The “Interpretation of Supreme People's Court on the Application of Punitive Damages in Hearing Civil Cases of Infringement upon Intellectual Property Right” has been implemented on March 3, 2021
In recent years, the revised “Trademark Law”, “Copyright Law”, and “Patent Law” have added punitive damages clauses and raised the upper limit of statutory damages. However, the guidance on applying punitive damages clauses is not clear. On March 2, 2021, the Supreme People’s Court issued the “Interpretation of Supreme People’s Court on the Application of Punitive Damages in Hearing Civil Cases of Infringement upon Intellectual Property Right ” (Fa Shi [2021] No. 4, hereinafter referred to as “Interpretation of Punitive Damages”), which has been implemented on March 3, 2021. The “Interpretation of Punitive Damages” has 7 articles, and the key points are as follows:
1. To set the time requirement for claiming punitive damages
The plaintiff could claim for punitive damages at the time of filing the lawsuit, or add such claim before the end of the court debate in the first instance. If the plaintiff adds such claim in the second instance, the people’s court may conduct mediation between the parties; if the mediation fails, the plaintiff has to file a separate lawsuit concerning punitive damages.
2. To set the requirements on determining the application of punitive damages:
The determination of “intentional” requires a comprehensive consideration of the type of intellectual property object, the status of rights, the popularity of related products, the relationship between the defendant and the plaintiff or interested parties, and so on. The “Interpretation of Punitive Damages” has listed 5 special circumstances which should be deemed as “intentional”. They are, 1) where the defendant continues to commit the infringement after being notified and warned by the plaintiff or interested parties;2) where the defendant or its legal representative or administrator is the legal representative, administrator or actual controller of the plaintiff or interested parties;3) where the defendant and the plaintiff or interested parties have labor, service, cooperation, licensing, distribution, agency or representative relationships, etc., and have had contact with the infringed intellectual property rights;4) where the defendant has business with the plaintiff or interested parties, or has held negotiations for the conclusion of a contract, etc., and has had contact with the infringed intellectual property rights; or 5) where the defendant has committed acts of piracy or counterfeiting of a registered trademark.
The determination of “serious circumstances” requires a comprehensive consideration of the means and frequency of infringement, the duration of the infringement, the geographical scope, the scale, the consequences, the actions of the infringer in the litigation and so on. The “Interpretation of Punitive Damages” has listed 6 special circumstances which should be deemed as “serious circumstances “. They are, 1) where the defendant has committed the same or similar infringement again after having been given an administrative penalty or held liable by a court due to infringement; 2) where the defendant has committed infringement upon intellectual property rights as a business; 3) where the defendant has forged, destroyed or concealed the infringement evidence; 4) where the defendant has refused to perform the ruling on preservation; 5) where the defendant has made huge gains from the infringement or the right holder has suffered huge losses; or 6) where the infringement may endanger national security, public interests or personal health.
3. To set the calculation base and multiple of punitive damages
The calculation base of punitive damages in the “Interpretation of Punitive Damages” is basically the same as stipulated in special laws, such as the “Trademark Law”. The calculation base shall be the actual amount of losses of the plaintiff, the amount of illegal gains of the defendant, or the multiples of the licensing fee for the right. In addition, when the plaintiff has provided evidence to prove the calculation base to a certain extent, but the defendant refuses to provide or provides false accounting books and data without justifiable reasons, the court may refer to the plaintiff’s claim to determine the calculation base.
However, in terms of multiples, the “Interpretation of Punitive Damages” clarified a new rule, that is, where the defendant claims to reduce or exempt the punitive damages liability after the administrative fine or criminal fine has been imposed for the same infringement and the enforcement of the penalty has been completed, the court shall not uphold such claim. However, the court may comprehensively consider the multiples with those factors.