The Supreme Court issued a judicial interpretation of punitive damages for intellectual property rights effective from March 3 （March 2021）

Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Intellectual Property Infringement Civil Cases (herein after referred to as the Interpretation) was released and put into effect on March 3, 2021.

The Interpretation makes specific provisions on the scope of punitive damages in civil intellectual property cases, the designation of intentional and aggravated circumstances, and the determination of the calculation base and multiplier. By clarifying the standards of adjudication, the Interpretation aims to guide courts at all levels to accurately apply punitive damages and punish serious infringements of intellectual property rights.

The Interpretation has the following three highlights:

I. It clarifies the relationship between "intentional" and “malicious."  The Civil Code stipulates that the subjective element of punitive damages is “intentional", while Article 63.1 of the Trademark Law and Article 17.3 of the Anti-Unfair Competition Law are defined as "malicious". The drafting process of the Interpretation, which entailed consulting various parties and examining a plethora of studies, came to the conclusion that the meaning of "intentional" and "malicious" should be the same.

II. It illuminates the criteria for determining the severity of the circumstances. Seriousness is one of the constitutive elements of punitive damages, which mainly focuses on objective aspects such as the means of the perpetrator and their consequences. It generally does not involve the subjective state of the perpetrator. The considerations stipulated in Article 4 of the Interpretation are mainly derived from existing representative cases.

III. It crystallizes the calculation of the punitive damages base. Regarding the calculation of the base amount of punitive damages, Article 71 of the Patent Law, Article 54 of the Copyright Law, Article 63 of the Trademark Law, Article 17 of the Anti-Unfair Competition Law and Article 73 of the Seed Law have made clear provisions. The Copyright Law and Patent Law do not stipulate the order of calculation of the base, while the Trademark Law, the Anti-Unfair Competition Law and the Seed Law stipulate the order of priority. In addition, there are inconsistencies among different laws as to whether punitive damages include reasonable expenses. In response, Article 5 of the Interpretation prescribes that "if the law provides otherwise, proceed in accordance with its provisions,” which means that different types of cases should be dealt with in consultation with their corresponding department law.

In addition,  in order to play a preemptive role in the punitive damages system to curb infringement, based on the actual trial of intellectual property rights, the Interpretation will refer to the plaintiff's claims and the amount of compensation determined by the evidence provided as one of the bases.  At the same time, it holds those who provide false books and information to be legally responsible according to Article 111 of the Civil Procedure Law.

Adapted from the Supreme People's Court website