Qiu Keqiang
Chinese legislators, prior to formally promulgating any amendments to the Trademark Law or the Patent Law, always release draft versions for scholarly discussion and public commentary. On August 30, 2013, the third set of Amendments to the Trademark Law was released. These amendments include a large number of changes; in particular, the changes in infringement compensation are quite gratifying and encouraging. Consequently, the author refers to the Amendments to the Trademark Law and entertains educated guesses on possible amendments to the Patent Law for your reference.
1. Increase in statutory compensation limits
The amended
Trademark Law provides that where it is hard to determine the rights owner's
actual infringement damages; the infringer's actual profits obtained due to the
infringement; or the royalties applicable to the registered trademark; the
People's Court shall award statutory damages of up to CNY 3 million on a
case-by-case basis.
The Amendments to the Trademark Law intensify the
crackdown on infringement. They increase the amount of the administrative
penalties and damages compensation (especially punitive statutory damages).
Prior to this amendment, compensation levels for patent infringement had long
been criticized. Research indicates that statutory damages were awarded in
97.25% of patent judgments. Article 65.2 of the Patent Law provides that
statutory damages range from CNY10,000 and CNY 1,000,000 depending on the
discretion of the court after it considers the characteristics of the patent
rights, the nature and circumstances of the infringement and other factors, as
long as it is difficult to ascertain either the losses incurred by the patent
owner, the profits gained by the infringing party and the applicable patent
royalties
Statutory damages are sometimes abused because of difficulties in
obtaining evidence, since typically no one but the infringer really knows how
much profit was gained through the infringement. The stringent attitude of
judges towards the application of the rules of evidence is also a reason for
abuse of statutory damages. Most plaintiffs are inclined to calculate
compensation based on their actual losses or the infringers’ illegal gains.
Judges, however, typically reject this calculation standard based on lack of
evidence, and replace it with statutory damages of lesser amounts. In practice,
statutory damages judgments generally award invention patent holders CNY200,000
to 300,000, utility model holders CNY 100,000 to 150,000, and design patent
holders less than CNY 100,000. These compensation amounts are seriously
inconsistent with the amount of the application fees, official fees, execution
expenses and creative work contributed by the inventors, and thereby greatly
dampen patent holders’ motivation to enforce their rights. Patent holders,
especially invention patent holders, deserve greater protection than trademark
holders, because under normal circumstances they must contribute far more
creative work and effort than trademark holders. Given this, the author
anticipates that the future Patent Law may raise statutory damages to at least
the CNY 3 million level provided by the new Trademark Law, and perhaps even to
the CNY 5 million to 10 million level.
2. Relieving the Patent Owner from
the Burden of Proof
The Amendment to the Trademark Law provides that for
the purpose of determining the compensation amount, where the account books and
information regarding infringement are held by the infringer and the rights
owner has used best efforts to prove the amount of compensation, the People's
Court may order the infringer to submit such account books and information; and
if the infringer refuses or submits falsified records, the People's Court may
determine the amount of compensation based on the rights owner's claims and
evidence.
The Amendment of the Trademark Law greatly relieves trademark
owners from the burden of proof in infringement cases. As mentioned earlier,
patent owners encounter the same or even greater difficulties than trademark
owners do in obtaining evidence of damages. Accordingly, the author boldly
speculates that the future Patent Law will include similar provisions to relieve
the patent owners’ burden of proof in infringement disputes.
3. Punitive
Damages for Malicious Infringement.
The Amendments also provide that the
amount of compensation for infringing the exclusive right to use a trademark
shall be determined based on the rights owner's actual losses due to
infringement, or if these are difficult to calculate, the infringer's actual
gain arising from infringement if the actual losses are hard to be determined.
If both the rights owners’ losses and the infringer’s gains are hard to
calculate, damages may be based on trademark royalties. For serious malicious
infringement, compensation may be calculated at 100% to 300% of the aforesaid
amounts. The amount of compensation must include reasonable expenses incurred by
the rights owner to prevent infringement.
Referring to the Draft for
Comments issued in 2012, we can be almost certain that the future Patent Law
will certainly apply similar provisions imposing punitive damages on malicious
infringement.
The foregoing merely represents the author’s personal opinion on the possible content of the new Patent Law. If it is amended in the manner I expect, infringement risks will be increased to a substantial degree, and patent owner’s confidence in the enforceability of their rights will be enhanced.
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