Since 2013, China has gradually introduced the concept of punitive damages in the amendments to several laws on intellectual property rights, in which the elements of punitive damages were also stipulated, namely the infringement has to be “intentional” or “malicious” and “serious”. In 2020, the Civil Code was officially adopted, and it stipulates that the award of punitive damages may only be considered where the infringed party has specifically request for the same.
On March 3, 2021, the Supreme People’s Court issued the “Interpretation on the Application of Punitive Compensation in the Trial of Civil Cases of Infringement of Intellectual Property Rights” (the “Interpretation”), which becomes effective on the same day. In particular, the revised patent law and copyright law took effect on June 1, 2021. The Interpretation made specific provisions on the scope of applying punitive damages, the determination of “intentional” and “serious circumstances”, as well as the basis for calculation of the damages. The Supreme People’s Court issued also issued several typical cases of applying punitive damages as examples.
In terms of the subjective elements, the Interpretation clarifies that the meaning of “intentional” and “malicious” is the same in the context of the Civil Code and the laws on intellectual property rights, and also lists six situations where “intentional” can be preliminarily identified. In terms of the objective elements, the Interpretation stipulates that multiple factors should be considered when determining whether the infringement is “serious”, and also lists seven situations as examples. In terms of the calculation basis, it is stipulated that the amount of actual loss, illegal gains, or the benefits obtained out of the infringement can be used as the basis for calculation; where the above amount is difficult to ascertain, the court may calculate the punitive damages based on the multiple of the license fee. In general, the Interpretation sets a threshold for applying punitive damages, and includes a cover clause (“other circumstances”) so that the application can be more flexible in practice.
The purpose of the Interpretation is to provide clear guidance to Courts at all levels to accurately apply the principle of finding punitive damages and to punish serious intellectual property infringement. The issuance of the Interpretation and the typical cases shows that the Chinese government is determined to punish and deter serious intellectual property infringement. It remains to be seen whether punitive damages will be applied extensively, and whether this will help deter notorious intellectual property infringement in China.