A Study on Typical Shanghai Court Cases Involving Punitive Damages in Intellectual Property Disputes and Their Adjudicative Principles (Mainland China)

With the continuous improvement of China’s intellectual property (IP) protection regime, punitive damages have emerged as an important institutional tool for increasing the cost of infringement and curbing malicious infringing conduct.  On December 12, 2025, the Shanghai High People’s Court released the Typical Shanghai Court Cases Involving Punitive Damages in Intellectual Property Disputes and Key Adjudicative Principles.  As one of the nation’s primary venues for commercial and intellectual property adjudication, Shanghai courts have accumulated extensive practical experience in applying punitive damages in recent years, giving rise to a number of representative and influential precedents.  This article seeks to review, from a case-based perspective, the adjudicative logic, salient features, and practical implications of the Shanghai courts’ application of the punitive damages regime.

I. Institutional Framework and Conditions for the Application of Punitive Damages

Punitive damages are generally applied at the court’s discretion upon the request of the right holder when specific statutory conditions are met.  Under Chinese law, where infringement of intellectual property rights—such as trademark rights, patent rights, or copyrights—is committed with malicious intent and the circumstances are particularly serious, the court may, based on the compensation amount determined in accordance with the law, award punitive damages ranging from one to five times that amount.  The purpose is to increase the cost of infringement and deter malicious infringers.

This regime has both substantive and procedural dimensions: it requires not only objectively serious infringing conduct, but also consideration of the infringer’s subjective malice.  In the adjudicative practice of Shanghai courts, the application of punitive damages has become increasingly mature, with typical cases spanning trademarks, copyrights, patents, and unfair competition, among other areas of intellectual property law.

II. Analysis of Selected Typical Cases

A. Malicious Infringement in the Trademark Field

Case 1: The “Norsk Hydro” Case (Case No.: (2024) Hu Min Zhong 571)
Norsk Hydro, a globally renowned aluminum company, enjoys a high level of recognition for its “Hydro” trademark in the Chinese market.  Xinjia Company and its affiliated entities systematically registered trademarks containing the words “海德鲁” and “HYDRO,” and maliciously filed complaints against competitors in major door and window supply projects, ultimately obtaining project contracts worth over RMB 24 million.

In this case, the court established multiple assessment criteria.  First, it held that the defendants’ conduct constituted malicious trademark infringement, as the trademark squatting violated the principles of good faith and business ethics.  Second, based on the long duration of infringement and the exceptionally large transaction amount involved in individual infringing acts, the court found the circumstances to be serious.  Finally, in calculating damages, the court innovatively adopted the completed project settlement price combined with a reasonable profit margin as the calculation base, and applied a fivefold punitive damages multiplier, resulting in a final award exceeding RMB 24 million.  This judgment illustrates the court’s standards for identifying and sanctioning malicious trademark exploitation.

B. Repeated Copyright Infringement

Case 2: Repeated Infringement of Novel Adaptation Rights in an Online Game (Case No.: (2024) Hu 0114 Min Chu 21889)
The plaintiff held the online game adaptation rights to a series of novels by Jin Yong.  In 2021, the defendant entered into a settlement agreement with the plaintiff following an infringement dispute, undertaking to delete the infringing content.  However, after the agreement was concluded, the defendant not only failed to fulfill its deletion obligations, but also introduced new infringing elements in a revised version of the game launched in 2024.  This conduct—characterized by the court as “failing to delete while instead adding more”—was deemed a new act of infringement.

The key adjudicative principles established in this case include two important rules.  First, settlement agreements should be interpreted holistically in light of their formation background and contractual purpose, rather than being confined to the literal meaning of individual clauses.  Second, when determining the base amount for punitive damages, the court may comprehensively consider factors such as game revenue, net profit margin, the contribution of the infringing content to revenue, and the duration of the infringement.

The court ultimately awarded compensation exceeding RMB 3 million and introduced a “rectification grace period” when determining the punitive damages period, in order to balance the rights and obligations of both parties.  This approach reflects judicial prudence: it severely punishes malicious infringement while still affording the infringer an opportunity to correct their conduct.

C. Determination of the Compensation Base

Case 3: The “Mango TV” Scripted Role-Playing Game (Script Murder) Infringement Case (Case No.: (2023) Hu 73 Min Zhong 912)
In the “Mango TV” scripted role-playing game infringement case, the court used the defendant’s own admission—20 franchise stores with an average authorization fee of RMB 50,000 each—as the basis for calculating infringing profits of RMB 1 million.  Applying a twofold punitive damages multiplier, the court awarded RMB 2 million. As for revenues from directly operated businesses that could not be precisely ascertained, the court determined statutory damages of RMB 800,000 after considering factors such as the fame of the trademark involved, the revenue of directly operated stores, and the contribution of the television program Who’s the Murderer to offline scripted role-playing games.

This coordinated application of punitive damages and statutory damages ensured both rigor in fact-finding and efficiency and fairness in damage determination.  In this case, the court established the principle of “partial ascertainment with partial punishment”: where infringing conduct is divisible, punitive damages are applied to the portion of damages that can be ascertained and used as the calculation base, while statutory damages are applied to the portion that cannot be determined.

D. Franchise Infringement: Judicial Responses to Large-Scale Commercial Models

Case 7: The “Counterfeit LEGO Classes” Franchise Infringement Case (Case No.: (2024) Hu 73 Min Zhong 1648)
Over a period of seven years, the infringers established more than 200 franchise outlets, forming an extensive infringement network.  The Shanghai Qingpu Court applied a threefold punitive damages multiplier based on franchise fees totaling RMB 24 million, and, in light of the plaintiff’s claims, ultimately awarded RMB 35 million.  This represents the highest punitive damages award in an intellectual property case by Shanghai courts among cases that have taken legal effect to date.

The handling of this case demonstrates the court’s profound understanding of infringement through commercial models.  Franchise models are characterized by rapid replication and wide-ranging impact; once exploited by infringers, they can generate massive infringement in a short time frame.  By imposing substantial punitive damages, the court not only compensated the right holder’s losses, but also sent a clear signal to the market: large-scale commercial operations based on infringing content will face severe legal consequences.

Through the release of these typical cases, we can observe that the strength of judicial protection for intellectual property in China continues to increase, laying a solid foundation for promoting social innovation and enhancing the effectiveness of the rule of law.  This is not only the experience of Shanghai, but also a concrete step forward in the advancement of China’s intellectual property protection regime as a whole.