Punitive Damages in Chinese Intellectual Property Law
Xiao Baiyang’s next blogpost focuses on the details of punitive damages in Chinese IP Law.
To understand the details of punitive damages in Chinese IP law better, Baiyang summarized the relevant rules in a table below.
|Law||Cause of action||Subjective Elements||Objective Elements||Related Provisions|
|Civil Code||Intellectual Property Infringement||Intentional||Serious circumstances||Article 1185 Where any harm caused intentionally by a tort to the intellectual property rights of another person with serious circumstances, the victim of the tort shall have the right to require corresponding punitive damages.|
|Patent Infringement||Article 71 In the case of an intentional patent infringement with serious circumstances, the damages may be determined as more than one time, but less than five times of the compensation determined in the aforesaid method.|
|Copyright Law (2020 Amendment)||Copyright Infringement||Article 54 Where an infringer intentionally infringes copyright or rights related to copyright and falls under serious circumstances, the compensation may be determined in an amount of more than one time, but less than five times of the compensation determined according to the aforesaid methods.|
|Trademark Law (2019 Amendment)||Trademark infringement||Bad faith
|Article 63 If the infringement is committed in bad faith with serious circumstances, the amount of damages may be determined as more than one time, but less than five times the compensation determined in the aforesaid method.|
|Anti-Unfair Competition Law (2019 Amendment)||Trade Secret Infringement||Article 17 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 less than five times of the compensation determined by the aforesaid method.|
Regarding the subjective elements in the applicable conditions of punitive damages for intellectual property laws, two expressions, including “intentional” and “malicious,” were adopted in related legislations. Among them, the Civil Code (2019), the Patent Law (2020 Amendment), and the Copyright Law (2020 Amendment) all adopted “intentional” as the subjective element, and the Trademark Law (2019 Amendment) and the Anti-Unfair Competition Law (2019 Amendment) all took “malicious” as the subjective element.
In the field of intellectual property rights in China, a punitive damages system was introduced in the Trademark Law (2013 Amendment) for the first time. Article 63 of the Trademark Law stipulates: “If the infringement is committed in bad faith(malicious) with serious circumstances, the amount of damages shall be more than one time, but less than three times of the amount determined in the aforesaid method.” Later, Trademark Law (2019 Amendment, enacted on 23 April) and the Anti-Unfair Competition Law (2019 Amendment, enacted on 23 April) increased the punitive damages for “malicious” infringement with serious circumstances from the original stipulation of “more than one time, but less than three times” to “more than one time, but less than five times.” However, Civil Code Article 1185 of Civil Code (enacted on 28 May, 2019) stipulated as “Where any harm caused intentionally by a tort to the intellectual property rights of another person has serious circumstances, the victim of the tort shall have the right to require corresponding punitive damages. The 2020 amendment to the Patent Law and Copyright law followed such expression, then directly introduced punitive damages and clearly stipulated that punitive damages for “intentional” infringement with serious circumstances shall be more than one time, but less than five times of the amount determined in the aforesaid method. Therefore, there are two different standards of subjective state of mind when determining punitive damage of Intellectual Property infringement: “intentional” for copyright and patent infringements, and “malicious” for trademark and trade secret infringements.
As revealed by Report on the Status of Judicial Protection of Intellectual Property Rights in 2019 published by the Supreme People’s Court and major district courts, only a few courts applied punitive damages in trials related to trademark disputes. Song Jian, Senior Judge of Jiangsu Higher People’s Court, summarized typical copyright, patent, and trade mark cases involved application of punitive damage and found that “malicious” was regarded as standard for determination of punitive damages in judicial practices. However, the newly adopted Civil Code, Copyright Law and Patent Law stipulated that the standard of subjective state of mind when determining punitive damage shall be “intentional” rather than “malicious,” which contradicts with the judicial practices. In Chinese Civil law, “intentional” could be interpreted as “direct intentional” and “indirect intentional,” while “bad faith” refers to “direct intentional” only. Diverging opinions emerged on interpretation of terms “intentional” and “malicious.” Still, some courts and scholars tended to understand and interpret the term “intentional” as “malicious,” and limited “malicious” as “direct intentional.” Beijing Higher People’s Court issued Guiding opinions on the determination of damage in cases of intellectual property rights and unfair competition and the judgment standards for statutory compensation, holding that “bad faith(malicious) generally means direct intention.” Senior Judge Song held that “only when the severity of malicious infringement is reached, punitive damages can truly exert a deterrent effect on intentional infringement.” While others hold the opinion that “the punitive nature of copyright infringement does not necessarily require the infringer to have the subjective malice of the infringement. As long as the subjective intention of the infringement is reached, it can fall into the scope of punitive damage, that is, the subjective standard of intentional is lower than malicious.”
On the one hand, Article 11 of Civil Code stipulated that “where there are any special provisions on civil relations in any other law, such special law shall apply.” Based on the principle of generalia specialibus non derogant, Trademark law, Patent Law and Copyright Law etc. are special laws to Civil Law, and shall apply in trials instead of the Civil Code. On the other hand, following the principle of “later laws prevail over those which preceded them,” Civil Code is the later law to Trademark Law and Anti-unfair Competition Law, and it shall be applied. Then here comes the question on how to settle the contradiction between two logic of application of laws? Article 92 of Legislation Law (2015 Amendment) stipulated that “if there is any discrepancy between new provisions and old provisions, new provisions shall prevail.” Accordingly, the inconsistency between the aforementioned Trademark Law, Anti-unfair Competition Law and the Civil Code depends on the clarification of the Standing Committee of the National People’s Congress.
Xiao Baiyang, born in September 1995, is a Chinese PhD student of the Faculty of Law and Political Science, University of Szeged. He graduated from Southwest University of Political Science and Law in 2020 with a Bachelor’s degree in Law and a Master’s degree in Intellectual Property Law. From 2017-2020, he participated in several academic projects related to the field of Artificial Intelligence (2017), Connected Vehicles (2018-2019), and Geographic Indications (2019-2020). His main research area is Liability of Online Intermediaries.