The Supreme People’s Court released its Interpretation on the Application of Punitive Damages in Civil Intellectual Property Rights Infringement Cases (the “Interpretation”) on March 2, 2021. Looking at the newly amended intellectual property right law series in the past two years, with provisions on malicious and willful infringement added to the Patent Law, the Trademark Law, the Copyright Law, the Anti-Unfair Competition Law and other laws, as well as the addition of punitive damages of one to five times for serious violations, how to apply the punitive damages has become an urgent issue that needs to be addressed. Therefore, the Interpretation on Punitive Damages contains specific provisions for this matter.
First, the Interpretation clarifies that the plaintiff has the burden of proof to show punitive damages and is required to specify the amount of damages, the calculation method and the facts and reasons relied on at the time of the complaint.
Second, the Interpretation stipulates, by way of principle and enumeration, the circumstances under which willful infringement of intellectual property rights is constituted. The principle is that the people’s court shall generally consider the type of object that is being infringed, the state of the IPR, the degree the relevant products are well-known, the relations between the defendant and the plaintiff or between the defendant and the interested party, as well as other factors. For the following circumstances, the people’s court may initially determine that the defendant has committed willful infringement: (1) the defendant received a notice or warning from the plaintiff or an interested party but still continues to engage in the infringing act; (2) the defendant or its legal representative or manager is the legal representative, manager or actual controller of the plaintiff or the interested party; (3) the defendant has a labor, service, cooperation, authorization, distribution, agency or other relationship with the plaintiff or the interested party and has had contact with the infringed IPRs as a result; (4) the defendant has had business dealings or has conducted contract negotiation with the plaintiff or the interested party and has had contact with the infringed IPRs as a result; (5) the defendant has engaged in piracy or counterfeited any registered trademark; and (6) there are other circumstances that can be determined to involve willfulness.
Third, the Interpretation also explained as to what constitutes serious infringement by way of principle and enumeration. To determine the seriousness of an IPR infringement, the people’s court shall take into account the means of infringement, the number of infringements, the duration, geographical scope, scale and consequences of the infringement, and the conduct of the infringer in the litigation and other factors. With respect to the enumerated provisions, the people’s court may conclude that the infringement is serious if the defendant is subject to any of following circumstances: (1) the defendant has engaged in the same or similar infringing act after having received administratively sanctions or assumed liabilities under a court ruling for any infringing act in the past; (2) the defendant’s business is engaging in IPR infringement; (3) the defendant has forged, destroyed or concealed evidence of infringement; (4) the defendant has refused to comply with a preservation ruling; (5) the defendant has enjoyed huge profits or the rights holder has suffered from huge losses; (6) the infringing act may undermine national security, public interest or personal health; or (7) there is any other circumstance that can be considered serious.
Fourth, the Interpretation also provides that the people’s court shall determine the basis of punitive damages based on the plaintiff’s actual losses, the defendant’s illegal proceeds or the benefit gained from the infringement, excluding the reasonable expenses paid by the plaintiff to stop the infringement.
Fifth, the Interpretation specifies that the defendant’s subjective degree of fault and the severity of the infringement shall be considered by the people’s court in determining the punitive damages multiplier.