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.
Lost Profits Calculation
Meaning
Quantitative legal assessment of the financial injury suffered by a rights holder because of a competitor’s unlawful market entry. Performing a lost profits calculation involves determining the number of sales the plaintiff would have made if the infringement had not occurred. This method is the primary way for legitimate businesses to recover damages under the Civil Code and specialized intellectual property laws in China.
Volume Assessment
The difference between the expected sales volume and the actual sales volume during the period of infringement serves as the starting point.
Margin Analysis
Accountants multiply the lost volume by the plaintiff’s average net profit per unit to reach a total loss figure. This calculation must account for market fluctuations and the presence of other competitors who might have captured some of the sales. The result must be backed by audited financial statements from previous fiscal years.
Market Reality
If the plaintiff lacks the production capacity to have fulfilled the additional orders, the court will reduce the calculated loss accordingly. Claimants must prove they were ready and able to supply the market at the scale they claim to have lost. This prevents the award of speculative damages based on unrealistic growth projections.