WIPS global: [International IP Briefing] China's Top Court: Free Gifts May Constitute Patent Sales

China’s Supreme People’s Court Holds That Free-of-Charge Provision of Infringing Patent Products May Constitute a “Sale”

On September 23, 2026, the Intellectual Property Court of the Supreme People’s Court of China published a case concerning the infringement of an invention patent, holding that providing an allegedly infringing patent product free of charge together with another product may constitute a “sale” under the Patent Law, depending on the substance of the transaction.

Overview

The Supreme People’s Court held that even where a promotional item is not separately priced, its provision may constitute a sale if it is offered on the condition that the customer purchases the main product and the economic value of the promotional item is effectively reflected in the profit from the sale of the main product. In such circumstances, the provision of the item forms part of the overall sales transaction.

Key Points

The key facts and findings of the Supreme People’s Court in Case No. (2024) Supreme People’s Court Intellectual Property Civil Final No. 1286 are summarized below.

Background of the Case

The patent holder owned an invention patent relating to a wire winding machine (“缠丝机”). The defendant sold three rebar cage welding machines and provided one wire winding machine free of charge with each machine. The wire winding machines were alleged to infringe the patent.

· The wire winding machines were not separately priced in the purchase contract.

· The defendant argued that because the machines were provided free of charge as promotional items, their provision did not constitute a “sale” under the Patent Law.

Whether the Provision Constituted a Sale

The Supreme People’s Court found that, in commercial transactions, providing a promotional item is a means of facilitating the sale of the main product. Once the purchaser pays for the main product, the economic value of the promotional item is effectively incorporated into the transaction.

· Accordingly, the fact that the promotional item was not separately priced did not prevent the transaction from being considered a sale under the Patent Law, where the provision of the item was conditional on the purchase of the main product and its value was reflected in the seller’s sales profit.

Patent Infringement

The Court found that the wire winding machines manufactured and provided by the defendant incorporated all of the technical features set forth in Claims 1–3 of the patent and therefore fell within the scope of the patent claims.

Determination of the Number of Infringing Products Sold

The Supreme People’s Court relied, among other evidence, on VAT invoice records obtained from the tax authorities to determine the number of rebar cage welding machines sold by the defendant and used those figures as a basis for estimating the number of infringing wire winding machines sold.

· Taking into account the defendant’s failure to provide relevant technical and sales information despite possessing such information, and its refusal to disclose the information on the grounds of commercial confidentiality, the Court determined that 468 wire winding machines had been sold between 2021 and 2024.

Calculation of Damages

The court of first instance awarded RMB 50,000 (approximately USD7,000) in statutory damages, including the patent holder’s economic losses and reasonable enforcement expenses. On appeal, however, the Supreme People’s Court recalculated the damages based on the infringer’s profits.

· Based on the sales volume, average selling price, and operating profit margin, the Court estimated the defendant’s profits from the infringement at approximately RMB 547,700 (approximately USD76,000).

· As the patent holder had claimed RMB 500,000 (approx. USD69,500) in damages, including reasonable enforcement expenses, the Supreme People’s Court awarded the full amount of RMB 500,000 (approximately USD69,500).

Final Judgment

The Supreme People’s Court upheld the first-instance order requiring the defendant to cease manufacturing and selling the infringing products, while increasing the damages from RMB 50,000 (approx. USD7,000) to RMB 500,000 (approx. USD69,500). The defendant’s appeal was dismissed.

The judgment is significant in clarifying that a product described as a “free gift” will not necessarily fall outside the scope of “sale” under China’s Patent Law. Where the gift is provided as part of a commercial transaction and its value is effectively incorporated into the price or profit of the main product, the transaction may be treated as a sale for patent infringement purposes.