Punitive Damages were Awarded under Repeated Patent Infringement Irrespective of Settlement Agreement–—​No.(2022)ZUIGAOFAZHIMINZHONG871

The Intellectual Property Tribunal of the Supreme People’s Court (SPC) issued a final judgement on the patent infringement case between the Plaintiff JIN, and the two defendants Baijia Hardware Retail Store (hereinafter “Baijia”), and Baifa Trading Co., Ltd (hereinafter “Baifa”). The SPC vacated the first-instance judgement of Zhengzhou Intermediate People’s Court particularly on the finding of not constituting an egregious case, and instead granted a punitive damage to the Plaintiff.

The Plaintiff, Jin, is the owner of the invention patent No. ZL01125315.0 titled “Reverse Ground Shaving Machine”. Prior to this dispute, Jin filed, in 2021, a patent infringement lawsuit against the same two defendants, asserting that they sold, without authorization, patent infringement products, which were exactly the same as those involved in the later case. The two parties later reached a settlement agreement on May 13, 2021. To get out of the lawsuit, the two defendants promised to stop the infringement and compensate Jin for economic losses and reasonable expenses totaling RMB 30,000. Jin then moved to withdraw the case. However, two months later, Jin found that the two defendants continued to sell the accused products, and then filed this second lawsuit before the same first-instance court.

The first instance court held that the accused infringing products fell within the protection scope of the patent at issue, but refused to grant a punitive damage on the grounds that the infringement did not constitute an egregious case. Unsatisfied with the first-instance judgment, Jin appealed the judgement to the Supreme People’s Court, claiming that the amount of compensation was too low, given the fact that the two defendants repeatedly committed infringement despite the earlier settlement agreement. The Plaintiff demanded a punitive damage of RMB 100,000, without submitting evidence to support the calculation of the claimed amount.  

Upon examination, the Supreme People’s Court held that when determining whether to apply punitive damages to the defendants, consideration shall be given to both the defendants’ subjective intention and the objective facts related to the case. Despite the clear knowledge of the Plaintiff’s patent, the two defendants committed the same infringement for the second time in less than two months after the settlement, which well established that the defendants were intentional to commit the infringement, so the case constituted repeated infringement, falling into the scope of “egregious case”.

As for the damage amount, since neither party provided evidence to prove the actual losses due to the infringement, or the infringer’s profits earned from the infringement, or the patent license royalties for reference, and given the fact that the infringement did not last long and the patent will be expired in a month, the SPC determined to calculate the punitive damage based on the settlement amount of RMB 30000 the parties reached in agreement earlier, and then awarded the enhanced damage of RMB 60000.

It is believed that this case will provide guidance to courts at all levels on how to apply the punitive damage, and that repeated, egregious infringements will face increasingly serious sentence in our country.