Bei­jing court hands down high­est ever com­pen­sa­tion or­der

China Daily (Hong Kong) - - IP SPECIAL - ZHANG ZHAO zhangzhao@chi­

In a patent rul­ing made by the Bei­jing In­tel­lec tual Prop­erty Court last week, the de­fen­dant was or­dered to pay a to­tal of 50 mil­lion yuan ($7.2 mil­lion) in dam­ages to the patent rights owner, the high­est amount since the court was founded in Novem­ber 2014.

It is also the first rul­ing in which the court clar­i­fied how the at­tor­ney fees were charged.

Both the plain­tiff, Watch­data Co Ltd, and the de­fen­dant, Heng­bao Co Ltd, are man­u­fac­tur­ers of USB keys used as elec­tronic au­then­ti­ca­tion de­vices in fi­nan­cial ser­vices.

Watch­data filed the law­suit in Fe­bru­ary 2015. It said that Heng­bao had de­vel­oped and sold many USB key prod­ucts to “scores of banks across China”, us­ing its patent called “physic iden­ti­fi­ca­tion method and elec­tronic de­vice” with­out its autho­riza­tion.

It re­quested the de­fen­dant cease its in­fringe­ment and asked for com­pen­sa­tion of 49 mil­lion yuan, plus 1 mil­lion yuan in lit­i­ga­tion costs.

Heng­bao claimed that the ques­tioned prod­ucts and physic iden­ti­fi­ca­tion method in on­line bank trans­fers were not un­der the pro­tec­tion of Watch­data’s patent.

The court or­ga­nized a collegial panel of judges and as­ses­sors, which ruled in fa­vor of the plain­tiff. The ju­di­cial com­mit­tee de­cided to cal­cu­late the com­pen­sa­tion by mul­ti­ply­ing the sales vol­ume of the in­fring­ing prod­ucts by the rea­son­able profit of each patented prod­uct.

In­ves­ti­ga­tions found the spe­cific sales vol­ume of the in­fring­ing prod­ucts to 12 banks na­tion­wide, which led to ac­tual yuan

at­tor­ney fees in­cluded in the com­pen­sa­tion from Heng­bao

dam­ages of about 48.1 mil­lion yuan.

The court also con­firmed that Heng­bao had pro­vided in­fring­ing prod­ucts to an­other three banks, but was un­able to ac­quire sales data from the banks or the com­pany.

“Heng­bao re­fused to hand in re­lated data be­cause it might lead to con­se­quences against its in­ter­ests,” said He Xuan, the pre­sid­ing judge of the case, in an in­ter­view with China Cen­tral Tele­vi­sion.

Based on com­mon prac­tices, the court pre­sumed that the il­le­gal profit from sell­ing the de­vices to the three banks was at least 2 mil­lion yuan.

The court also sup­ported the de­mand of the lit­i­ga­tion cost, com­monly known as at­tor­ney fees, con­sid­er­ing the ne­ces­sity of hir­ing agents, the dif­fi­culty of the case and the ac­tual con­tri­bu­tion of the lawyers.

For the first time, the Beij i n g In t e l l e c t u a l P r o p e r t y Court rec­og­nized the above three fac­tors as the prin­ci­ples to judge at­tor­ney fees.

C hen Jinchuan, deputy di­rec­tor of the court, said they have been en­hanc­ing IP pro­tec­tion by greatly in­creas­ing com­pen­sa­tion from rights vi­o­la­tors, es­pe­cially those com­mit­ting bad faith and repet­i­tive vi­o­la­tions, so that the cost of IP in­fringe­ment will no longer be low.

“The mar­ket is the best frame of ref­er­ence to de­ter­mine the value of IPs,” he said.

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