Damages in Chinese Patent Cases Are Quite Small Compared to Those in the US

The dynamics of Chinese patent litigation vary significantly from those in the US—and one key distinction involves damage awards, which tend to be much smaller than those seen in American patent suits.

Although at least some damages have been awarded in more than half of the cases closed since 2006, those awards have often been remarkably small, with the overwhelming majority amounting to $100K or less. Notably, only about 0.1% of the awards exceed $1M—and of those, only two cases resulted in an award greater than $10M. (Note that settlement figures are not publicly available.)

These lower awards are partly the result of the fact that damages in Chinese patent cases are often calculated under statutory damages formulas. 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, in 2016, China’s Supreme People’s Court published a clarification stating that if records needed to prove unfair profits are in the hands of the defendant, the court may order the defendant to disclose those records. If those records are withheld, the court has the ability to determine profits obtained due to infringement based on the plaintiff’s evidence and allegations.

Given the relatively small nature of damage awards in Chinese patent cases, the primary expenses for foreign companies litigating in China are therefore likely to be costs (which are not included in damages amounts) and contending with the impact of injunctions—which RPX data reveal are issued more than 90% of the time. Beyond just their prevalence, Chinese injunctions can also be more powerful than their US counterparts in that they can block the export of patented articles, giving plaintiffs significant leverage over domestic exporters and foreign importers.

See here for an analysis of Chinese injunction rates.