Summary of the Judgment

Where a right holder has submitted prima facie evidence showing that the actual loss caused to the right holder or the benefit gained by an alleged infringer due to an alleged infringement is significantly higher than the upper limit of compensation in the amount of CNY one million stipulated in Article 65 of the Chinese Patent Law, if a corresponding evidence that can determine the actual loss suffered by the right holder or the benefit gained by the alleged infringer due to the alleged infringement is under the control of the alleged infringer, and if the alleged infringer refuses to submit the corresponding evidence without valid reasons or if the evidence submitted is untrue or incomplete rendering it difficult to determine the corresponding amount, the amount of compensation may be determined by reference to the claim of the right holder.

In this case, firstly, although KAKUSAN Company claimed that the sales of the allegedly infringing products were unsatisfactory and production had been stopped, it did not submit any evidence to prove its claim, which obviously lacked factual basis. Secondly, the trial court had explicitly requested KAKUSAN to submit account books and other evidences reflecting its profits from the sales of the allegedly infringing products. However, KAKUSAN did not submit its account books, and only provided three self-made sales records and orders, and MTG did not accept the authenticity of these three pieces of evidence. On this basis, the trial court made reasonable judgment supporting MTG’s CNY three million economic losses claim in full, taking into account the long duration of KAKUSAN's infringement, the large number of sales of the allegedly infringing products, the high profits from the sales of the allegedly infringing products, and the fact that MTG had tried its best to produce evidence and KAKUSAN refused to provide the relevant financial data.

Case Information

Case Summary

MTG Corporation is a well-known Japanese company dedicated to beauty and health products, and its ReFa series of beauty rollers are popular all over the world and are known as face slimming tools. MTG has a number of design patents in China, including a design patent entitled "Beauty Roller" under the patent number ZL201130162283.7 (the "patent at issue").

MTG Corporation found that Shenzhen KAKUSAN Technology Co (hereinafter referred to as "KAKUSAN") and Beijing Junhong Shangpin Technology Co., Ltd (hereinafter referred to as "Junhong Shangpin") were suspected of infringing the patent at issue by manufacturing, selling and offering to sell beauty rollers without being licensed. After comparison, the product with the model number KB-188 and entitled mini Y-shaped massage bar (the "allegedly infringing product") fell into the scope of protection of the patent at issue and infringed the plaintiff's design patent right. MTG Corporation requested the Beijing Intellectual Property Court (hereinafter referred to as “the court of first instance”) to 1. order the two defendants to immediately stop manufacturing, selling and offering to sell the allegedly infringing products, and to take back and destroy the allegedly infringing products; 2. order the two defendants to destroy all promotional materials of the allegedly infringing products and to delete the promotional contents of the allegedly infringing products on the Internet and social networking platforms; 3. order the defendant KAKUSAN to destroy the special molds used for manufacturing the allegedly infringing products; 4. order the two defendants to destroy the entire inventory of the allegedly infringing products and the defendant KAKUSAN to collect and destroy the unsold allegedly infringing products from the sales stores; 5. order the two defendants to jointly compensate the plaintiff for the economic loss of CNY 3 million and reasonable expenses of CNY 200,000; 6. order the two defendants to bear the costs of the lawsuit.

KAKUSAN argued that: 1. On January 1, 2010, Guo Xiaolin (a natural person) issued a "License Letter on Patent Implementation", agreeing to license all the patents applied for and to be applied for in the future under his name to the defendant, and the authorization period is the legal validity period of each patent. The allegedly infringing product corresponds to a design patent entitled "Massage stick (Y-shaped with bending handle)" under the patent number 201230491066.7, which design was invented by KAKUSAN based on a utility model patent entitled "a Y-shaped beauty apparatus" under the patent number 201020102572.8 (the application date is January 26, 2010, the publication for grant date is September 22, 2010, and the patentee is Guo Xiaolin) with reference to some prior arts, and thus is self-developed with no infringement; 2. The application date of the plaintiff's patent is later than the application date of the utility model patent which is the basis of the defendant's product; 3. Sales of the allegedly infringing product were not satisfactory and the production has stopped, so the amount of economic loss the plaintiff claimed is groundless. Therefore, the defendant requested the court to reject the plaintiff's claim according to law.

Junhong Shangpin argued that their company was an authorized network distributor of KAKUSAN, and had no idea of whether the allegedly infringing products were infringing any rights or not, and that the products involved have been removed from the shelves, and their company also applied to withdraw from the Tmall store due to poor operation. Accordingly, they requested the court to reject the plaintiff's claim in accordance with the law.

