CHINA Trends and Developments Contributed by: James Luo and Angie Guo, Lawjay Partners
consequences of the infringement, providing a more accurate reflection of the rights-holder’s losses. Intellectual property contribution rate In determining the compensation base amount, consideration should also be given to the con- tribution rate of the intellectual property to the product’s value. Different intellectual proper- ties (eg, trade marks, patents, copyrights, trade secrets) may contribute variably to product sales and profits; therefore, reasonable deductions for the value generated by other rights should be made during calculation. This ensures that the compensation amount is fair and reasonable, reflecting the actual role of the intellectual prop- erty in the commercial success. Judicial practice in the application of punitive damages From 2015 to 2020, Chinese courts primar- ily adopted statutory compensation standards in intellectual property cases, with 99.62% of copyright cases, 99.6% of trade mark cases, and 98.4% of patent cases relying on statutory compensation (see Zhan Ying:”In-Depth | A Fur- ther Investigation and Reflection on the Current State of Intellectual Property Infringement Dam- ages Compensation in China’s Judiciary”, pub- lished in “Legal Science (Journal of Northwest University of Political Science and Law)”, July 2020). This trend indicates a judicial preference for statutory compensation over punitive dam- ages based on actual losses. In recent years, with legal improvements and advances in judicial practice, the application of punitive damages in trade mark infringement cases has increased, resulting in several high- compensation cases. For example, in 2021, the Supreme People’s Court awarded CNY159 mil- lion in the Xianglan Su trade secret infringement
case, setting a record for the highest compen- sation in such cases in China’s judicial history. In 2023, the court ordered CNY100 million in damages in the Panpan trade mark infringe- ment case, and the Jiangsu Provincial Higher People’s Court awarded CNY50 million in the Xiaomi trade mark infringement case. Despite the increase in punitive damages cases, their actual application proportion in trade mark infringement cases remains low, with most cas- es still adopting statutory compensation. This reflects the challenges faced by rights-holders in practice, such as the need to prove actual losses, the infringer’s subjective malice, and the seriousness of the infringement – often involving complex financial analyses and market assess- ments. Additionally, difficulties in evidence col- lection, high litigation costs, and regional varia- tions in legal application significantly constrain the widespread adoption of punitive damages. Relationship between punitive damages and other legal liabilities Regarding the relationship between punitive damages and administrative fines or criminal penalties, if an infringer has been subjected to administrative fines or criminal penalties for the same infringing act, they generally cannot request offsetting the base amount of punitive damages on this basis. However, when deter- mining the multiplier for compensation, courts may consider these factors at their discretion. Recent developments in the punitive damages regime To address practical challenges, Chinese courts have implemented measures to reduce the evi- dentiary burden on rights-holders and encour- age the application of punitive damages.
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