Source:广东君龙律师事务所|Author:Ice Tang|Publish time: 2021-03-08|48 Views
The Supreme People’s Court issued the “Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights” on March 3, 2021.
Let’s look back at the development of punitive-damage-related laws and regulations in the IP law system:
The “Trademark Law” revised in 2013 introduced the punitive damage system for the first time. In 2019, the same concept was introduced into the revised Anti-Unfair Competition Law. The “Trademark Law” revised in 2019 further increased the multiples of punitive damages. The Civil Code of the People’s Republic of China, which came into effect on January 1, 2021, establishes the civil law basis for the application of punitive damages for infringement of intellectual property rights in the tort liability section. The “Copyright Law” and “Patent Law” revised in 2020 and coming into effect on June 1, 2021 also introduce a punitive damage system.
The aforesaid relevant legal provisions on punitive damages for intellectual property infringement in China are detailed as follows:
Article 63 Paragraph 1 of the 2013 revised “Trademark Law” (implemented on May 1, 2014):
Article 63. The amount of damages for infringing the exclusive right to use a trademark shall be actual losses that the right owner has suffered as a result of the infringement during the period of the infringement; where the losses suffered by the right owner cannot be determined, the amount of damages for trademark infringement shall be the profits that the infringer has earned as a result of the infringement during the period of the infringement; where the losses suffered by the right owner, or the profits earned by the infringer, cannot be determined, the amount of damages shall be determined based on a reasonable amount that would be paid for a licensing royalty for the trademark right. If there is malicious infringement and an existence of serious circumstances, the amount may be more than one up to three times the aforesaid determined amount. The amount of damages will also include reasonable expenses the right owner has suffered to prevent the infringement.
The 2019 revised “Trademark Law” (Effective Date: November 1, 2019) Article 63 Paragraph 1:
Article 63 The amount of compensation for infringing the exclusive right to use the trademark shall be determined based on the right owner’s actual losses due to infringement or the infringer’s actual interests obtained due to the same if the actual losses are hard to be determined, or may be determined based on times of the royalties of the registered trademark when both the losses or the infringer’s actual interests obtained are hard to be determined. For seriously malicious infringement, the amount of compensation may be between one time to five times the aforesaid amount determined in light of the foregoing regulations. The amount of compensation shall include reasonable expenses of the right owner to prevent the infringement.
Article 17 Paragraph 3 of the 2019 Revised “Anti-Unfair Competition Law” (Effective Date: April 23, 2019):
The amount of compensation for the damage caused to a business by any act of unfair competition shall be determined as per the actual loss of the business incurred for the infringement or if it is difficult to calculate the actual loss, as per the benefits acquired by the tortfeasor from the infringement. If a business infringes upon a trade secret in bad faith with serious circumstances, the amount of compensation may be determined to be more than one time but not more than five times the amount determined by the aforesaid method. The amount of compensation shall also include reasonable disbursements made by the business to prevent the infringement.
Article 1185 of the Civil Code (implemented on January 1, 2021):
In the case of deliberate infringement of the intellectual property rights of others and the circumstances are serious, the infringed party shall have the right to claim corresponding punitive compensation.
The 2020 revised edition of the Patent Law (Effective Date: June 1, 2021) Article 71 Paragraph 1:
The amount of compensation for patent right infringement shall be determined according to the patentee’s actual losses caused by the infringement or the benefits acquired by the infringer through the infringement. If it is hard to determine the losses of the patentee or the benefits acquired by the infringer, the amount of compensation may be determined according to the reasonably multiplied amount of the royalties of that patent. If a party infringes upon a patent intentionally with serious circumstances, the amount of compensation may be determined to be more than one time but not more than five times the amount determined by the aforesaid method.
The 2020 revised edition of the Copyright Law (Effective Date: June 1, 2021) Article 54 Paragraph 1:
Article 54: In case of infringement of copyright or copyright-related rights, the infringer shall pay compensation based on the actual loss suffered by the right holder or the illegal gain of the infringer; if the actual loss of the right holder or the illegal gain of the infringer is difficult to calculate, compensation can be made with reference to the royalties of the rights. If the circumstances are serious for intentional infringement of copyrights or copyright-related rights, compensation may be made not less than one time and not more than five times the amount determined in accordance with the above-mentioned method.
