liability for repayment of partial reasonable expenses for safeguarding rights therein.
The Supreme People's Court held, in the second instance, that Rizhao B Company's legitimate source defense was established.
Regarding whether the reasonable expenses for safeguarding rights claimed by Rui’an C Company should be borne by Rizhao B Company, according to paragraph 1 of Article 11 in the Patent Law, "use" is a type of patent infringement; and according to paragraph 1 of Article 65 that "the amount of compensation for patent infringement... shall also include the reasonable expenses paid by the patentee for preventing the infringement." To curb the infringement from the root, the patentees are guided to prevent the infringement from the manufacturing process of infringing products. At the same time, given that the user of the infringing product who has established the legitimate source defense does not have the subjective intention to infringe, the current legislation and judicial interpretations have designed a system that exempts the compensation liability of the users. However, the legitimate source defense, as a cause of exemption of compensation liability, does not automatically have the legal effect of eliminating the need to stop infringement or bear reasonable expenses.
In this case, Rizhao B Company used the accused infringing product manufactured and sold by Juxian A Factory in its production and operation activities. Such use constituted an infringement of the patent involved in the case. Although Rizhao B Company's legitimate source defense was established, the nature of its use being infringement remains unchanged, so it still needs to bear the reasonable expenses incurred by Rui’an C Company for safeguarding rights in this case.
At the same time, damages in civil cases of patent infringement and the patentee’s expenses for safeguarding patents are also different in their legal natures. Damages refer to the losses caused by infringement to the patentee in R&D costs, market share, trading opportunities, etc. It can be calculated based on the actual losses of the patentee or the profit of the infringer, while taking into account factors such as the price, quantity, profit margin, and patent contribution of the accused infringing products. Reasonable expenses include attorney fees, notarization fees, travel expenses, and other actual expenses incurred in rights protection activities, which are the monetary costs that the patentee incurred to obtain infringement relief, and therefore should be borne by the act conductor of the infringement.
In a case where there are multiple infringement act conductors, such as manufacturers and users, the reasonable expenses for infringement relief are for all the above-mentioned infringement behaviors, so, all infringement act conductors are liable for reasonable expenses that the patentee incurred for safeguarding rights.
The specific amount that each infringement act conductor should bear needs to be determined based on their respective infringement behaviors, the causal relationship or degree of correlation between their behaviors and the patentee's rights protection behavior, whether they hindered the smooth development of the patentee's rights protection behaviors, and whether they increased expenses for right safeguarding.
In this case, the reasonable expenses for safeguarding rights that Rui’an C Company requested Juxian A Factory and Rizhao B Company to jointly afford were generated aiming at both the manufacture and sales of the accused infringing products by Juxian A Factory and the infringement behaviors of Rizhao B Company’s infringing use, so such expenses should be afforded by both appellants.
 (2021) Zui Gao Fa Zhi Min Zhong No. 1406

If you have any question about the protection of intellectual property rights, please feel free to send us emails. For patent-related matters, please send to info@afdip.com. For trademark/litigation/legal matters, please send to info@bhtdlaw.com.