False patent marking in China – How the courts are determining damages

5 minute read
29 September 2022

False patent marking is the act of falsely claiming a product or process is patented. In China, false patent marking is on the rise, so it is interesting that in June 2022, the Chinese Supreme People's Court (SPC) heard an appeal case that shed light on how damages should be determined in such cases. The outcome highlights a differing approach to that for patent infringement cases.



A brief summary of the case

A Chinese company, Jiaxing Jieshun Traveling Product Co., Ltd (Jiaxing Jieshun) owned a utility model patent for a "self-extruding plate pallet" (patent number 201420624020.1(the patent)). At first instance, Jiaxing Jieshun alleged that an individual called Yao Kuijun (Yao) was carrying out false patent marking by claiming he owned the Patent on his e-platform and that the products he was selling were protected by that patent when, in fact, Yao's product does not use the patented technology.

The first instance court held that Yao's activities constituted false patent marking, which would mislead the public into believing that the products he was selling had additional value due to the patented technology. On the question of compensation, as is often the way in China, Jiaxing Jieshun could not prove its loss of profits as a result of Yao's activities. The only supporting evidence Jiaxing Jieshun submitted showed that the unit price of Yao's products was between RMB 30 and 40 (which is approximately USD 5) and the sales volume was more than 100,000 pieces. Due to lack of supporting evidence concerning compensation the first instance court, consistent with standard practice in patent infringement cases, awarded statutory damages based on Article 65 of the PRC Patent Law to the amount of RMB 100,000 (approximately USD 15,000).

Yao appealed to the SPC on two grounds. First, that false patent marking is different to patent infringement. Second, because false patent marking differs in terms of the principles of patent infringement, the first instance court was wrong to award damages based on Article 65 of the PRC Patent Law.

Issue 1 of the SPC: False patent marking vs. patent infringement

The SPC found that false patent marking is different from patent infringement for the following key reasons:

(1) Patent infringement concerns exploiting the technical solution of the patent without authorisation, while false patent marking (in itself) does not exploit the patented technology.

(2) Patent infringement harms the patent rights based on the technical solution, while false patent marking harms the rights to identify a patent, as well as the rights and interests of the state patent management and public.

Issue 2 of the SPC: Liability of false patent marking

On the basis that the SPC held that patent infringement and false patent marking are founded on different principles, it agreed with Yao that Article 65 PRC Patent Law (which related to patent infringement) was not the appropriate remedy for false patent marking cases. Instead, the SPC held that for false patent marking cases the court should determine the damages based on general principles of general civil law as set out in Article 19 of old PRC Tort Law, therefore allowing the court to award damages on a discretionary basis. As a result, the SPC awarded damages to Jiaxing Jieshun on a discretionary basis of exactly the same amount as ruled by the first instance court, RMB 100,000.

It is also interesting to note that the SPC clarified that once a civil court has found a defendant liable for false patent marking, the civil court has the discretion to transfer the case to a local administrative authority to initiate administrative action.

Conclusion

This is an important case because it demonstrates that China's courts are taking the rising problem of false patent marking seriously. We now understand how damages will be assessed in such cases and how courts and administrative authorities will work hand in hand to combat these types of activities - providing a level of clarity that is good news for patent holders in China.

To discuss any of the points raised here further or to understand more about China Patent Law in general and the key areas to consider for your business, please contact us.


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