The Court Decreed High Amount Compensation by the Punitive Compensation Principle


In terms of regulations for trademark infringement in China, i.e., the Trademark Law, it rules that the amount of damages for infringement shall be determined according to the actual losses and the benefits acquired by the infringer. The regulations basically comply with the principle of recovering losses of the obligee. The punitive compensation principle improves the compensation system that better protects the rights and interests of victims in intellectual property infringement cases. The following case between OPPLE and Huasheng company embodies the punitive compensation principle and rightly guarantees the plaintiff’s trademark rights.
On October 6, 2012, OPPLE Lighting Co., Ltd. (hereafter referred to as OPPLE)  held two trademarks “欧普OPPLE with graphic” and  “欧普” as a transferee. OPPLE used them on lamps and similar goods in class 11; until August 2016, it encountered the infringement. 
OPPLE found Guangzhou Huasheng Plastic Products Co., Ltd. (hereafter referred to as Huasheng company) sale lamps carrying marks “欧普特” and “OUPUTE 欧普特” on the e-commerce platform, which infringed its exclusive trademark rights concerning ‘欧普’. 
OPPLE prosecuted Huasheng company and claimed a financial compensation amount to 3 million yuan, while the latter defended that the alleged signs were distinguished from OPPLE’s trademarks. 
So did the courts. The first instance court, Guangzhou Nansha People’s Court ruled against OPPLE, finding that the alleged signs were dissimilar to OPPLE’s. Even appealing to Guangzhou Intellectual Property Court, the court still held that infringement was not established. OPPLE’s claim wasn’t sustained.
Things changed in 2019, OPPLE applied to the Guangdong High People’s Court for a retrial. The court reviewed the case and put on trial. 
The court found that the trademark “欧普” had a high notability and was certified as a famous trademark. “欧普特” was just one word different from “欧普”, and “OUPUTE” was confusing. Finally, the court confirmed the infringement and decreed the compensation totaling 3 million yuan. 
The case drew broad attention among the public, mostly because of the high compensation to the plaintiff. The reason why the compensation amounted so high was that the court applied the punitive principle, which is provided in article 63 of the Trademark Law.
According to the provision, if the infringement is committed in bad faith with severe circumstances, the amount of damages shall be the one to five times of the amount determined in the method described above and shall include reasonable expenses of the right holder for stopping the infringement. The amendment of the Trademark Law in 2013 firstly provided the punitive compensation principle as above, and the regulation has been properly applied in the judicial practice in these years. The principle aims at increasing the cost of infringement and protecting the intellectual property rights for applicants. In this way, courts can legitimately rule a higher amount of compensation, giving a penalty and deterrence to the infringers and relieving the high cost of intellectual property rights protection. Due to its speciality, the application of the principle requires certain conditions.
Applying the punitive principle in an infringement case means a higher amount of compensation ruled to infringers. To apply the particular principle, the court shall confirm the bad faith of infringers and the serious circumstances caused. Bad faith refers that the infringement was committed deliberately with malicious intention. The plaintiff’s proof shall achieve that the infringer was or should be fully aware of the prior legal rights and harmful consequence of its behaviour. Taking the above case as an example, the plaintiff argued the defendant's malice by proving its reputation among the market. The brand and its products were so popular that the infringers shall know the prior rights of the plaintiff. The court agreed with the reputation and considered the defendant's trademark application, which demonstrated its awareness of OPPLE’s existing similar trademarks proved its bad faith.
Not only in the Trademark Law, but regulations concerning punitive compensation also provided in the field of patent rights and copyrights, building an overall protection system for intellectual property rights in China.
In recent years, China’s intellectual property system and protection work have been continuously perfected, and punitive damages have been increasingly applied in infringement cases, which provides a better law enforcement environment for companies, individuals and foreign investors to conduct business when engaging in intellectual property matters. We believe the trademark rights, patents and copyrights will be more and more well-protected together with implementing different kinds of protection policies.