Sub Assembly Mapping Strategies under PRC Patent Law
Mapping sub-assemblies against PRC patent claims separates component scope from combined assembly limitations to manage indirect liability and customs hold risks.
Article 585 Damages
Meaning
Contractual compensation adjustments under the civil code of the People’s Republic of China allow judicial bodies to increase or decrease agreed liquidated damages to align with actual economic losses. Under article 585 damages are evaluated against the benchmark of the real harm suffered by the non-breaching party. The law prevents either windfall profits or punitive penalties by authorizing courts to recalibrate the financial obligations of the contract.
This balancing mechanism ensures that commercial agreements do not become instruments of financial destruction.
Judicial Adjustment
Judicial intervention requires a formal application from a party. Judges will reduce the agreed amount if it exceeds the actual losses by more than thirty percent. This ensures that the compensation remains remedial.
Evidentiary Burden
Proof of actual damage lies with the party seeking the adjustment. In manufacturing disputes, this requires presenting purchase orders, storage costs, alternative supplier quotes, and lost profit projections. A party cannot claim that the agreed figure is unfair without presenting structured financial data to support the assertion.
This high evidentiary standard protects the principle of contractual autonomy and prevents arbitrary adjustments by the court.
Contractual Protection
Risk mitigation remains possible through precise drafting. Supply chain agreements should define the method for calculating actual loss to avoid prolonged disputes under the rules of article 585 damages. Companies must document their pre-contractual negotiations to demonstrate that both parties agreed to the penalty structure.
Clear records reduce the likelihood that a court will modify the contractual damages.