With multinational and domestic companies responding to the tough market conditions by means of budget cutting, law firms in China have seen a significant reduction in demand for patent filings and prosecutions. However, IP litigation, enforcement and licensing work are the areas in which law firms still expect to see prospects of growth.

"In boom times, some companies didn't pay enough attention to some infringement problems, and didn't have time to fully realise the commercial potential of their IPRs. Now, the quiet time gives them a good opportunity to adjust their IP strategy and planning and reap more economic benefits from their existing IP portfolios," said Jay Sha, a partner of Liu Shen & Partners.

As companies start to see the potential to get royalty payments or licence fees from infringers, they are becoming more aggressive in filing law suits against infringers. Another determining factor is the relatively more affordable litigation costs in China.

"The volume of IP litigation has increased in recent years. And more importantly, the damage awards in infringement cases are rising and increasingly punitive," said Gordon Gao, a partner of Fangda Partners and a member of the firm's IP practice group.

The firm has been involved in a large number of high-profile IP litigation cases, some of which were included in the "100 Typical IPR protection cases" recently announced by the Supreme People's Court. Last October, Jiang Zhipei, former chief justice of the IP tribunal in the Supreme People's Court, joined Fangda as a senior advisor, further boosting the firm's IP litigation capability and expertise.

"It's noticeable that judicial damage awards for IPR violations in China are increasing. In the past few years, there have been many cases involving significant damages and complex matters, and high damage awards are occurring more frequently each year," said Gao.

According to a recent report on IP litigation and damages trends in China issued by NERA, an international economic consulting firm, the highest damages award in each of the last five years are: US$2.78 million (2008 - midyear), US$44.3 million (2007), US$210,000 (2006), US$1.1 million (2005), and US$50,000 (2004). The median damage award in the NERA database was $34,722 for patent infringement, $18,109 for copyright infringement, and $18,488 for trademark infringement.

"The trend signals another important progress in China's protection of IPRs. The positive changes in IPR enforcement will attract more foreign investment, particularly R&D investment, into China and facilitate the development of an innovative and knowledge-based economy," Gao said.