Patent Infringement Damages Based On Actual Damages: A Comparative Study Between China And The U.S.

The basic principle of patent infringement damages in China is compensatorydamages. Only by awarding damages based on actual damages can the aim of makingthe patentee full be fulfilled. With respect to actual damages, the existing studies havenot established feasible causation test and quantitative approaches. As a result,Chinese courts rarely determine damages based on actual damages in patent cases. Inaddition, the causation test used in determining actual damages failed to reflect thecausation between infringement and the actual loss of the patentee.The basic principle of patent infringement damages in the U.S. is alsocompensatory damages. To be awarded actual damages, the patentee must prove thecausation in fact between infringement and his actual loss. He must meet the “but for”test. Namely, he must prove that but for the infringement, he should have made moreprofits. To meet the “but for” test, the patentee usually must first prove that theproduct of the patentee competes with that of the infringer in the relevant market.Then he must prove the first three factors of the Panduit test—the demand for theproduct of the patentee, absence of the non-infringement alternatives, and adequacy ofproduction and marketing ability. After establishing causation in fact, the U.S. courtthen tests proximate causation. If a particular loss of the patentee was or should be reasonably foreseeable by an infringing competitor in the relevant market, that loss iscompensatory. After establishing causation, the patentee must either quantify actualdamages merely based on historical records or quantify actual damages afteraccurately adjusting the historical records.The major differences between China and the U.S. are the causation test and thecomprehensive quantitative approach. The test for causation in fact in the U.S. is morelogical. The test for proximate causation could reasonably limit the damages. Thecomprehensive quantitative approach computes the actual damages more accurately.Therefore, China should borrow from the U.S. the causation test and the quantitativeapproach when determining actual damages.