NEWS & PUBLICATIONS
Anticipating Amendments to the Patent Law Based on Amendments to the Trademark Law
Wed Jan 22 13:14:00 CST 2014 Published by:

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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