China’s top 20 patent cases of 2020: Lumi v. Siemens

China IP,[Patent]

 

Docket number of the case in the first instance: 916, first instance (初), civil case (民), (2018) Shanghai Intellectual Property Court (沪73)
Docket number of the case in the second instance: 224, second instance (终), civil case (民), (2020) Shanghai High People's Court (沪)
 
[Basic Facts]
Appellant (Defendant in the case in the first instance): Lumi United Technology Co. LTD. (Hereinafter: Lumi)
Appellee (Plaintiff in in the case in the first instance): Siemens
Defendant in the case in the first instance: Shanghai Jiyan Intelligent Technology Co., Ltd (Hereinafter: Jiyan)
 
The plaintiff Siemens is the patentee of the design patent named “Switch”. In September 2018, the plaintiff purchased six switch products of Aqara series of the defendant Jiyan at Tmall.com. These products were produced by the defendant Lumi that also displayed the six alleged infringing products on its official website and sold them through multiple channels. Lumi sold the alleged infringing products through online channels, including JD, Tmall, mi.com, xiaomiyoupin.com, suning.com, etc. According to the plaintiff's application, the court acquired the sales data of Aqara series wireless switches, Neutral and Live wire switches and single Live wire switches (including single-and double-key versions) from various online sales platforms and found that, as of January 2019, the total sales of six switch products recorded RMB 42,497,186.20. The defendant Lumi said on its official website that “as of 2018, Lumi had 300 service providers, and 115 smart home experience stores across China...”. According to the information disclosed on the website, Lumi has 133 authorized 4S flagship stores, and franchised service providers for channel cooperation nationwide. Holding that Lumi and Jiyan infringed upon the patent right it enjoyed in the case, the plaintiff filed a lawsuit with the court, requesting that the two defendants stop infringement and Lumi compensate it for the economic losses and reasonable expenses totaling RMB 6 million.
 
Shanghai Intellectual Property Court ruled in the first instance, the alleged infringing product is the same as the patented product. According to the comparison results, the alleged infringing product and the patent involved have the same distinguishing design characteristics, and the difference lies in the parts that are not easily observed during normal use of the product or the difference is subtle. Therefore, the six alleged infringing products are similar to the patent involved and fall within the scope of protection of the plaintiff's design patent right involved. The defendant commits infringement acts and shall bear civil liability for stopping infringement and compensating for the loss.
 
Regarding the computable profit from infringement in the amount of compensation, as of January 2019, the total sales of online stores of Lumi acquired by the plaintiff exceeded RMB 42.49 million. According to the price discount granted to a third party by Lumi and the industry profit margin submitted by the plaintiff, the court determined that the profit margin of the alleged infringing product was 40%; when determining the contribution rate of the patent involved, the court excluded the influence of product functions and other related factors, and referred to the price difference between the plaintiff's patented product and the common switch product, determining that the profit margin of the patented design involved was 20%. Based on this, the computable profit from infringement of Lumi exceeded RMB 3.39 million.
 
With respect to other online and offline sales claimed by the plaintiff, the case takes into account the following factors when determining the amount of compensation: First, the evidence provided by the plaintiff shows that, the sales data collected by the investigation order failed to cover the sales scope of all the online stores of Lumi; second, after the plaintiff collected the sales data of the alleged infringing product with the investigation order, Lumi was still producing and selling the alleged infringing product. According to the average monthly sales of each platform, the sales amount of the defendant Lumi after the above data cut-off date was at least RMB 12 million; third, Lumi also has offline sales channels, with 133 4S flagship stores, 300 service providers and 115 smart home experience stores, with a wide range of offline sales channels and a large sales scale. The existing evidence shows that the profit from infringement of Lumi has significantly exceeded the maximum statutory damages. The court has, by taking into account the above factors, the type of the patent involved, the nature and circumstances of the infringement and other factors, determined the amount of compensation above the maximum statutory damages as appropriate. Given the amount of indemnity determined by the court as appropriate and the sum of reasonable expenses and the calculated portion of the profits from infringement have exceeded RMB 6 million claimed by the plaintiff, the court supported the plaintiff's claim in full.
 
Based on the above grounds, the court ruled in first instance: The defendants Lumi and Jiyan shall stop infringement and indemnify the plaintiff for the economic loss and reasonable expenses totaling RMB 6 million.
 
Lumi refused to accept the verdict of first instance, and appealed to Shanghai High People's Court. In the second instance, Lumi applied to withdraw its appeal on the grounds that it had reached a settlement with Siemens. The second-instance court ruled to allow Lumi to withdraw its appeal.
 
[Typical Significance]
In its processing, this case adopted the principle of full compensation, and explored the details in determining the damages for patent cases. In practice, it’s often impossible for the right holder to provide evidences for all the sales scope of the alleged infringing product. The trial of this case makes clear the rules for adding the parts that can be accurately calculated and those that can’t be accurately calculated, that is, when determining the amount of damages in a patent case, calculate the profit from infringement for the online sales of the alleged infringing product with specific data proof; for other online and offline sales, when the existing evidence shows that the defendant's profit from infringement significantly exceeds the maximum statutory damages, it’s necessary to take into account relevant factors and determine the compensation amount of this part above the maximum statutory damages as well as the total amount of damages with the sum of the two parts.
 
Moreover, the judgment explores the considerations in determining product profit margins and patent contribution rates, and further clarifies the ruling rules: When determining the product profit margin, it’s necessary to consider the price discount granted to a third party, and the industry average; when determining the contribution rate of the product patent, it’s necessary to exclude the influence of product function and other factors, and consider the price difference between the patented product and the common product.
 
This case makes a beneficial exploration into the compensation methods for intellectual property damage, further increasing the cost of infringement and strengthening the protection of intellectual property rights. This case was selected as one of the “Typical Cases of Strengthening Intellectual Property Protection by Shanghai Courts in 2020”.

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