*AI-generated translation, for reference only.

[Keywords]

Civil; Utility model patent infringement; Offer for sale; Civil liability; Damages

[Judgment Digest]

An infringer who, without the authorization of the patent holder, engages in an offer for sale shall not only bear civil liability to cease the infringement and pay reasonable expenses for rights protection in accordance with law, but shall also bear civil liability for compensation for losses in accordance with law. Such liability for compensation is not contingent upon an actual sale having taken place. Regarding the amount of compensation, where the losses caused to the patent holder by the offer-for-sale infringement, the profits obtained by the infringer therefrom, and the patent licensing fees are all difficult to determine, the people's court may, taking into account the subjective fault of the infringer and the circumstances of the infringement, reasonably determine the amount within the statutory range of compensation.

[Case Facts]

Qingdao Qing [REDACTED] Heavy Industry Co., Ltd. (hereinafter referred to as "Qing [REDACTED] Heavy Industry Company") is the patent holder of a utility model patent entitled "Vertical Secondary Structural Column Pump" (hereinafter referred to as "the patent at issue"). On September 29, 2018, Qing [REDACTED] Heavy Industry Company obtained notarial preservation of a webpage from an online platform store operated by Qingdao Chen [REDACTED] Mechanical Equipment Co., Ltd. (hereinafter referred to as "Chen [REDACTED] Mechanical Company") displaying the vertical secondary structural column pump. On October 20, 2019, it again obtained notarial preservation of a webpage on Chen [REDACTED] Mechanical Company's website displaying the vertical secondary structural column pump. Qing [REDACTED] Heavy Industry Company subsequently filed a lawsuit against Chen [REDACTED] Mechanical Company on the grounds that its manufacture, offer for sale, and sale of the accused infringing products infringed upon the patent rights at issue, requesting the court to order Chen [REDACTED] Mechanical Company to cease the infringement and compensate for losses. Chen [REDACTED] Mechanical Company argued in defense that it had only engaged in an offer for sale and had not manufactured or sold the products; that it had neither caused any economic loss to Qing [REDACTED] Heavy Industry Company nor obtained any economic benefit through the offer for sale; and that therefore Qing [REDACTED] Heavy Industry Company's litigation claims regarding damages lacked a basis.

Upon trial, the court found that: the accused infringing products possessed all the technical features of the relevant claims of the patent at issue, and Chen [REDACTED] Mechanical Company's display of the accused infringing products on its website and online platform store constituted an offer-for-sale infringement. Qing [REDACTED] Heavy Industry Company did not submit evidence establishing that Chen [REDACTED] Mechanical Company had engaged in manufacturing or sales activities.

[Judgment]

On August 19, 2020, the Intermediate People's Court of Qingdao, Shandong Province rendered Civil Judgment No. (2019) Lu 02 Zhi Min Chu 169: First, Chen [REDACTED] Mechanical Company shall, from the date this judgment takes effect, immediately cease offering for sale products that infringe upon Qing [REDACTED] Heavy Industry Company's utility model patent rights for the "Vertical Secondary Structural Column Pump"; Second, Chen [REDACTED] Mechanical Company shall, within 10 days from the date this judgment takes effect, compensate Qing [REDACTED] Heavy Industry Company for economic losses of RMB 30,000 (inclusive of reasonable expenses; same currency hereinafter); Third, other litigation requests of Qing [REDACTED] Heavy Industry Company are dismissed. Following the judgment, Chen [REDACTED] Mechanical Company disagreed and appealed to the Supreme People's Court. On March 22, 2021, the Supreme People's Court rendered Civil Judgment (2020) SPC IP Civil Final 1658: the appeal is dismissed, and the original judgment is upheld.

[Reasoning for Judgment]

The disputed issue in this case is: what infringement liability Chen [REDACTED] Mechanical Company should bear for committing offer-for-sale infringement.

Chen [REDACTED] Mechanical Company's display of the accused infringing products in an online platform store for the purpose of sale constitutes an offer for sale. An unauthorized offer for sale is a form of infringement expressly prohibited by the Patent Law. It may occur either after or before a product has been manufactured, and either before or during the sale of a product. Although an offer for sale is directed toward a sale, it itself constitutes a legally independent form of infringing conduct. Civil liability for such infringing conduct is not contingent upon whether an actual sale has taken place. This is because once an unauthorized offer for sale occurs, regardless of whether an actual sale follows, it will generally result in losses to relevant patent licensing fees. Moreover, since the price at which the accused infringer offers products for sale is typically lower than the price of the patented product, the offer for sale may create a psychological suggestion in potential consumers, affect the reasonable pricing of the patented product, or cause consumers to forgo purchasing the patented product and instead consider contacting the accused infringer for purchase, thereby causing delay or even reduction in the normal sales of the patented product. An offer-for-sale infringement may also have an adverse effect on the advertising and promotional effectiveness of the patented product. It is thus evident that an offer for sale will both cause licensing fee losses to the patent holder and may result in damages such as price erosion of the patented product and delay or reduction in business opportunities. Such damages should also be remedied in accordance with law. Accordingly, while ordering the infringer to cease the infringement, the court should also order the infringer to bear liability to compensate for losses arising from the offer-for-sale conduct. This approach is more conducive to protecting and incentivizing innovation, better serves the legislative purpose of the Patent Law, and fosters a sound business and innovation environment. If an infringer were to be exempted from liability for damages merely because the specific harmful consequences of the offer-for-sale conduct are difficult to prove precisely — with only cessation of the offer for sale and payment of the patent holder's reasonable expenses for rights protection being imposed — this would be detrimental to the protection of patent rights and the realization of the legislative purpose of the Patent Law.

Where a patent holder has difficulty adducing evidence to prove the specific losses suffered as a result of the offer-for-sale conduct, the amount of damages may be calculated through the statutory compensation method. It is precisely in consideration of the difficulties in proving patent infringement damages that the Patent Law has established a system of statutory compensation. Where the losses suffered by the patent holder due to the infringement or the profits obtained by the infringer are difficult to determine, the amount of compensation may be determined based on factors such as the type of patent right, the nature and circumstances of the infringing conduct, and other relevant factors. In this case, given that Qing [REDACTED] Heavy Industry Company did not adduce evidence to prove its actual losses, Chen [REDACTED] Mechanical Company's profits from the infringement, or the licensing fees for the patent at issue, the people's court, having comprehensively considered factors including the type of the patent at issue, Chen [REDACTED] Mechanical Company's subjective fault, the circumstances of Chen [REDACTED] Mechanical Company's infringing conduct, and the reasonable expenses incurred by Qing [REDACTED] Heavy Industry Company for rights protection, exercised its discretion in accordance with law to determine that Chen [REDACTED] Mechanical Company shall compensate Qing [REDACTED] Heavy Industry Company for economic losses of RMB 30,000.

[Legal Provisions]

Paragraph 1, Article 11 and Article 71 of the Patent Law of the People's Republic of China (Amended in 2020) (The provisions applicable to this case are Paragraph 1, Article 11 and Article 65 of the Patent Law of the People's Republic of China as amended in 2008)