Punitive damages are an enhanced compensation regime in intellectual property: for infringers who maliciously infringe the exclusive right to a trademark under serious circumstances, the court awards one to five times the base amount determined by actual losses, infringer's profits, or a multiple of the license fee. Going beyond the make-whole principle, it serves compensatory, punitive, and preventive functions, and is provided in Article 63(1) of the Trademark Law.
Legislative History
The 2013 amendment to the Trademark Law first introduced punitive damages, at one to three times the base; the 2019 amendment raised the ceiling to five times and lifted the statutory damages cap from RMB 3 million to RMB 5 million. Article 1185 of the Civil Code, effective in 2021, confirmed at the basic-law level that where an intellectual property right is intentionally infringed under serious circumstances, the infringed party has the right to claim punitive damages; the Supreme People's Court issued a judicial interpretation on punitive damages for intellectual property in the same year, unifying the application standards.
Elements
- Subjective element (malice/intent): knowingly infringing another's registered trademark. Typical circumstances enumerated in the judicial interpretation include: continuing the infringement after receiving the rights holder's warning letter or notice; repeating the same or similar infringement after an administrative penalty or court judgment; infringing after access to the mark through an employment, agency, or cooperation relationship with the rights holder; and counterfeiting registered trademarks;
- Objective element (serious circumstances): making a business of infringing intellectual property, counterfeiting registered trademark labels, refusing to comply with a preservation ruling, huge infringement profits or losses to the rights holder, or infringement that may endanger personal safety or the public interest.
Calculation
Damages = base amount × multiplier. The base is determined by actual losses, infringer's profits, or a multiple of the license fee; statutory damages cannot serve as the base; reasonable expenses are not included in the base and are supported separately. The multiplier, between one and five, is discretionary based on the degree of malice and the seriousness of the circumstances.
Relationship with Statutory Damages
Statutory damages are the fallback when evidence of the base cannot be produced, and they are mutually exclusive with punitive damages: applying punitive damages precludes using statutory damages to set the base. Rights holders must therefore decide early—where there are channels to uncover the other side's profits, pursue the base-plus-multiplier route for a high award; where the base genuinely cannot be ascertained, accept statutory damages and push the discretionary amount upward with evidence of fame.
Evidence and Practice
The hard part of punitive damages is proving the base. The rights holder should: lock down profits through platform sales data and financial account books (the court may order the defendant to produce them; refusal allows reference to the plaintiff's claims) and administrative penalty decisions; and prove malice through proof of service of warning letters and records of prior penalties. For the accused party, timely rectification after receiving an infringement notice and preserving legitimate-source documentation are key to avoiding a bad-faith finding and multiplier damages.
Details of how these concepts apply in practice vary; before proceeding, you may consult a filed trademark agent on MyTMBee for case-specific analysis.