IP special

Landmark patent rights compensation payout now in doubt

For Qian Jing, chairman of Hengbao Co Ltd, it was a big surprise to hear that his company might not have to pay 50 million yuan ($7.2 million) to Watchdata Co Ltd for violating its patent rights.

One year after the result of the first trial was announced, attracting much attention, the case, famous for its rare large compensation sum, saw signs of a dramatic reversal recently.

Both companies are developers of USB keys, a technological tool used as electronic authentication devices in financial services.

Defendant Hengbao was charged with violating the rights of Watchdata by using its patent “physic identification method and electronic device” in USB key products sold to banks across China.

In December 2016, the Beijing Intellectual Property Court ordered Hengbao pay 50 million yuan in damages to Watchdata, the highest amount since the court was founded in November 2014.

However, the case saw signs of being overturned when the Patent Reexamination Board of the State Intellectual Property Office announced Watchdata’s patent was invalid, after receiving an application from a third-party participant.

“It may not be necessary for a second trial,” Qian said. “It means the net profit of our company could increase 50 million yuan.”

However, Watchdata said it was still too early for a final result.

“It sounds like they already succeeded,” Watchdata VicePresident Guo Tianguang told China Securities Journal. “But it’s just the beginning.”

Watchdata said it has initiated an administrative lawsuit against the Patent Reexamination Board and is waiting for the final result, which may not be confirmed for two years.

The dispute between the two companies was listed among many other major and typical intellectual property-related cases handled by specialized IP courts in Beijing, Shanghai and Guangzhou since they were founded in late 2014, in a report delivered by Zhou Qiang, head of the Supreme People’s Court, last August.

A day after the original ruling on Dec 9, 2016, the stock market reacted negatively with Hengbao’s share price dropping 7.09 percent, and continuing to decrease 4.58 percent in the next day’s trading.

“At the beginning, Watchdata asked for compensation of 1 million yuan, and we thought