Published on January 4, 2023

Neteast Co., Ltd. is the official distributor of the world popular game Minicraft. In November 2022, Guangdong Higher People’s Court (“the Second Instance Court”) issues a judgement, ordering Shenzhen Miniwan Co., Ltd. (“the Defendent”) to pay CNY 50 Million (USD 6.94 Million) to Neteast Co., Ltd. (“The Plaintiff”) for copyright infringement and unfair competition, marking possibly the highest damages ever awarded for IP infringement in game field of Mainland China. Principle of Reverse of burden of proof is once again applied in this case.

In China, generally speaking, to prove infringement and damages, the burden of proof is on the plaintiff’s side.
According to "Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China" Article 90 A party concerned shall provide evidence to prove the facts on which his own claim is based or the facts on which the opposing party's claim is based, unless otherwise stipulated by law. Before a judgment is made, if a party fails to provide evidence or the evidence is insufficient to prove its factual claim, the party bearing the burden of proof shall bear the adverse consequences.

However, under certain circumstance, the burden of proof will be reversed and it’s the adverse party’s responsibility to provide evidence. In recent years, such principle has been incorporated into the amended IP Laws such as Copyright Law (2020 Amendment)
Article 54…
According to Copyright Law Where the rights holders have already satisfied the necessary burden to produce evidence and the account books and materials related to the infringement are mainly in the hands of the infringers, the people's courts may order the infringers to provide them in order to determine the amount of compensation, and where the infringers fail to provide them or provide false account books, materials, and so forth, the people’s court may determine the amount of compensation by referring to the claims of the right holder and the evidence provided.

In this case, the Plaintiff claims his copyright is infringed and requests damages of CNY 50 million. Shenzhen Intermediate People’s Court, which is the first instance court, finds that the Defendant infringes the copyright and the Defendant is liable to damages of CNY 21.13 million. Neither the Plaintiff nor the Defendant is satisfied with the result and the Plaintiff files an appeal again the first instance judgement. The Second Instance Court believes that the Defendant, as the infirming party, should be in control of the relevant operational data and therefore the burden of evidence is shifted to the defedant. However, the Defedant refuses to provide it to the Court without justifiable reason. Therefore, it should bear the legal consequences of unfavorable presumption. Based on the 3rd party data such as number of download, transaction income etc. submitted by the Plaintiff, it is estimated that the profit made by the Defendant due to infringement has far exceeded the damages claimed by the Plaintiff (CNY 50 million). Therefore, the Court completely support the claim of the Plaintiff and issue damages of CNY 50 million.

In IP infringement case, it is usually very hard to collect evidence of damages, because accounting information, which reflects the cost and profit of the infringing activity is usually under control of the infringer. Application of the reverse of burden of proof may shift the responsibility of preparing evidence to the infringer. In order to shift the burden of evidence to the Defedant, the Plaintiff is suggested to try its best to provide as much supporting evidence as possible to support his claim for the damages estimate. For example, in this case, the Plaintiff provides the 3rd party statistic showing the number of downloads of the infringing app in the IOS and Android market as well as transaction amount. It can be confirmed that profit of CNY 315.9 million has been made by he Defendant. After detailed analysis, it can also be found that 30.9% of the elements in the Defendant’s game (221 out of 713 elements) are infringing. Therefore, the damages should be CNY 315.9 million X 30.9% = CNY 97.6 million which is much higher than CNY 50 million as claimed by the Plaintiff. In China, discovery procedure is not available. However, through shifting of burden of evidence from the Plaintiff to the Defendant, the Court may order the parties to produce evidence if necessary. In this case, the Court orders the Defendant to produce the download and sales data through IOS and Android platform but the Defendant refuses to provide such information. Therefore, considering absence of evidence from the Defendant’s side, the Court believes that the evidence provided by the Plaintiff, although does not directly reflect the accounting information of profit earned by the Defendant due to infringement, should be deemed as predominant evidence on which the judgement is based.