Changes May Increase Defendant Risk in China, Where Patent Plaintiffs Already Enjoy High Win Rate
June 23, 2021
China has become an increasingly popular venue for patent litigation, as the country’s courts offer patent owners a variety of significant benefits over other jurisdictions—including a markedly higher plaintiff win rate. As shown below, plaintiffs have prevailed in around 80% of the cases that have reached merits-based decisions during the past few years, far higher than litigants may be used to seeing in the US.
The consequences of a plaintiff victory in China can also be particularly severe for defendants, as courts tend to award injunctive relief in most cases. Furthermore, Chinese injunctions can be used to prevent exports out of the country, which may give plaintiffs significant leverage against defendants with China-dependent supply chains—as an injunction may disrupt a company’s ability to ship China-manufactured products, or critical components, out of the country. On the other hand, damages currently tend to be much lower in Chinese patent cases, due to the fact that they are often calculated under statutory damages formulas (providing for damages ranging from just USD $1.5K-$154.5K under current exchange rates). While damages can be based on lost profits or unfair profits gained, with no real discovery available, plaintiffs have historically struggled to prove such damages and often are left with no choice but to take capped statutory damages.
However, changes to China’s patent law that took effect on June 1, 2021 may lead to larger damage awards in patent suits. These updates include an increase in the available range of statutory damages, to $4.6K-$772.3K—still far lower than US damage awards, but not insignificant to smaller defendants in particular. Also worrisome for accused infringers could be the introduction of punitive damages, enabling up to a 5X damages enhancement upon a finding of willful infringement. Additionally, courts will be able to order an infringer to provide accounting books and other records for calculating damages (a change that codifies the existing practice), potentially making it easier for more patent owners to show infringement, while the statute of limitations for patent suits will increase from two to three years.