The court of first instance found by comparison that the allegedly infringing products fell within the scope of protection of the patent at issue. The defendant KAKUSAN was found to have committed the act of manufacturing and selling the allegedly infringing products. The defendant Junhong Shangpin was found to have committed the act of selling the allegedly infringing products. And both defendants have committed the act of offering to sell the allegedly infringing products. Regarding the plaintiff's loss, the court of first instance, based on the evidence submitted by the plaintiff, found that the sales duration of the allegedly infringing products was 48 months; the reasonable profit of each piece of the allegedly infringing products was between CNY 70 and CNY 159 when they were sold at retail, and was between CNY 28 and CNY 80 when they were sold at wholesale. It is determined that during the infringement period, the defendant KAKUSAN made profits of CNY 100,461 from the sales of the allegedly infringing products by retail and wholesale through Tmall and Alibaba website. In addition, according to the evidence on file, the defendant KAKUSAN also sold a large number of the allegedly infringing products through online channels such as Taobao.com, China Supplier.com, and Bazhuo.com, besides Tmall and Alibaba, and through offline channels such as exhibitions and authorized distributors. The defendant KAKUSAN also claimed that "a single beauty stick developed and produced by KAKUSAN in 2010 created a miracle of selling 2.6 million pieces in Japan in half a year," that "the products produced by KAKUSAN are sold in major supermarkets, duty-free stores and network TVs in Japan and Korea," and that "we (KAKUSAN) are a factory, available for OEM and OMD… specializing in exporting to Japan." Therefore, the aforementioned reasonably estimated profits from sales was only a small part of the defendant KAKUSAN's profits from selling the allegedly infringing products. In addition, the court of first instance also requested KAKUSAN to submit account books and other evidential materials that could reflect its profits from the sales of the allegedly infringing products. However, KAKUSAN did not submit its account books, and instead provided three self-made sales records and orders. The court of first instance held that this alone could not truly reflect the defendant KAKUSAN's profits from the sales of the allegedly infringing products. The court of first instance took the above into consideration, especially the long duration of the infringement by KAKUSAN, the large number of sales of the allegedly infringing products, the high profits from selling the allegedly infringing products, and the fact that the plaintiff had tried its best to provide evidence but the defendant refused to provide relevant financial data of which they had control, and the court supported in full the plaintiff's claim of economic losses of CNY 3 million and the reasonable expenses of CNY 114,941.97 which the plaintiff submitted bills to prove.

Accordingly, the court of first instance ruled that: KAKUSAN should stop manufacturing, selling and offering to sell, and Junhong Shangpin should stop selling and offering to sell the allegedly infringing products; the two defendants should destroy all the promotional materials of the allegedly infringing products and remove the promotional contents of the allegedly infringing products from the Internet and social media platforms; the defendant KAKUSAN should compensate the plaintiff for the economic losses totaling CNY 3 million and reasonable expenses of CNY 114,941.97 for stopping the infringement.

KAKUSAN appealed to the Beijing High People's Court (the "court of second instance") against the judgment of the first instance. After hearing the appeal, the court of second instance found that KAKUSAN's grounds of appeal were not valid, and decided to reject the appeal and affirm the original judgment.

Case Interpretation

The case involves an infringement dispute between a well-known foreign manufacturer of beauty and health products and a domestic enterprise, and the amount involved in the lawsuit was more than CNY 3 million. The highlight of the case mainly lies in the calculation and determination of damages. The plaintiff's claim for damages of CNY 3 million, which was above the statutory limit of compensation under the Patent Law at that time, was fully supported, which was exemplary and significant.

Our firm represented the plaintiff MTG Corporation in the first and second trial stages, and performed notary preservation several times in the preparation stage of the lawsuit. Not only could the evidence prove that the two defendants had committed the acts of producing, selling and offering to sell the allegedly infringing products, but also could the notarized content prove the infringement duration of the allegedly infringing products, the unit price of sales, the wide range of infringing acts committed by the defendants, and the numerous sales channels, which laid the foundation for the court to determine the infringement facts and the damages in this case.

In particular, in this case, the allegedly infringing products were not sold online only, which made it difficult to calculate the overall sales volume and profits from sales based on the data published by e-commerce platforms. As a result, on the one hand, we made detailed statistical calculations based on evidence of profits from online sales; and on the other hand, we submitted a large amount of evidence to show the court that the allegedly infringing products were sold through various channels and the overall sales volume was huge, and we also requested the court to order the defendant to submit its account books.

Based on our claims, the court of first instance confirmed the quantity, retail unit price and wholesale unit price of the allegedly infringing products based on the evidence on file, calculated the infringement profits obtained by the two defendants through online channels, recognized the fact that KAKUSAN also sold a large number of infringing products through online channels such as Taobao, China supplier network, Baizhuo.com and offline channels such as exhibitions and authorized dealers with high sales volume and wide sales range based on KAKUSAN’s promotional materials. In order to identify the infringement profits, the court, based on our request, ordered KAKUSAN to submit account books and other evidential materials that could reflect its profits from the sales of the allegedly infringing products. Since KAKUSAN did not submit its account books but only provided three self-made sales records and orders, the court concluded that these content alone could not truly reflect the defendant KAKUSAN’s profits from the sales of the allegedly infringing products. Considering the above circumstances, especially the long duration of the infringement by KAKUSAN, the large number of sales of the allegedly infringing products, the high profits from the sales of the allegedly infringing products, and the fact that the plaintiff had tried its best to prove and the defendant has refused to provide the relevant financial data, the plaintiff's claim of CNY 3 million economic loss was supported in full. At the same time, we provided various types of invoices to prove the reasonable expenses, including notary fee invoices, invoices for the purchase of the allegedly infringing products, invoices for translation fees, invoices for attorney's fees, etc. The court of first instance also supported the reasonable expenses proved by the above invoices, totaling CNY 114,941.97. The court of second instance also upheld the judgment of the first instance.

Links to the judgment

Second instance:

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=bJZNHdNjlwdE5G335ZhxUnKqp4YElP6eqJwUcK0a2RsbZxiOP2EFo5/dgBYosE2gvjuUm1r4zeFFmI882Qz9PfTXTyWfi7q21XjDwDE+Xhb5AznXCU9t6fLxwFoXI3FB

First instance:

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=HhxJUUuixFAgEg/4UvXEUo8nrAGXm96DvkdtFHLtyKaLxa0sdl1TmJ/dgBYosE2gvjuUm1r4zeFFmI882Qz9PfTXTyWfi7q21XjDwDE+Xha4QM8j/+iqBn6suz9jRM6R