IP in China - record fine for French company

Today's FT has an interesting article about patent infringement under Chinese Law. Historically, IP enforcement has been weak and only small fines have been levied. However, things appear to be somewhat different when the guilty party is foreign.

Whilst this individual case holds only minor interest the general trend and IP protection in China is an important one.

As an aside, the current iMEGA vrs US government online gaming row may turn on China's threat to weaken copyright law. This is a complex case but the rest of the world is seeking up to £100 billion from the US for violating WTO rules. If no compensation is forthcoming China may retaliate. This would bring other US lobby groups into play that would overpower the current anti-gambling lobby. Hollywood and the software industry have considerable clout. See Netbetblog for the full story.

China fines Schneider $45m

A Chinese court has ordered France’s Schneider Electric to pay a Chinese company $45m in damages for infringing its patent, the largest amount ever awarded in an intellectual property case in the country.

Intellectual property violations are one of the main sources of friction between China and the rest of the world, and in the vast majority of IPR cases involving foreign players, the Chinese company is the defendant.

The Intermediate People’s Court in Wenzhou city, eastern Zhejiang province, told Schneider to stop making five types of miniature circuit-breakers, which it ruled were based on patents held by low-voltage equi­p­ment maker Chint Group of Wenzhou. The court also awarded Chint Rmb334,869,872 ($44.6m) in damages.

“This is the biggest amount by far granted in an intellectual property case in China,” said Larry Sussman, partner at O’Melveny & Myers lawyers in Beijing. “It’s a startling development and could mean we are embarking on a new path in China.”

Lawyers say China is notable for awarding tiny sums in IP rights cases and while there has been a number of high-profile rulings in favour of foreign companies, the wins have been largely symbolic and the am­ounts awarded inconsequential.

The fact the ruling was made by the hometown court of the plaintiff could have affected the outcome, lawyers say.

Schneider said yesterday it was “disappointed” by the verdict, but intends to appeal and is challenging Chint’s patents in a separate case. The company “strongly contests the validity of Chint’s utility model” and “will continue working closely with the related Chinese judicial authorities to clarify the dispute”. It asserts it has been using the technology in the disputed circuit-breakers since the early 1990s, before Chint’s patent applications in 1999.

In spite of the record size of the damages a Chint spokesman said yesterday the ruling was “very normal in the process of the law” and showed the company was justified in protecting its intellectual property rights.

The damages were based on Schneider’s profits from sales of the products from August 2004 to July 2006, according to a copy of the verdict obtained by the FT. Last month the Supreme Court in Beijing upheld the Zhejiang Provincial High Court ruling ordering Chinese motorcycle manufacturer Zhejiang Huatian to pay Rmb8.3m to Yamaha of Japan for infringing its trademark. That was the largest pay-out to a foreign company in an IP case in China and was seen as a watershed, said August Zhang, a lawyer at Rouse & Co.