“Offering to sell” or “offer for sale” refers to the act of expressing an intention to sell products through such means as advertising, window display or exhibition at trade shows. Offering to sell any patented product without a patentee’s permission is prohibited under article 11 of the Patent Law, but quite what form of legal liability should be assumed has been a matter of prolonged debate.
One view holds that an offer for sale should only lead to an injunction and an award of reasonable expenses, rather than damages, on the basis that the act itself causes no actual loss. The opposing view maintains that an offer for sale may also lead to liability for damages, as it may cause indirect loss to the patentee.
Guiding case No. 274, recently released by the Supreme People’s Court (SPC), clarifies that the infringing act of an offer for sale is subject to a full range of remedies, including damages, and sets an important precedent for future patent disputes.
Facts of the case
Patent Attorney
CCPIT Patent & Trademark Law Office
Tel: +86 10 6604 6336
E-mail: guoxj@ccpit-patent.com.cn
The defendant, Qingdao Chenyuan Mechanical Equipment (Chenyuan Mechanical), displayed an allegedly infringing product – a vertical plunger pump for secondary construction – on its online store and official website. The plaintiff, Qingdao Qingke Heavy Industry, is the holder of a Chinese utility model patent for the same product. The plaintiff alleged that Chenyuan Mechanical had manufactured, offered for sale and sold the infringing product, and sought both injunctive relief and damages.
Chenyuan Mechanical denied manufacturing or selling the product, contending that it had only engaged in an offer for sale. It further argued that no economic loss had been caused to the patentee, and that it had derived no profit from its actions. Consequently, the claim for damages was unfounded.
The plaintiff provided no evidence to substantiate the allegations of manufacturing or actual sales. Yet the court found that the accused product embodied all the technical features of the relevant claims of the patent – and Chenyuan Mechanical’s display of the product on its website and online store was held to constitute an infringing offer for sale.
Chenyuan Mechanical was ordered to stop offering for sale the infringing products and to pay the plaintiff compensation for economic losses and reasonable expenses.
It subsequently appealed the decision, but the SPC dismissed the appeal and affirmed the lower court’s judgment that displaying the accused product in an online store for sale constitutes an offer for sale.
SPC reasoning
The key issue in the appeal was whether the patentee could claim damages based solely on an offer for sale. The SPC held that an offer for sale is itself a standalone infringing act explicitly defined in the Patent Law. The imposition of civil liability for such an act does not depend on whether a sale is ultimately concluded.
Once an unauthorised offer for sale is made, it typically results in the loss of potential patent royalties. Moreover, the price quoted by the alleged infringer in the offer is often lower than that of the patented product. Such conduct may shape consumer expectations, undermine the patentee’s right to reasonably price the product, or cause potential buyers to postpone or forgo purchasing the patented product and instead contact the infringer for a transaction.
In addition, an infringing offer for sale can impair the advertising and promotional value associated with the patented product. An offer for sale may therefore not only deprive the patentee of licensing fees but also cause other forms of harm, such as price erosion and loss of business opportunities. Such harms warrant legal redress.
Accordingly, in addition to ordering the cessation of the infringement, courts should also impose liability for damages arising from the offer for sale. This approach aligns with the legislative intent of the Patent Law and contributes to a favourable environment for business and innovation.
Discussion
The rationale for the SPC’s conclusion can be understood from the following perspectives.
First, the nature of an offer for sale does not justify treating it differently from an actual sale, particularly in the context of online commerce, where a transition from offer to sale can be completed instantly without geographical constraint. The gap between displaying a product in an online store and completing a transaction is often negligible.
Second, unlike traditional offline offers, which require time and physical proximity to reach consumers, online offers can be released instantly and accessed globally at any time. This removes both temporal and spatial barriers, extending the duration and expanding the geographic scope of the infringement. As a result, the harm inflicted on the patentee is broader in scope and greater in degree.
Third, legislative history confirms that offers for sale are not exempt from damages. China established independent rights against offers for sale, first for inventions and utility models, and later extended to design patents. The purpose of creating independent rights was to strengthen the protection of patent rights, not to limit remedies. Accordingly, all remedial measures for patent infringement shall apply equally to the act of offering for sale.
Fourth, imposing damages for an offer for sale is consistent with the principle of full compensation, also known as the make-whole principle. The royalties the infringer should have paid, but did not, represent precisely the kind of loss the make-whole principle seeks to redress. Since an offer for sale requires the patentee’s authorisation, and the infringer proceeded without such authorisation and without payment, holding them liable for compensatory damages is entirely justified.
Guo Xiaojun is a patent attorney at CCPIT Patent & Trademark Law Office. He can be contacted by phone at +86 10 6604 6336 and by email at guoxj@ccpit-patent.com.cn
Guo is also the secretary-general of the Chinese group of the International Association for the Protection of Intellectual Property (AIPPI)
