Summary of the judgment
The Court verified that the calculation method claimed by MTG Co., Ltd. was in accordance with the law and that all the data based on which it calculated the amount of compensation was available for investigation on Taobao, Tmall, JD and other e-commerce platforms. Although MTG's claim of reasonable profit is partly presumptive, the presumption is not groundless in view of the value orientation of commercial entities to pursue profits and avoid losses. This is sufficient to show that MTG has fulfilled its preliminary burden of proof to the best of its ability. Therefore, the Court finds that MTG's proof has preliminarily proved that Hengjianda made profits from the sale of the infringing products.
Article 27 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Disputes over Infringement of Patent Rights (II) provides that: “Where it is difficult to determine the actual loss suffered by the right holder as a result of the infringement, the people's court shall, in accordance with the provisions of Article 65(1) of the Patent Law, require the right holder to prove the benefit gained by the infringer as a result of the infringement; where the right holder has already provided prima facie evidence of the benefit gained by the infringer, and the account books and information relating to the patent infringement are mainly in the control of the infringer, the people's court may order the infringer to provide such account books and information; if the infringer refuses to provide such account books or information without justifiable reasons or provides false books or information, the people's court may determine the benefit obtained by the infringer as a result of the infringement on the basis of the claims of the right holder and the evidence produced.” Accordingly, the Court issued discovery order, which required Hengjianda Company to provide the sales data, account books and information on the infringing product line. Hengjianda Company, however, refused to submit any data for no justifiable reason, even though it was fully capable of presenting counter-proof, and the reasons it claimed were verified as not in line with the fact by the Court. Therefore, the act of Hengjianda Company has constituted an obstruction of proof, and it should bear the adverse consequences arising therefrom. The Court supports MTG’s claims though there was a presumption in reasonable profit.
Case information
Case Brief
MTG developed and manufactured a fitness device of “the Sixpad AbsFit”, which is widely sold in Japan, China, Korea, the United States and other countries. MTG owns a CN design patent entitled “fitness device” under patent number ZL201530198276.0 (hereinafter referred to as “the asserted patent”).
MTG found that Shenzhen Hengjianda Technology Co., Ltd (hereinafter referred to as “Hengjianda”) manufactured, sold and offered to sell infringing products that were highly similar to the asserted patent without its permission. MTG sued against Hengjianda before Shenzhen Intermediate People's Court, requesting Hengjianda to immediately stop manufacturing, selling and offering to sell “intelligent fitness device” products that infringed MTG's design patent No. ZL201530198276.0, destroy the molds used to manufacture the infringing products and the special manufacturing equipment, destroy the entire inventory of the infringing products and to collect and destroy the unsold infringing products from the sales shops; requesting Hengjianda to compensate MTG for the economic losses suffered by MTG as a result of the infringement and the reasonable costs incurred in investigating and stopping the infringement, totaling RMB 2.2 million; and requesting Hengjianda to bear all the costs of this case.
Hengjianda Company made the non-infringement defense, arguing that the infringing products were manufactured in accordance with its own patents and they did not infringe the asserted patent owned by MTG.
The court of first instance found that the three accused infringing products were neither identical nor similar to the asserted patent design1 and that the design of infringing products did not fall within the scope of protection of the asserted patent. As none of the three infringing products fell within the scope of protection of the asserted patent, the acts of manufacture, sale and offering to sell of the relevant products by Hengjianda did not infringe the asserted patent owned by MTG and MTG's claim was dismissed.
MTG appealed to the Guangdong High People's Court (the "Court of Second Instance") against the first instance judgment.
The court of second instance held that the infringing design and the granted design were similar and that the infringing product 1, 2 and 3 fell within the scope of protection of the asserted patent. In the first instance, Hengjianda confirmed that it manufactured and sold the infringing products and that it displayed pictures of the infringing products on the sales links of its e-commerce platform, which also constituted the act of offering to sell. In view of the fact that the infringing products fell within the scope of protection of the asserted patent, Hengjianda manufactured, sold and offered to sell products infringing the asserted patent owned by MTG without permission, which constituted an infringement of the asserted patent and should bear the civil liability of stopping the infringing acts of manufacturing, selling and offering to sell and compensate for damages.
With regard to the amount of compensation, MTG claimed that the amount of compensation should be calculated on the basis of the profits made by Hengjianda from the sale of the infringing products on Taobao, Tmall, JD and other e-commerce platforms, and submitted relevant evidence for this purpose. Based on the evidence on file, MTG also calculated that the profit made by Hengjianda from the sale of the infringing products was the total sales of the infringing products 1, 2, and 3 × profit per unit = 69,568 units × CNY 50 ≈ CNY 3.47 million. The Court of Second Instance found that the calculation method claimed by MTG was in accordance with the law, and that all the data it based on to calculate the amount of compensation was available on Taobao, Tmall, JD and other e-commerce platforms, and that although the reasonable profit claimed by MTG was partly presumed, the presumption was not groundless in view of the value orientation of commercial entities to pursue profits and avoid losses. This is sufficient to demonstrate that MTG has fulfilled its preliminary burden of proof to the best of its ability. Therefore, it was held that MTG's evidence was sufficient to prove that Hengjianda had made profits from the sale of the infringing products.
