The plaintiff (WatchData) and the defendant (Hengbao) are both manufacturers of smart password key products. The plaintiff, owner of invention patent ZL200510105502.1 in respect of “a physical authentication method and an electronic device”, discovered that the defendant was manufacturing and selling several types of USB key products to dozens of banks in China, which, along with the physical authentication method adopted when using these products to perform online banking transactions, have fallen into the protection scope of the plaintiff’s invention patent, and thus constituted infringement. The plaintiff filed a lawsuit at Beijing IP Count on February 26, 2015, requesting the court to order the defendant stop the infringement act immediately and pay an indemnity of 49 million yuan for economic loss compensation together with 1 million yuan for reasonable litigation cost.

Beijing IP Court found that the USB key products at issue and the physical authentication method adopted thereby in performing online banking transactions both fall within the protection scope of the plaintiff’s patent right, and therefore the defendant has constituted infringement on the plaintiff’s patent right. In determining the amount of compensation for infringement and the amount of compensation for lawyers' fees, the Court adopted the following methods:

1. The amount of compensation for infringement damages shall be the actual numbers of infringing products multiplied by the reasonable profit of each patented product.

2. In view of the fact that the defendant refused to provide its profits earned from selling the infringing product to Bohai Bank, Zhejiang Rural Credit Union (Cooperative Bank) and Hubei Bank, the amount requested by the plaintiff shall be supported.

3. The charge-by-hour method adopted by law firms can be used for calculating the reasonable legal expenses in this case; factors such as the necessity of an attorney for the case, the complexity of the case and the actual input from the lawyer shall be taken into consideration to decide whether the plaintiff’s claim of legal expenses is reasonable.

Based on the above, Beijing IP Court supported the plaintiff’s claim of 49 million yuan’s economic compensation in full amount. This is the highest indemnity amount ever decided by Beijing IP Court since its establishment. With regard to the one million legal expenses claimed by the plaintiff, Beijing IP Court held that the charge-by-hour method proposed by the plaintiff in this case is a common method adopted in legal service field, which does not violate any law and regulations, can be used as the basis for calculating the reasonable lawyer fees. This is also the first time for the court to adopt charge-by-hour method to calculate legal fees in a verdict.