Compensation Should Fully Reflect the Market Value of the Intellectual Property
To Protect the Infringed Enterprise from the Predicament of “Significant Loss but Little Compensation”
Crack down Infringement by Writing “A Ticket of the Largest Amount”
Shanghai Intellectual Property Court Solves “Three Difficulties” of Intellectual Property Protection Observation II
August 27, 2018 Jiefang Daily 01: Highlights
Journalist Wang Xianyue
This June, Shanghai Intellectual Property Court wrote “a ticket of the largest amount” ever since the establishment of the court.
In a computer software infringement case, after investigation, it was found that the use of the computer software by the defendant constituted an infringement, and the actual losses suffered by the plaintiff exceeded the upper limit of legal compensation amount specified by the Copyright Law, i.e. RMB 500,000.Therefore, after taking full consideration of the price of the plaintiff's software, the number of the software used by the defendant, the duration of infringement, subjective malicious intention and other factors, the court made the decision that the defendant should compensate for the plaintiff’s economic losses and reasonable costs of RMB 15.05 million according to the law.
Many enterprises have been greatly encouraged by the announcement of the judgment results, believing that the court really deals a heavy blow to infringement and protects effectively the legal interests of the right owner were protected.
Determine the compensation amount based on the detailed facts of the specific infringement case
“It is very easy to infringe intellectual property, for example, you can copycat a software just by clicking the mouse; however, it is not easy to protect the owner’s rights, because it is time consuming and needs much effort, including evidences collection and litigation”. Many enterprise owners confess that “it is a mental torture”, because the compensation amount obtained after winning the case was insufficient to make up the actual losses.
According to Vice President of Shanghai Intellectual Property Court, Li Shulan, the compensation for intellectual property infringement should fully reflect the market value of the intellectual property, and protect the infringed enterprise from the predicament of “significant losses and little compensation”. In recent years, Shanghai Intellectual Property Court conducted proactive exploration in trial, and for those infringements with a long duration, a large scale or obvious malicious intention, the court will decide the compensation amount at the maximum legal compensation according to the actual circumstances. In a case on “RT-Mart” trademark rights infringement, the court ordered the defendant to bear the maximum legal compensation of RMB 3 million.
For the cases where the actual losses are proved to exceed the maximum legal compensation after investigation, the court will determine the compensation amount at an amount over the maximum legal compensation by taking into account the specific facts and failure by the defendant to provide evidences for profits from infringement. In the two dispute cases over computer software copyright infringement filed by SAP company, although it was hard to determine the actual losses of the plaintiff and the illegal profits gained by the two defendants, there were sufficient evidences to prove that the actual losses of the plaintiff exceeded the maximum legal compensation of RMB 500,000, so according to the law and on a reasonable basis by taking comprehensive consideration of all the evidences, the court decided that the two defendants should indemnify the plaintiff s at an amount over the maximum legal compensation, i.e. RMB 1.18 million and RMB 1.55 million respectively.
Except for the infringement compensation amount, the claim by the right owner for reasonable costs incurred in the course of litigation was also affirmed by the court. In the BOSS trademark infringement case, the plaintiff provided a large number of reliable evidences, and the workload was very heavy, therefore, the court affirmed the attorney fee of about RMB 350,000 incurred from rights protection based on the market value of the work of the plaintiff’s lawyers.
Make use of deterrence and make the infringer pay the price
In the trademark infringement case filed by Honeywell, the compensation amount in the judgment of second instance was RMB 300,000, but the same was only RMB 80,000 in the first instance. Why?
The reasons is that, after trial, Shanghai Intellectual Property Court concluded that, the defendant was a producer of fake products and a source of infringement, and should bear more liabilities, therefore, in the second instance, the compensation amount was increased based on actual facts and infringement scale. “In case of repeated infringement, malicious infringement and other situations of serious infringement, the infringers are made to pay a high price by increasing the compensation amount according to the law, effectively combating and deterring acts of intellectual property infringement.”
There are many other similar cases.
In “Red Anthill” trademark dispute case, the defendant continued to use the trademark involved after its use of “Red Anthill” trademark was decided to be infringing in the effective judgment of the court, the court increased the compensation amount payable by the infringer according to the law, so as to severely punish the malicious act of infringement. In another dispute case on trade secrets infringement, the plaintiff was a manufacturer of wood-working machine, possessing the technical secrets involved in the case. The 3 defendants were employees of the plaintiff, and they came into contact with and then mastered the technical secrets of the plaintiff during work. After leaving their jobs the 3 defendants disclosed the technical secrets of the plaintiff to a machinery company which used such technical secrets to manufacture products. After investigation, Shanghai Intellectual Property Court found that the machinery company had used the technical secrets disclosed by employees of the plaintiff to manufacture and sell 5 machines, and the court decided the compensation amount at about RMB 1.32 million based on the average selling price and the average gross profit rate of the machine.
Li Shulan said that “we should focus on improving judicial mechanism, giving play to legal deterrence, increasing the costs of conducting illegal acts and uplifting the compensation amount, and this has positive significance in encouraging the right owners to protect their own rights and safeguarding the normal market economic orders as well as the orders of intellectual property management”.
