Pryroda Engineering

In May 2008,Evalueserve published a white paper Patent Landscape in China with analysis and advise, notably based on the Schneider Electric vs Chint case (see our previous posts on the subject).
In the white paper, Evalueserve provides sound analysis. The citation below describes patent strategy insights.

The following are some key insights that can be learned from the Schneider Electric versus Chint Group case:

Damages relating to a patent litigation do not always have an upper limit: A popular myth about patent
enforcement in China is that even if infringement has been established, damages are capped at CNY 500,000. In
reality, damages are calculated based on a) losses incurred by the plaintiff and b) the profits made by the
defendant from the sale of the infringing product. In the event that there is no evidence available to ascertain
these two amounts, statutory damages within a compensation limit of CNY 500,000 can be awarded. However,
patent license royalties can also be used as a reference to calculate damages. These damages could be
between one and three times the amount of such royalties. Furthermore, the damages may also include
expenses incurred by the plaintiff to investigate and prevent the said infringement. In summary, with increasing
awareness of enforcement of patent rights in China, the amount of money paid by companies in out-of-court
settlements and in patent license fees is bound to increase in the near future.
Chinese prior art cannot be ignored: Given the exponential increase in the number of filings with the SIPO, it
is prudent for every company operating in China to review Chinese patent prior art. One of the best practices
may be to regularly review patent application filing activity in the country within a given field of interest. As always,
forewarned is forearmed. Proactive measures towards invalidation of granted patents (especially 10-year patents)
may also be a good way to avoid possible litigation.

Seek the help of Chinese patent research professionals: Foreign companies should try to identify Chinese
patent professionals who can help them analyze Chinese patents and other prior art. The primary reason for this
is that the majority of Chinese patents are only available in Chinese languages (particularly Mandarin). Searching
the Chinese patent database is easy, since all patents and published applications are available online, but the
search has to be carried out in Chinese. Furthermore, simply translating English keywords to Chinese (or vice
versa) may not work because Chinese languages have many variations that cannot be captured in English.
Finally, current machine translations cannot be relied on for semantic, cultural, and contextual reasons.

Utility model (10-year) patents should figure in every company’s China IP strategy: In view of the unique
position of 10-year patents in China’s intellectual property scenario, any company producing or selling its
products in China cannot afford to ignore these patents. After the changes to the patent law proposed in 2006
have been implemented, foreign applicants may need to choose between an invention patent and a utility model
if they want to enter the national phase in the country through the PCT route.