According to the New amendment of China's Patent Law (effective from 1st June, 2021), It is made clear that the court follows below orders to determine the amount of damages in patent infringement cases:

(1) The actual loss suffered by the patent owner or the benefits obtained by the infringer;

(2) The reasonable multiple of the royalties of the patent; and

(3) The statutory damages in a range of CNY 30,000 – 5,000,000.

Among them, the reasonable multiple of royalties is normally used only if the parties can't prove (1) the actual loss of the patentee and the benefit obtained by the infringer.

In practice, the court is prudential in using reasonable multiple of the royalties for determining the damages. The reason is that:

   (i) Most Chinese patents have never been licensed or recorded, so there is no evidence for royalties;

  (ii) Even if the patent is licensed and recorded at CNIPA, and there is no actual payment of royalties between the licensee and licensor, so the credibility of the license agreement is questionable;

  (iii) Some license agreements are signed between parties having relation of interest (for example, the licensee is the patentee's affiliated company in China; or the CEO of the licensee is the patentee's wife, etc), so the credibility of the license agreement is questionable.

In fact, the royalties are mainly used as reference for courts to estimate the damages. Indeed, Chinese courts prefer to interpret “multiples” as between one to three according to a meeting held in 2001 by the Supreme Court. However, the court has its own discretion and will also look at the specific infringement scenario, the scale and consequences of the infringement, and the willfulness of the infringer, etc. Therefore, it does not mean the court will follow the absolute rules of "between one to three times of royalties" to estimate the damages. 

Particularly, according to the new “Chinese Civil Code” published in May of 2020, the punitive damages will be introduced for all types of IP-related infringement shortly, and this will take effect from January 1, 2021. 

Thus, it is foreseeable that the new Patent Law, together with administrative measures, will create a further deterrence to the IP copycats in the future, and will further strengthen the patent enforceability in China.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.