Punitive damages are applicable in all areas of IPR infringement and have been steadily improving in PRC legislation in recent years. It is also part of the latest Five-Year Plan through the government’s stated goal of establishing a comprehensive IPR infringement compensation system.
The Judicial Interpretation of Punitive Damages for Intellectual Property Rights to Punish Serious Infringement of Intellectual Property Rights (Interpretation), dated March 3, 2021, specifies precisely when a plaintiff may claim damages in excess of actual damages. According to Article 3 of the Interpretation, when investigating intentional infringement, the People’s Court shall first consider the nature of the infringed object and the relationship between the defendant and the plaintiff. Intent is also established if the defendant continued the infringement despite being notified and warned by the plaintiff or the party concerned. In addition, there is intent if the defendant and the plaintiff are in an employment, service, cooperation, license, distribution or agency relationship and have come into contact with the plaintiff’s intellectual property.
Baidu, an internet company, has benefited from punitive damages. It was awarded the sum of RMB 2.3 million by the Beijing Intellectual Property Court in December 2021. Five other companies had integrated the characters 百度 typical of the Baidu search engine into their company and brand names and marketed them on social networks in their own interests over a long period of time. The court ruled in favor of treble punitive damages because the infringement period lasted for an extended period of 5 years and the motive to profit from Baidu’s fame was intentional. Foreign companies operating in China should carefully examine the requirements for punitive damages and secure the necessary evidence to prove intent.