The new interpretation refines the legal standards for punitive damages based on experience gained since the previous rules were issued in 2021. It aims to make the rules more practical, unify court decisions, and offer clearer guidance for rights holders and the market.
Key clarifications in the new interpretation include the following:
First, it provides more detailed rules for determining when a defendant’s conduct is “intentional” or “serious”. For example, it treats as “intentional” a situation where a defendant, after settling with the plaintiff and agreeing to stop the infringement, later commits the same or a similar act. It also gives a clearer definition of “making a business out of infringement”.
Second, it offers clearer methods for calculating the base amount for punitive damages. If the base amount is based on the defendant’s illegal gains or profits, courts may refer to operating profits. If the defendant makes a business out of infringement, sales profits may be used. Statutory damages cannot serve as the base for punitive damages.
Third, it clarifies how the multiplier for damages should be determined. Courts must take into account any administrative or criminal fines already imposed for the same infringing act, even if the plaintiff does not request it.
The Supreme People’s Court expects these rules to help impose meaningful penalties on serious IP infringers, thereby fostering a legal environment that supports innovation and high quality development.
