Understanding the Application of Punitive Damages in Patent Infringement Cases through a Typical Case

In recent years, with the increasing emphasis on intellectual property protection, the number of patent infringement disputes has been on the rise. One issue that has always been a concern for all parties involved is the determination of compensation amounts. In particular, the amended Patent Law in 2020 introduced a punitive damages system. Specifically, Article 71(1) of the Patent Law provides that "the amount of compensation for infringing a patent shall be determined based on the actual losses suffered by the right holder or the benefits obtained by the infringer as a result of the infringement; where it is difficult to determine the losses suffered by the right holder or the benefits obtained by the infringer, the amount may be reasonably determined by reference to multiple times of the patent license fee. For intentional patent infringement with serious circumstances, the amount of compensation may be determined at more than one time but less than five times the amount determined according to the above method.”

Therefore, for the right holder, if punitive damages can be applied in an infringement lawsuit, it not only has a greater deterrent effect on the infringing behavior but may also lead to greater compensation. So what are the conditions for applying punitive damages, and how can the court support claims for punitive damages? This article explores the determination of punitive damages in patent infringement cases by examining relevant legal provisions and a typical case. It aims to provide some insights for right holders in terms of providing evidence for claiming punitive damages in patent infringement lawsuits.

I. Conditions for Applying Punitive Damages

According to Article 1 of the "Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights", "where the plaintiff claims that the defendant has intentionally infringed its lawful intellectual property rights and the circumstances are serious, and requests that the defendant be ordered to bear punitive damages liability, the people's court shall examine and handle it according to law."

Therefore, in patent infringement litigation, when the plaintiff requests the application of punitive damages, it is not only necessary to prove that the defendant intentionally infringes on the plaintiff's patent rights, but also to prove that the defendant's infringing behavior is objectively serious.

1. Determination of Subjective Intention

According to Article 3 of the " Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights", for the determination of intentional infringement of intellectual property rights, the people's court shall comprehensively consider factors such as the type of the infringed intellectual property object, the status of the rights, the fame of relevant products, and the relationship between the defendant and the plaintiff or interested parties.
Under the following circumstances, the people's court may preliminarily determine that the defendant has the intention of infringing on the intellectual property rights:
(1) The defendant continues to commit infringing acts after being notified or warned by the plaintiff or interested parties;
(2) The defendant or its legal representative or manager is the legal representative, manager, or actual controller of the plaintiff or interested parties;
(3) The defendant has a labor, service, cooperative, licensing, distribution, agency, representative relationship or other relation with the plaintiff or interested parties, and had access to the infringed intellectual property;
(4) The defendant has business dealings, or has negotiated for reaching a contract, etc., with  the plaintiff or interested parties, and had access to the infringed intellectual property;
(5) The defendant engages in piracy or counterfeit trademark registration;
(6) Other circumstances that can be determined as intentional.

2. Determination of Serious Circumstance

According to Article 4 of the "Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights ", for the determination of serious circumstances in the infringement of intellectual property, the people's court shall comprehensively consider factors such as the means and frequency of infringement, the duration, geographical scope, scale and consequences of the infringing act, and the behavior of the infringer during the litigation.
The people's court may determine that the circumstance is serious if the defendant has any of the following circumstances:
 (1) Committing the same or similar infringement again after being administratively punished or being held liable by a people’s court;
 (2) Committing infringement of intellectual property rights as a business;
 (3) Forging, destroying or concealing evidence of infringement;
 (4) Refusing to fulfill a preservation ruling;
 (5) Making huge gains or causing the right holder to suffer huge losses (from the infringement);
 (6) Endangering national security, public interests or personal health with the infringing act;
 (7) Other circumstances that can be determined as serious.

II. Case Analysis

Guangzhou Intellectual Property Court released the Top 10 Typical Cases of Service and Guarantee for Technological Innovation in 2021. The tenth case is a series of disputes over infringement of utility model patents between LeDiamond Optoelectronic Co., Ltd. and Zhongshan Meigao Lighting Co., Ltd. [(2020) Yue 73 Zhi Min Chu 57].
Basic case information:
LeDiamond Optoelectronic Co., Ltd. (hereinafter referred to as LeDiamon) is the patentee of a utility model patent named "Structure Improvement for LED Bulbs", with patent number ZL201420776830.9. In the case of (2018) Yue 73 Min Chu 200, LeDiamond claimed that Zhongshan Meigao Lighting Co., Ltd. (hereinafter referred to as Meigao) had infringed on its utility model patent, and the judgment has recognized Meigao's actions as infringing on the patent and ordered Meigao to stop manufacturing, selling, or offering for sell products that infringe on LeDiamond's involved patent, and compensate for economic losses and reasonable expenses for safeguarding rights, totaling 60,000 yuan. However, Meigao did not initiatively execute the judgment, and the executing court did not find any property information that could be executed, resulting in the executing court making a civil ruling to terminate the execution in case (2019) Yue 20 Zhi 3. Later, LeDiamond found that Meigao had once again committed actions suspected of infringing on the utility model patent for "Structure Improvement for LED Bulbs" with patent number ZL201420776830.9 and filed this case.
After trial, the court held that Meigao had the subjective intention to infringe on the involved patent. Not only did it refuse to execute the patent infringement responsibility determined by the effective judgment of the previous case, but it also repeated the behavior of infringing the involved patent. And Further, the infringement has been going on for a long time, and it has not provided evidence to prove that the alleged infringement has been stopped, which constitutes serious circumstances. Therefore, LeDiamond's claim that Meigao's involved infringing behavior was malicious and should be severely punished by law is reasonable, and punitive damages should be applied to the infringing behavior. Accordingly, the court fully supported LeDiamond's claim for 250,000 yuan in compensation for economic losses and reasonable expenses for safeguarding rights from Meigao.

Summary:
In this case, the defendant Meigao had a clear understanding of the technical solution of the involved patent. More than a year after the previous infringement case was declared, the plaintiff purchased and obtained the alleged infringing products through notarization, which still infringed on the same patent. Therefore, it can be determined that Meigao intentionally committed the alleged infringing behavior. In addition, Meigao not only refused to execute the effective judgment of the previous case objectively but also repeated the behaviors of manufacturing, selling, and offering for sell the alleged infringing products, which infringed on the same patent of the plaintiff again. And the infringement has been going on for a long time. These meet the requirements of serious circumstances.

III. Suggestions

In the typical case published, the determination of intention and serious circumstances in applying punitive damages in patent infringement cases mainly involves situations where the defendant has not executed or not fully executed the effective judgment firstly, and repeated the infringing behavior. This not only provides practical examples from exploration to actual implementation for similar cases, protects the legitimate rights and interests of the plaintiffs and technological innovation, but also provides reference and guidance for the parties to claim and present evidence for punitive damages.