Punitive Damages and Shifted Burden of Proof
Average Trial Concludes in 73 Days
Foreign Company Cases Increase by 45% Annually
After China reformed its laws and systems related to patent litigation in 2019 and 2020, the number of foreign companies participating in lawsuits increased by more than 40% each year. It was also found that, from 2020 to 2022, cases involving foreign patents accounted for over 10% of all patent lawsuits filed.
According to the Intellectual Property Tribunal of the Supreme People's Court of China and Chinese intellectual property experts, the proportion of patent lawsuits involving foreign companies exceeded 10% of all cases filed with the courts from 2020 to 2022. The average annual growth rate reached 45.6%.
The introduction of a punitive damages system appears to have played a significant role in encouraging foreign companies to actively participate in patent litigation in China, which has been stigmatized as a "technology theft country." Between 2014 and 2019, China introduced a punitive damages system that allows courts to award up to five times the amount of damages calculated based on the losses suffered by the patent holder, the profits gained by the infringer, or the patent license fee in cases of intentional patent infringement. Comparing the periods before and after the introduction of the system, the average compensation awarded in the Beijing region increased from $80,000 in 2018 to $450,000 in 2022, a more than fivefold increase. In 2021, punitive damages were applied in 895 cases.
The shift in the burden of proof has also influenced foreign companies to actively file patent lawsuits in China. Under the revised law, if the plaintiff submits basic evidence, the burden of proof shifts to the defendant. The success rate for foreign plaintiffs is 77%, while for Chinese plaintiffs it is 74%, showing virtually no difference in success rates based on nationality.
The fact that disputes are now resolved quickly is another notable change. In January 2019, China established the Intellectual Property Tribunal under the Supreme People's Court, which is responsible for handling appeals of technology-related patent cases nationwide. In its first year, the Intellectual Property Tribunal received 1,945 cases and concluded 1,433 of them. The average trial duration was 73 days.
In South Korea, the average duration of a first-instance trial for intellectual property infringement lawsuits is 554 days, which is well over a year. The maximum tenure of judges in charge of intellectual property cases is limited to two years, which has been pointed out as a problem. Due to the short tenure, it is difficult for judges to develop long-term expertise in complex technical issues. The absence of punitive damages provisions for intentional infringement in Korean patent law is also cited as one of the reasons why patent litigation is less common in South Korea.
A representative of the Korean Patent Attorneys Association stated, "In China, the procedures are fast and punitive damages are awarded through the revision of relevant laws and systems," adding, "Now, not only the United States and Europe, but also China has global competitiveness in the speed of handling patent lawsuits."
Lee Jinyoung, Law Times Reporter
※This article is based on content supplied by Law Times.
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