Written by: Xiao
HAN (Nicole) and Haoyu ZHOU (Elliot)
On 3rd March, 2021, the Supreme People’s
Court issued "Interpretation of the Supreme People's Court on Punitive Damages Concerning the Trial
of Civil Cases Involving Infringements upon Intellectual Property Rights"
(hereinafter referred to as "judicial interpretation").
The judicial interpretation includes specific
provisions on how to apply punitive damages in civil cases involving intellectual
property, and how to determine “intentional” and “serious circumstances”, and how
to determine the bases and multiples when calculating the punitive damages.
Some of the most important provisions
are copied below:
1. If the
plaintiff requests the application of punitive damage, the amount of punitive
damage, the method of calculation, and the facts and reasons on which it is
based shall be specified when the lawsuit is filed.
If the plaintiff
adds a request for punitive damages before the end of the court debate of first
instance, the people's court shall approve the request; if a request for
punitive damages is added in the second instance, the people's court may
conduct a mediation based on the parties' willingness. If the mediation fails,
the parties shall be notified to file another lawsuit.
2. The following situations involved in intellectual
property infringement can be preliminarily determined as “intentional” by the people's court:
(1) The defendant
continues to commit the infringing act after being notified or warned by the
plaintiff or the interested party;
(2) The defendant,
its legal representative or manager is the legal representative, manager or
actual controller of the plaintiff or the interested party;
(3) The defendant
and the plaintiff/the interested parties have relationships involving labor,
cooperation, licensing, distribution, agency, representative, etc. AND the defendant was in touch with the
infringed intellectual property rights;
(4) The defendant
has business dealings with the plaintiff or the interested parties, or the defendant
and the plaintiff or the interested parties had negotiations for the conclusion
of contracts, etc., AND the
defendant was in touch with the infringed intellectual property rights;
(5) The defendant
commits acts of pirating or counterfeiting registered trademarks;
circumstances that can be determined as intentional.
3. The following
actions of the defendant may be
determined as “serious circumstances”
by the people's court:
(1) After being punished
by an administrative penalty or a court decision for infringement, the
defendant commits the same or similar infringement act again;
(2) Taking the
infringement of intellectual property rights as business;
destroying or concealing evidence of infringement;
(4) Disobeying the
(5) The benefit
obtained by the infringer through infringement or the loss of patentee caused
by the infringement is considered huge;
infringement act may endanger national security, public interest or personal
circumstances that can be determined as serious.
4. When determining the amount of punitive damages, the people's court
shall use the actual loss of the plaintiff, the amount of the defendant's
illegal gains or the benefits obtained by the infringer through infringement as
the base in accordance with relevant laws. This base shall not include the
reasonable expenses paid by the plaintiff to stop the infringement; if
otherwise provided by law, it shall be in accordance with such provisions.
If the abovementioned
actual loss of the plaintiff, the amount of the defendant's illegal gains or
the benefits obtained by the infringer through infringement cannot be calculated,
the people's court shall determine the base according to reasonable multiple of
5. The people's court orders the defendant to provide the
account books and materials related to the infringement in accordance with the
law. If the defendant refuses to provide or provides false account books and
materials without justifiable reasons, the people's court may determine the base
amount of punitive damages by referring to the plaintiff's claims and evidence.
Particularly, (3) and (4) above in Article
2 required that the plaintiff and the defendant have specific relationships AND
the defendant was in touch with the infringed intellectual property rights.
That is to say, the infringement would not
be considered “intentional” if the defendant is merely aware of the infringed
intellectual property rights but has no specific relationship with the
For example, if the defendant found the
plaintiff's patent when conducting a freedom-to-operate patent search, but they
still chose to infringe for the business interests. If there was no relationship
(e.g., collaboration) between the plaintiff and the defendant, the infringement
may not be regarded as an
Therefore, in order to be entitled to the
“punitive damages”, the threshold is relatively high. The plaintiff needs to
show that there were former or existing relationship between the plaintiff and
the defendant, or to show that the defendant has been warned but did not stop. Merely
showing that the defendant knew or would have known the plaintiff’s patent may
not be sufficient.
To this end, for the situation where the
Examiner cited the plaintiff’s patent during the patent prosecution of the defendant’s
patent application, such is not
considered as “intentional infringement” according to the judicial interpretation.
It should also be noted that Article 3(5) -
"serious circumstances" - is relatively vague. What would be
considered as “huge amount of
benefit obtained by the infringer or huge
loss of patentee”? Such needs to be further explained by the Supreme Court.
Please feel free to contact us via firstname.lastname@example.org should you have any questions in relation
to the IP punitive damages in China.