A look at Chinese courts’ new approach to IP damages

February 11, 2022
Supreme Court Building Washington DC

In this Law360 article, Fei Deng, Hong Qiao, and Yi Cheng examine the trend of Chinese courts toward awarding larger non-statutory damage awards in IP cases. They analyze how Chinese courts have arrived at damages awards in recent judgments and provide advice on what future litigants can do to better prepare their IPR infringement damage arguments in China.

Since 2019, China has implemented a series of legislative revisions and measures that have raised the ceiling for damage awards, enhanced discovery, and facilitated the calculation of non-statutory damages. As a result, the number of IP infringement judgments with adjudicated damage awards equal to or above RMB 10 million (approximately $1.6 million) increased from single digits per year between 2015 and 2018, to at least 15 to 20 per year during 2019 to 2021.

Based on an in-depth study of these recent judgements, the authors find that Chinese courts have frequently relied upon the infringer’s unjust enrichment as a measure of damages, adopted alternative data and evidence proposed by rightsholders when the infringer refused to submit its own data, and enhanced the application of punitive damages. In addition, Chinese courts have started to grapple with the apportionment issue, although rigorous analysis determining the incremental value of the infringed right over non-infringing alternatives generally is still lacking.

The authors suggest that companies operating in China should strategize accordingly whether bringing or being the subject of IP litigation in China, including putting forward damage calculations based on multiple methodologies, taking full advantage of Chinese courts’ enhanced discovery process, designing and integrating technical and economic analyses of apportionment and non-infringing alternatives, and seeking punitive damages when possible.