In order to further investigate the profits gained from infringement, the Court of Second Instance issued a discovery order, ordering Hengjianda to provide on-line sales data, account books and the information about the infringing product. Hengjianda however refused to submit any data for no justifiable reason, even though it was fully capable of presenting counter-proof. Therefore, the Court of Second Instance held that the act of Hengjianda Company has constituted an obstruction of proof, and it should bear the adverse consequences arising therefrom. The Court supports the compensate amount claimed by MTG in full.
Regarding the reasonable costs of right enforcement, MTG had submitted corresponding bills to prove that it had spent CNY 148,528.24 on investigating and stopping the infringement in the first and second trial stages of the case. The Court of Second Instance held that, although MTG lacked documents to substantiate some of the expenses incurred in its right enforcement, Hengjianda had kept selling and offering to sell the infringing products even after the end of the second trial, which was a serious infringement, and given its obstruction of proof in the course of the proceedings and obvious bad faith, resulting in an increase in MTG's reasonable costs of its right enforcement, the reasonable costs of right enforcement claimed by MTG in this case shall be fully supported.
Accordingly, the Court of Second Instance finally ruled that the judgment of the first instance is reversed and that Hengjianda shall stop manufacturing, selling and offering to sell products infringing MTG's patent entitled "fitness device" under patent No. ZL201530198276.0, destroy the entire inventory of the infringing products, and compensate MTG for economic losses of RMB 2 million and reasonable expenses for right enforcement of RMB 200,000.
Attorney’s interpretation
In this case, the results of the first and second trials are completely different. While the court of first instance held that infringement was not established and thus dismissed the plaintiff's claim in full, the court of second instance revised the first instance judgement by affirming the infringement and upholding the amount of damages claimed by the plaintiff in full.
Regarding the infringement determination, this is a design patent infringement litigation case, there are indeed some differences between alleged infringing products and the asserted patent, and whether the differences will cause a different overall visual effect are more or less subject to subjective judgment. After the court of first instance denying the establishment of infringement, our firm actively appealed in order to safeguard the legitimate rights of the right holder. In order to reverse the unfavorable finding, apart from conducting an infringement comparison and claiming that the similarities between the two are distinguishing design features and have more impact on the overall visual effect, while the differences are subtle, our firm supplemented two pieces of evidence, the first of which was a questionnaire survey on the similarity between the two conducted by an online questionnaire survey company targeting at ordinary internet users, and the second of which was our invalidation request against the patent owned by the defendant by using MTG’s patent as a reference document. The defendant also submitted a questionnaire with the opposite conclusion. During the second trial, the two parties argued vigorously about whether the infringement was constituted, and the judge conducted detailed examination and questioning of both parties' questionnaires. At this point, there was already some influence on the judge's mental impression, and after the second trial, the CNIPA made a decision to declare the defendant's patent invalid. As the defendant had been arguing that the alleged infringing product implemented its own patent and that the alleged infringing product was essentially the same as its patent, the invalidation decision also indicated that the CNIPA’s opinion that Hengjianda’s patent was similar to our client’s patent. The invalidation decision we submitted strengthened the determination of the Court of Second Instance to revise the judgment of the first instance.
The focus of the second trial thereafter shifted to the determination of damages. Based on the evidence on file, including the notarized and time-stamped information about the sale of the alleged infringing products by Hengjianda on Taobao, Tmall, JD and other e-commerce platforms, we submitted to the court a clear method of calculating the infringement profits, i.e., based on the unit price and difference between the sales of the alleged infringing products by Hengjianda, the profits of the alleged infringing products were reasonably presumed, and eventually, based on the allegedly infringing products' sales volume already reflected in the evidence on file, the profits of Hengjianda were conservatively estimated to be RMB 3.47 million. In the first instance, we had applied for the court to order the defendant to disclose its account books, and in the second trial we once again submitted an application for an evidence discovery order to the court.
The court of second instance found that our evidence had preliminarily proved that Hengjianda had gained profits from the sale of the infringing products and issued an order to Hengjianda, requesting the provision of the on-line sales data, account books and the information about the infringing product. Hengjianda thereafter submitted a statement claiming that the links had been taken off the shelves and that the corresponding sales records could not be provided. In response, we submitted a counter-argument and the foundation of our argument that, according to the information published by Taobao and other e-commerce platforms, the removal of the links from the shelves would not result in the disappearance of the shop's back-end sales records. The court of second instance also verified the information published by the e-commerce platforms. The court ultimately found that Hengjianda's refusal to submit any data without justifiable reason, despite being fully capable of producing counter-evidence, constituted an obstruction of proof. Therefore, in view of the fact that our claim were well founded and reasonable, that the proved profit gained from infringement exceeded the claimed compensation of CNY 2 million, and that Hengjianda constituted an obstruction of proof and should bear the adverse consequences, the compensation we claimed was awarded in full.
Link to the judgment
Second instance:
https://www.iphouse.cn/cases/detail/og5xrp2e08w365yd819l71qkzm9n4vdy.html?keyword=%282018%29%E7%B2%A4%E6%B0%91%E7%BB%88682%E5%8F%B7
