——Hengbao vs. Watchdata

On Dec. 8, 2016, Beijing Intellectual Property Court made its judgment of the highest amount of compensations since its establishment. In the case where Watchdata System Co., Ltd. (Watchdata) filed a lawsuit against Hengbao Co., Ltd. (Hengbao), claiming infringement upon the patent rights, Hengbao’s infringement act was established and Hengbao was ordered to immediately stop its infringement and indemnify Watchdata for the economic losses of RMB49,000,000 (about USD7,140,000), and reasonable expenditure of RMB1,000,000 (about USD146,000). It is worth mentioning that in such case, Beijing Intellectual Property Court clarified the references for determining compensations to the attorney’s fees for the first time.

Watchdata and Hengbao are enterprises both for producing smart keys (USBKeys, also called “U-SHIELDs”) for finance feilds. Watchdata claimed that several USBKey products manufactured and sold by Hengbao to tens of banks in China and the physical authentication method used by the defendant when using such kind of product for online banking transfer transactions infringed upon its invention patent right of “Physic identification method and electronic device ” (patent number: ZL200510105502.1). Therefore, Watchdata requested the court to judge that Hengbao should stop its infringement and indemnify the plaintiff for the economic losses of RMB49,000,000 (about USD7,140,000), and reasonable expenditure of RMB1,000,000 (about USD146,000).

After hearing, Beijing Intellectual Property Court determined that Hengbao’s act constituted infringement. As for Watchdata’s request of compensation amounting to RMB49,000,000, during the hearing, the court found out by means of investigations and collection of evidences from the banks, etc., the actual quantity of the infringed products sold by Hengbao to 12 banks in China, and recognized the reasonable profits of each patented product as proposed by Watchdata. According to the provisions of the relevant juridical interpretation issued by the Supreme People's Court. Beijing IP Court calculated the actual losses of the plaintiff amounting to RMB48,142,000 through multiplying the actual sales volume of the infringed products by the reasonable profits of each patented products,

In addition, the court also established that Hengbao sold the infringed products to three banks in addition to the above-mentioned 12 banks, and it hold the evidences for actual sales volume but refused to provide with the Court. Watchdata inferred according to the industrial practices that Hengbao’s profits from sales of the infringed products to these three banks were above RMB2,000,000, and claimed a compensation of RMB858,000. Beijing Intellectual Property Court supported Watchdata’s claim according to the Supreme People's Court’s juridical interpretation on obstruction of evidences. Finally, the court supported Watchdata’s claim for economic compensations amounting to RMB49,000,000.

As for the compensation claim for the attorney’s fees amounting to RMB1,000,000 as proposed by Watchdata, the court determined that Watchdata’s claim was reasonable and supported, after considering such factors as “necessity and complexity of the case, and the attorney’s actual pay-out, etc.”. And the court determined the above hearing principle for the first time.