Supreme People's Court of China Interprets Application of Punitive Damages in Intellectual Property Infringement Civil Cases
On 20 April 2026, the Supreme People’s Court of China (“SPC”) issued the Judicial Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Civil Disputes Involving Infringement of Intellectual Property Rights[1] (Judicial Interpretation [2026] No. 7) (“2026 Interpretation”). The 2026 Interpretation came into force on 1 May 2026, simultaneously repealing the previous 2021 version (Judicial Interpretation [2021] No. 4) (“2021 Interpretation”).
The SPC’s 2026 Interpretation is an interpretive instrument that functions to transform relatively general or abstract provisions from superior laws (e.g., the Civil Code, the Patent Law, the Trademark Law, the Copyright Law, the Anti-Unfair Competition Law, the Civil Procedure Law, etc.) into adjudicatory rules that courts can apply directly, so as to ensure uniform adjudication nationwide. Accordingly, the courts at all levels across China should follow the 2026 Interpretation to ensure consistency in similar cases. In other words, the 2026 Interpretation has strong binding force within China’s judicial system.
In practice, trial courts will typically apply and cite statutory provisions (superior laws) first and then cite the 2026 Interpretation for specific determinations regarding “intent/serious circumstances,” “calculation base and multiplier,” and “burden of proof and standard of proof.”
The key changes in the 2026 Interpretation compared with the 2021 Interpretation are as follows.
Improvements to Procedural Provisions and Litigation Restrictions
§ Prohibition of Separate Subsequent Lawsuits: Under the newly added Article 4, if a plaintiff fails to request punitive damages during litigation despite clarification from the court, they will no longer be granted the opportunity to file a separate lawsuit for such relief later.
§ Clear Non-Applicability Scenarios: Under the newly added Article 5, punitive damages are generally not supported for unfair competition acts other than the infringement of trade secrets, unless otherwise provided by law.
Expanded Determinations of “Intent/Intentionally”
§ Building on the circumstances in the 2021 Interpretation for finding intent, such as “piracy” and “counterfeiting a registered trademark,” the 2026 Interpretation further categorizes patent passing-off as a form of “intent.”
§ Under the newly added Circumstance (6) of Article 6, repeated infringement after a settlement may constitute “intent.”
§ Under the newly added Circumstance (7) of Article 6, evasion of infringement liability, for example by setting up affiliated companies, changing legal representatives, establishing a company under another name to hide actual control, or signing indemnity agreements, may constitute “intent.”
Refinements of “Serious Circumstances”
§ Under Article 7, when determining whether “serious circumstances” exist, courts will also consider the infringer’s awareness and fundamental attitude toward their actions, in addition to factors such as the scale of infringement and its consequences.
§ Under Article 7, Circumstance (4), “making a business of IP infringement” is exemplified as engaging in infringement as a main business or as the primary source of profit.
§ Under Article 7, Circumstance (5), “significant loss suffered by the right holder” is exemplified as serious damage to the right holder’s goodwill, market share, etc., caused by the infringement.
Clarification of the Method for Calculating the Base Amount
§ Under newly added Article 9, where the defendant’s illegal gains or infringing profits are used as the base amount, the base may be calculated by reference to operating profit, sales profit (where IP infringement is the infringer’s business), or profit-margin data for the same period and the same industry published by statistical departments, industry associations, etc.
§ Article 8 explicitly excludes statutory damage amounts from being used as the base for punitive calculations.
Improvements to the Determination of the Multiplier
§ Newly added Article 12 limits the multiplier to a maximum of five times the base amount, with reasonable expenses calculated separately.
§ Article 11 confirms that the multiplier may be a non-integer.
The 2026 Interpretation enhances the operability of the judicial application of punitive damages and offers certain guidelines for IP right holders and potential infringers. On the one hand, for right holders, a decision and an evidentiary roadmap as to “whether to claim punitive damages” should be finalized before case filing, to avoid losing a second opportunity due to hesitation during litigation. On the other hand, for potential infringers, to avoid being found to have acted “intentionally” and under “serious circumstances” and thus being held liable for punitive damages, they should abandon tactics such as “changing the corporate shell,” “changing the legal representative,” or “setting up a new affiliated entity to continue selling” to resolve disputes, and instead focus on establishing an evidence chain of “good faith and compliance,” such as rights searches and FTO opinions, rectification records after settlement, supplier warranties and accountability mechanisms.
