Beijing High People’s Court issued guidelines on punitive damages in civil IP cases

The Beijing High People’s Court released Guidelines on Punitive Damages in Intellectual Property Infringement Civil Cases (Guidelines) on April 25. The Guidelines lay out the methodologies for measuring punitive penalties, as well as the conditions in which punitive damages are appropriate, and the Internet service providers’ punitive damages liability. The court also published a few typical cases alongside the Guidelines to show how punitive damages were given in real situations.

When a violation is proven to be both “serious” and “intentional,” a Chinese court may impose punitive damages. The Supreme People’s Court of China also issued the Judicial Interpretation on Punitive Damages in Civil Intellectual Property Infringement Cases (SPC Interpretation), which goes into effect on March 3, 2021, to define the variables to consider when determining seriousness and intent. However, many questions in the application of punitive damages by courts in practice remain unclear. The Guidelines are intended to provide guidelines to close these shortcomings.

The Guidelines, in particular, address the following concerns.

Punitive damages calculations

The Guidelines specify that the overall amount of damages will be the total of the base amount and the product of the base amount and its multiple, in accordance with relevant IP legislation. In most cases, the base amount of damages is estimated with verifiable evidence on the infringer’s actual earnings, the rightsholder’s actual losses, or a considered license price.

The Guidelines also specify the sequences of such verifiable facts that are appropriate under distinct IP laws (Articles 3.3 and 3.4). The base amount, for example, should be calculated in the order of the rightsholder’s actual losses, the infringer’s actual profits, and the considered licensing costs under Trademark Law. If calculating the base amount with one type of these data is challenging, the rightsholder has the option of selecting the next data in the sequence to estimate the base amount.

Meanwhile, the Guidelines specify the specific factors for determining the rightsholder’s actual loss, the infringer’s illegal gains, or a deemed royalty, as well as the common factors for calculating the multiple of punitive damages as well as the specific factors calculating the multiple under various IP legislations.

Defining the application process

The Guidelines also define the procedural criteria for filing a request for punitive damages, including the content and timing of such a request, as well as the order in which punitive damages and other damages should be filed.

Furthermore, the Guidelines explain the applicability of the request to other co-owners who do not make such a request, as well as the conditions in which punitive damages may be imposed in part or in full to different infringers in the same case. At the demand of the rightsholder, different bases or multiples of punitive damages could be applied to individual infringers (Article 5.7).

Malicious intent and seriousness consideration

In general, punitive damages may be imposed in circumstances of intentional and significant IP infringement. The SPC Interpretation lays out the specific considerations that Chinese courts must consider when deciding whether or not a violation is deliberate and serious. In a step forward, the Guidelines define eight scenarios in which an infringement could be regarded as both intentional and serious. Furthermore, the Guidelines explain the standards for malicious intent (Article 2.2), seriousness consideration (Article 2.3), and determining the seriousness of IP violation (Article 2.3). (Article 2.5).

Finally, the Guidelines mostly reflect the principles and procedures already established in major IP legislations and SPC Interpretations, but they also address a few key lingering difficulties in the use of punitive damages in legal procedures. While the Guidelines would ostensibly only be binding on Beijing courts, it is expected that courts across the country will resort to them when considering and awarding punitive damages, laying a solid foundation for rightsholders to prosecute bad faith infringements across the country.

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