Judicial Apportionment Models for Trade Secret Damages in PRC Intermediate IP Courts
PRC Intermediate IP Courts limit trade secret damages to net profits directly driven by proprietary secrets, deducting market, capital, and non-infringing inputs.
Judicial Apportionment
Meaning
Calculations performed by courts allocate total commercial profits between protected intellectual property features and non-infringing product components in damages calculations. Judges apply judicial apportionment when determining financial compensation under the Patent Law and Anti-Unfair Competition Law of the People’s Republic of China. The method isolates the monetary contribution generated by the infringed technical patent or trade secret from value derived from overall manufacturing assembly, brand equity, distribution networks and market capital.
Without this proportional distribution, damage awards would improperly penalize defendants for profit generated by unpatented technology or general business operations.
Analytical Formula
Financial experts evaluate the structural contribution of individual patented features to the overall profit margin of an accused device. Courts multiply total net sales profits by a determined percentage representing the specific technical driver of consumer purchasing decisions.
Evidentiary Burden
Litigants must present detailed cost accounting statements and market research data to establish the economic weight of the patented technical feature. Plaintiffs bearing the burden of proof submit accounting reports that isolate profit streams associated with the infringed technology. When defendants operate integrated manufacturing facilities that combine multiple proprietary and open-source components, courts examine production records, supplier contracts, bills of materials and comparative product pricing to determine reasonable allocation ratios.
Failure to provide granular financial records often leads judges to rely on expert evaluation reports or statutory damages frameworks.
Damages Limit
Proportional calculation rules apply exclusively to the quantification of monetary damages and do not limit injunctive relief. An injunction granted by a court halts manufacturing and sales regardless of whether the patented feature accounts for a small fraction of the total product value. Furthermore, statutory damage provisions supersede judicial apportionment calculations whenever financial records are completely absent or demonstrably falsified by either party.