On December 8, 2016, the Beijing Intellectual Property Court issued its largest damages award since its establishment. In Watchdata System Co., Ltd. v. Hengbao Co., Ltd., the court found patent infringement and ordered Hengbao to stop the infringement immediately and pay Watchdata RMB 49,000,000 (approximately USD 7,140,000) for economic losses and RMB 1,000,000 (approximately USD 146,000) for reasonable expenses. The court also clarified, for the first time, the factors relevant to determining recoverable legal fees.

Watchdata and Hengbao both manufacture smart keys, known as USBKeys or U-SHIELDs, for the financial sector. Watchdata alleged that several USBKey products manufactured and sold by Hengbao to dozens of Chinese banks, and the physical authentication method used with those products for online banking transfers, infringed its invention patent entitled “Physical identification method and electronic device” (ZL200510105502.1). It therefore sought an injunction, RMB 49,000,000 in damages and RMB 1,000,000 in reasonable expenses.

After hearing the case, the court found infringement. In considering the RMB 49,000,000 damages claim, the court investigated and collected evidence from banks to establish the actual quantities of infringing products sold by Hengbao to 12 Chinese banks. It also accepted Watchdata’s proposed reasonable profit per patented product. Under the relevant Supreme People’s Court judicial interpretation, the court multiplied sales volume by reasonable profit per product and calculated Watchdata’s actual losses at RMB 48,142,000.

The court also found that Hengbao had sold infringing products to three additional banks. Hengbao possessed evidence of those sales but refused to provide it. Relying on industry practice, Watchdata estimated Hengbao’s profits from these sales at more than RMB 2,000,000 and claimed an additional RMB 858,000. The court accepted this claim under the Supreme People’s Court’s rules on obstruction of evidence, bringing the total economic damages to RMB 49,000,000.

The court also accepted Watchdata’s claim for RMB 1,000,000 in legal fees as reasonable, taking into account the necessity and complexity of the case and the lawyers’ actual work and expenditure. This was the first time the court had expressly adopted these assessment principles.

Source: http://www.iprchn.com/Index_NewsContent.aspx?newsId=97273