China’s Supreme People’s Court Releases Typical Cases of Punitive Damages in Intellectual Property Infringement

Borsam IP
China IP Law Update———————————

China’s Supreme People’s Court released the “Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights” on March 3, 2021.  In order apply the Interpretation consistently and fairly, on March 15, 2021, the Supreme People’s Court released the “Typical cases of applying punitive damages in civil cases of infringement of intellectual property rights” (侵害知识产权民事案件适用惩罚性赔偿典型案例).  The Typical Cases contains five trademark infringement cases and one theft of trade secret cases with explanations. No patent cases were listed.  One foreign company, Adidas, made the list winning punitive damages of over 1 Million RMB

The Supreme People’s Court explains:

1. Guangzhou Tianci Company, etc., and Anhui Newman Company, etc., in a dispute over theft of trade secrets.

Guangzhou Tianci Company and Jiujiang Tianci Company claimed that Hua XX, Liu XX, Anhui Newman Company, Wu XX, Hu XX, Zhu XX and Peng infringed their “Kabo” manufacturing technology secrets and filed a lawsuit with Guangzhou Intellectual Property Court requesting an injunction, compensation for losses, and an apology. The Guangzhou Intellectual Property Court determined that the alleged infringement constituted theft of trade secrets and considering the intentional infringement and the circumstances of the infringement, applied 2.5 times the damages as punitive damages. Guangzhou Tianci Company, Jiujiang Tianci Company, Anhui Newman Company, Hua XX and Liu XX all refused to accept the judgment of the first instance and appealed to the Supreme People’s Court. The Supreme People’s Court on appeal held that the alleged infringement constituted theft of trade secrets, but the first-instance judgment did not fully consider the contribution of the trade secrets involved in determining the amount of compensation, and did not fully consider the willfulness of the infringer when determining punitive damages. Serious circumstances such as the degree of malice and the use of infringement, large scale of infringement, long duration, and hindrance of proof, so on the basis of maintaining the first-instance judgment on cessation of infringement, the applicable punitive damages were increase to the maximum at five times. The company compensated Guangzhou Tianci Company and Jiujiang Tianci Company for economic losses of 30 million RMB and reasonable expenses of 400,000 RMB. Hua, Liu, Hu and Zhu paid the compensation of 5 million, 30 million, and 1 million RMB respectively. 

Typical Significance: This case is the first punitive compensation case for intellectual property infringement that the Supreme People’s Court has handed down. The judgment of the case fully considered the subjective malice of the accused infringer, the business of infringement, the hindrance of proof, the duration of the accused infringement, the scale of infringement, etc., applied punitive damages, and finally determined the punitive damages at the highest multiple (five times) of the amount of compensation, which clearly sends a strong signal to strengthen the judicial protection of intellectual property rights.

  2. Case of trademark infringement dispute between Erdos Company and MiQi Company

Erdos (or Ordos) Company obtained the exclusive right to use the registered trademark on February 14, 2004 in class 25 for scarves, clothing, gloves and other commodities. In June 2015, Erdos Company discovered that Mi Qi Company’s “cashmere thread” products sold on its Tmall website “Mi Qi Apparel Store” prominently used the distinctive elements of the trademark involved, that is, the Chinese text of “鄂尔多斯” . Erdos Company filed an infringement lawsuit. The Beijing Intellectual Property Court held that the profit of Mi Qi Company from the alleged infringement can be determined by the product of the total number of infringing products sold, the unit price of the product, and the reasonable profit rate of the product. The “Ordos” series of trademarks of Ordos Company are well-known, and the profit margins of products in “Tmall” stores are higher, and the implementation of the alleged infringement has caused more serious damage to the trademark owner. As an operator of goods closely related to clothing such as “wool, scarf thread, cashmere thread”, Mi Qi Company should know the popularity of the trademark involved, and it prominently used the logo almost identical to the trademark involved in the case in its self-operated online store and the time of infringement was Long, maliciousness is obvious, and the infringement is serious. The amount of compensation is determined based on twice the profit of Mi Qi Company due to infringement.

Typical Significance: This case fully demonstrated the people’s court’s confidence and determination to correctly implement the punitive compensation system and severely sanction the malicious infringement of trademark rights. The reasoning part of the judgment document fully and clearly explained the factors that should be considered when determining “subjective malice” and determining the “base” and “multiples” of punitive damages, so that the process of judgment formation is more transparent and the judgment result is more persuasive. After the verdict of the case was pronounced, both parties did not appeal and achieved good social effects.

  3. Case of trademark infringement and unfair competition disputes between Xiaomi Technology Company, etc. and Zhongshan Ben Teng Company, etc.

In April 2011, Xiaomi Technology Co., Ltd. registered the “Xiaomi” trademark, and the approved products include mobile phones and video phones. Since then, it has successively applied for registration of a series of trademarks such as “” and “智米.”  Since 2010, Xiaomi Technology Company and Xiaomi Communication Company have successively won a number of national honors in the industry. Major media have carried out continuous and extensive publicity reports on Xiaomi Technology Company, Xiaomi Communication Company and their Xiaomi mobile phones.

In November 2011, Zhongshan Ben Teng applied for the registration of the “小米生活” trademark, which was approved for registration in 2015. The approved products include electric cookers, water heaters, electric pressure cookers, etc. In 2018, the registered trademark of “小米生活” was declared invalid because it was “registered through improper means.” In addition, among the more than 90 trademarks registered by Zhongshan Ben Teng, not only are many are similar to the “Xiaomi” and “智米” marks of Xiaomi Technology Company, but also many are similar to other well known brands.

The Higher People’s Court of Jiangsu Province held that the number of comments on online store products (reviews on e-commerce platforms) can be used as a reference for determining the volume of commodity transactions. The sales of the 23 stores involved can be included in the calculation of the infringement profits in this case. At the same time, it is believed that 1. Until the second instance, Zhongshan Ben Teng Co., Ltd. continued to promote and sell the alleged infringing goods, which had obvious malicious infringement. 2. Zhongshan Ben Teng Company, etc. sells online through multiple e-commerce platforms and many shops. The infringing goods displayed on the webpage are diverse, large in quantity, and large in infringement. This scenario should also be used as a factor in determining the amount of punishment. 3. The “Xiaomi” trademark is a well-known trademark with high visibility, reputation and market influence. 4. The alleged infringing goods were identified as substandard products by the Shanghai Municipal Market Supervision and Administration Bureau, and some users also reported that the alleged infringing goods had certain quality problems. The alleged infringements by Zhongshan Ben Teng Company and others have caused damage to the good reputation of Xiaomi Technology Company and Xiaomi Communication Company. Punishments should be increased. The infringement profits shall be used as the base of compensation, and the compensation amount shall be increased by three times. The 50 million RMB compensation claimed by Xiaomi Communication Company shall be fully supported.

Typical Significance: The judgment comprehensively analyzed and elaborated the “malicious” and “serious circumstances” elements of punitive damages and the method of determining the base and multiples. It not only took into account the characteristics of the sales of the alleged infringing goods, but also comprehensively analyzed the relevant factors affecting the penalty multiple. The multiples that are compatible with the subjective degree of malicious infringement, the severity of the circumstances, and the severity of the consequences of the infringement provide a practical example for the application of the punitive compensation system and reflect the orientation of severely cracking down on serious infringements of intellectual property rights.