Meaning
Article 65 of the Patent Law of the People’s Republic of China establishes the statutory framework for calculating administrative penalties and civil damages resulting from unauthorized exploitation of a patented invention. National enforcement authorities and people’s courts apply this provision when a party manufactures, uses, offers to sell, sells, or imports a protected product or process without licensing permission from the patent holder. Statutory calculations rely on economic losses suffered by the right holder or illegal gains derived by the infringer, moving through tiered evidentiary standards before defaulting to statutory damages prescribed by judicial interpretations.
Territorial boundaries restrict the application of this provision to acts committed within mainland borders, excluding extraterritorial manufacturing that lacks domestic importation or distribution steps.
Penalty Calculation
Financial assessments begin with actual losses sustained by the patentee through diminished sales volume or depressed market pricing caused by the infringing activity. Commercial records and accounting ledgers from the infringing entity serve to verify profit margins and units sold, establishing the baseline for disgorgement when direct loss proves difficult to quantify. License fees serve as a secondary multiplier when primary accounting records remain obscured or unavailable, applying standard industry royalty rates to the duration and scale of the unauthorized use.
Statutory caps apply automatically when neither economic losses nor infringer gains can be established through documentary evidence, leaving judges to fix monetary awards within prescribed legislative limits based on the severity and duration of the infraction.
Enforcement Authority
Administrative bodies operating under provincial intellectual property administrations possess jurisdiction to conduct on-site inspections, question relevant personnel, and seal premises associated with suspected infringement activities. Local enforcement officers may order immediate cessation of infringing acts, confiscate illicit inventory, and impose administrative fines proportional to illegal business revenue generated by the operation. Judicial proceedings provide an alternative forum through intellectual property tribunals, where right holders initiate civil lawsuits demanding permanent injunctions and financial compensation alongside administrative remedies.
Evidentiary burdens shift toward the defendant once the patentee demonstrates valid intellectual property rights and proves that the accused product or process falls within the scope of the patent claims.
Remedial Limitation
Statutory time bars restrict the recovery of damages to a three-year window preceding the date of filing a lawsuit or launching an administrative complaint, leaving older infringements uncompensated under the law. Ongoing commercial disputes often stall while administrative findings undergo judicial review, delaying the ultimate execution of financial judgments against recalcitrant entities. Local protectionism across different provincial jurisdictions can introduce inconsistencies in penalty enforcement, complicating nationwide compliance strategies for foreign patent holders seeking uniform redress.
Provisional protection rights granted during the patent application phase operate under separate rules, preventing the retroactive application of full statutory damages to acts occurring prior to formal patent grant.
