The newly issued Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Adjudication of Civil Disputes Arising from Intellectual Property Infringement took effect on 1 May 2026, repealing the same-named judicial interpretation issued in 2021, refining the scope of application, determination of circumstances, and calculation of damages for punitive damages. After the implementation of the new interpretation, the following key points should be noted when claiming punitive damages:

1. Conditions and Timing for Claiming Punitive Damages

When claiming punitive damages, the plaintiff shall specify the amount of damages, the calculation method, and the underlying facts and grounds. A rough claim in the complaint is insufficient.

Under the 2021 version of the judicial interpretation, if a plaintiff raised a claim for punitive damages in the appeal and the mediation failed, the court would advise the plaintiff to file a separate lawsuit. However, under the new version, if the mediation regarding punitive damages fails in the appeal, the court will no longer support such claim. Moreover, if the plaintiff did not request punitive damages in the infringement action and, after being clarified by the court, still fails to do so, the court will not accept any subsequent claim for punitive damages based on the same infringing facts after the conclusion of the litigation. Henceforth, punitive damages claims must be raised within the intellectual property infringement action, and no follow-up remedial procedure will be available.

2. Punitive Damages Are Available Only for Unfair Competition Involving Trade Secret Misappropriation

Article 5 of the new judicial interpretation provides that if a plaintiff seeks punitive damages against a defendant for intentional acts of unfair competition other than trade secret misappropriation, the court shall not support such claim, unless otherwise provided by law. This further limits the scope of punitive damages.

3. New and Refined Circumstances of Willful Infringement and Seriousness

With respect to common scenarios in practice, Article 6 of the new judicial interpretation adds that in the following circumstances: (i) the defendant, after reaching a settlement with the plaintiff and agreeing to cease the infringement, commits the same or a similar infringing act again; and (ii) the defendant conceals its actual controlling relationship by establishing affiliated companies, changing the legal representative or controlling shareholder, setting up a company under a nominee name, or signing a disclaimer agreement to evade liabilities for infringement, unless the defendant presents sufficient contrary evidence, the court will find the defendant’s infringement is willful. This provides more legal grounds for the plaintiff to claim punitive damages.

In determining serious circumstances of infringement, the new judicial interpretation replaces “can determine” with “shall determine”, and refines the meaning of “engaging in infringement as a business” to include “taking infringement as the main business or deriving the majority of profits from infringement”. It also adds the circumstance of “the infringement causes serious harm to the right holder’s goodwill, market share, etc.” after “huge profits from infringement”, corresponding to the factors in determining the amount of damages “actual losses” and “infringement profits”. The above offer clearer guidance for both courts and plaintiffs.

4. Statutory Damages Cannot Serve as the Base for Calculating Punitive Damages

Where actual losses, illegal gains, profits from infringement, or licensing fees are difficult to determine, the court will, at its discretion, determine the amount of damages (statutory damages), and under such circumstances, punitive damages shall no longer be applicable. In practice, due to factors such as the covert nature of certain infringing acts and the inaccessibility of materials  such as the defendant’s accounting books and records, it is often challenging to adduce evidence to prove actual losses or infringing profits. In light of Point 1 and Point 4, the courts now impose higher evidentiary requirements on plaintiffs. To successfully claim punitive damages, proving the defendant’s willfulness and the seriousness of the infringement is only one aspect, while proving the specific amount of damages is equally important.

5. Clarifying the Profit Margins Applied to Calculate Profits from Infringement

Article 9 of the new judicial interpretation clarifies the profit margins that may be used to calculate infringing profits. The defendant’s illegal gains or profits from infringement can be calculated by reference to its operating profit. If the defendant is engaged in infringement as a business, its profits can be calculated by reference to its sales profit. Where the profit margin cannot be determined, reference can be made to the average profit margin of the same industry in the same period released by institutions such as statistical authorities and industry associations, or the right holder’s profit margin.