The Supreme People’s Court issued the “Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights” on March 3, 2021 (Fa Interpretation [2021] No. 4), which further clarified the applicable conditions, what constitute serious infringement, basis for determining the damage and the multiples. This Interpretation includes in total seven Articles, which read as follows:
“Article 1 Where the plaintiff claims that the defendant intentionally infringed his/her/its legal intellectual property rights with serious circumstances, and where the plaintiff requests to order the defendant to bear punitive damages, the people’s court shall review and deal with it in accordance with the law.
The term “intentional” mentioned in this interpretation includes the bad faith or malicious infringement stipulated in Article 63 Paragraph 1 of the Trademark Law and Article 17 Paragraph 3 of the Anti-Unfair Competition Law.
Article 2 Where the plaintiff requests punitive damages, the amount of compensation, the method of calculation, and the facts and reasons on which it is based shall be clarified at the time of filing the suit.
If the plaintiff adds a request for punitive damages before the end of the debate in the court of first instance, the people’s court shall approve it; if the request for punitive damages is added in the second instance, the people’s court may conduct mediation on the basis of the parties’ voluntary principle; if parties fail to reach a settlement, the people’s court shall notice the parties to file a new suit.
Article 3 For the determination of intentional infringement of intellectual property rights, the people’s court shall comprehensively consider factors such as the type of the infringed intellectual property rights, the status of rights and the popularity of related products, the relationship between the defendant and the plaintiff or interested parties.
In the following situations, the people’s court can preliminarily determine that the defendant has the intention to infringe on intellectual property rights:
(1) The defendant continues to commit the infringing act after being notified or warned by the plaintiff or the interested party;
(2) The defendant or its legal representative or manager is the legal representative, manager or actual controller of the plaintiff or interested party;
(3) The defendant has employment, labor, cooperation, licensing, distribution, agency, representative, etc. relationship with the plaintiff or the interested parties, and moreover has been in contact with the infringed intellectual property rights;
(4) The defendant has business relationship or has negotiated for the conclusion of contracts, etc. with the plaintiff or interested parties, and moreover has been in contact with the infringed intellectual property rights;
(5) The defendant committed acts of pirating or counterfeiting registered trademarks;
(6) Other circumstances that can be determined as intentional.
Article 4 For the determination of serious infringement of intellectual property rights, the people’s court shall comprehensively consider factors such as the means and frequency of infringement, the duration, geographical scope, scale, and consequences of the infringement, and the behavior of the infringer in the lawsuit.
If the defendant has the following circumstances, the people’s court may determine that the circumstances are serious:
(1) After being punished by an administrative penalty or a court decision for infringement, committing the same or similar infringement again;
(2) Taking the infringement of intellectual property rights as its business;
(3) Forging, destroying or concealing evidence of infringement;
(4) Refusal to perform the preservation ruling;
(5) The infringement gains or the losses suffered by the right holder are huge;
(6) The infringement may endanger national security, public interest or personal health;
(7) Other circumstances that can be determined as serious.
Article 5 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 due to infringement as the calculation base in accordance with relevant laws. The basis for determining the punitive damage does not include the reasonable expenses paid by the plaintiff to stop the infringement. If the law provides otherwise, follow its provisions.
If it is difficult to calculate the actual amount of losses, the amount of illegal gains, and the benefits obtained due to the infringement as mentioned in the preceding paragraph, the people’s court shall reasonably determine it by referring to the multiple of the license fee for the right in accordance with the law, and use this as the basis for calculating the amount of punitive damages.
The people’s court shall order the defendant to submit the account books and materials related to the infringement act in its possession according to law. If the defendant refuses to submit or submit false account books and materials without justifiable reasons, the people’s court may refer to the plaintiff’s claims and evidence to determine the basis for calculating the amount of punitive damages. If the circumstances provided for in Article 111 of the Civil Procedure Law are met, legal liabilities shall be shouldered in accordance with the law.
Article 6 When the people’s court determines the multiples of punitive damages in accordance with the law, it shall comprehensively consider factors such as the degree of the defendant’s subjective fault and the severity of the tort.
Where an administrative fine or criminal fine has been imposed for the same infringement and the execution has been completed, and the defendant requests to reduce or exempt punitive damages, the people’s court will not support it, but can consider it comprehensively when determining the multiples mentioned in the preceding paragraph.
Article 7 This interpretation shall come into effect on March 3, 2021. If the relevant judicial interpretation previously issued by the Supreme People’s Court is inconsistent with this interpretation, this interpretation shall prevail.”
So far, China has built a comprehensive system of punitive damages from the legislative and judicial levels.