Punitive Damages In Intellectual Property Civil Cases

Supreme People Court (SPC) 2026 Judicial Interpretation.

The 2026 SPC Interpretation further refines and supplements the rules set out in the 2021 version and addresses practical issues arising in judicial practice over recent years, including determining of “intent”, assessing “serious circumstances,” and the calculation of damages.  

Punitive damages have become a core feature of high-value IP disputes in China. The 2026 Interpretation represents a mature and structured regime: clearer procedural rules, more predictable standards for intent and seriousness, and a more workable methodology for damages calculation. 

On 20 April 2026, the Supreme People’s Court (SPC) released the Interpretation of the SPC on the Application of Punitive Damages in the Trial of Civil Disputes over Intellectual Property Infringement (Fa Shi [2026] No. 7), which came in force on 1 May 2026 and replaces the 2021 version (Fa Shi [2021] No.4).

We aim to elaborate on the core aspects of these changes below. 

1. Revised procedural framework 

The 2026 Interpretation clarifies procedural requirements for claiming punitive damages and strengthens litigation discipline.  

• Timing requirement: A claim for punitive damages must be raised before the conclusion of oral debate at first instance, where such a claim is newly raised in the second instance, the court may conduct mediation, and if mediation fails, the claim will not be supported. 
• No second chance through re-filing: Where a right holder claims damages but did not claim punitive damages and, after the court’s clarification, still declines to do so, no separate lawsuit based on the same facts may be filed to seek punitive damages. 
• Limited scope in unfair competition lawsuits: Punitive damages are generally supported exclusively to trade secret infringement, or otherwise provided by law. 

2. Refined standards for “intent” 

The 2026 Interpretation provides more detailed criteria for determining intentional infringement. Courts shall consider factors such as the nature and status of the IP rights, its notoriety, and the relationship between the parties. 

It further enumerates specific circumstances under which intent may be found (subject to rebuttal), including: 

• continuing infringement after receiving effective notice 
• having a relationship (e.g., employment, cooperation, licensing, distribution or negotiation) through which the defendant had access to the IP 
• engaging in counterfeiting, piracy, or passing off 
• resuming the same or similar infringement after reaching a settlement and agreeing to cease infringement 
• evading infringement liability by concealing actual control through affiliated entities, nominee arrangements, changes of legal representative or controlling shareholder, or liability-shifting agreements.  

These provisions target typical bad-faith practices observed in judicial practices. 

3. Refined Criteria for “Serious Circumstances” 

The 2026 Interpretation elaborates how “serious circumstances” shall be determined. Court shall comprehensively assess factors such as: 

• means, frequency, duration, geographical scope and scale of infringement 
• consequences of the infringement 
• the infringer’s awareness and attitude toward the conduct. 

It also enumerates circumstances that shall be deemed “serious,” including: 

• repeated infringement after administrative penalties or judicial judgments
• refusal to comply with preservation measures without justified reasons 
• fabrication, destruction, or concealment of evidence 
• conducting infringement as a core business or primary source of profit 
• substantial illegal gains or serious damage to reputation or market share 
• harm or potential harm to national or public interests. 

4. Methodology for determining the calculation base 

The 2026 Interpretation stipulates clear rules for determining the base for punitive damages.  

The calculation base shall be determined based on the right holder’s actual losses, the infringer’s illegal gains, or the benefits obtained from infringement. The base shall not include reasonable costs for enforcement. The court may refer to the licensing fee to determine the base where the right holder’s actual losses, the infringer’s illegal gains or infringement benefits cannot be ascertained. It also makes clear that statutory damages cannot serve as the calculation base. 

Regarding the calculation of profits by infringement, it specifies: 

• Where illegal gains or infringement profits are considered, courts may refer to operating profits; 
• Where infringement constitutes the defendant’s main business, courts may refer to sales profits. 
• If the profit margin cannot be determined, courts may rely on industry averages or the right holder’s profit margin. 

In addition, the court may determine the base amount based on the plaintiff’s claim and the available evidence where defendants refuse to provide or provide forged financial records. 

5. Determination of Multiplier 

The 2026 Interpretation clarifies how the multiplier for punitive damages should be determined.  

The multiplier shall be determined within the statutory range and may not be necessarily an integer. The total punitive damages shall not exceed five times the base, while reasonable enforcement costs shall be calculated separately. It also introduces the principle of proportionality of penalty to offence: where administrative penalties or criminal fines have already been imposed and executed for the same conduct, such factors shall be taken into account when determining the multiplier.

Concluding remarks 

Key highlights of the 2026 Interpretation include a clarified procedural framework, refined criteria for determining intent and serious circumstances, more detailed rules on the calculation base, and a structured approach to determine the multiplier. 

For right holders, the message is clear: punitive damages should be considered as a core litigation tool rather than an ancillary claim. Successful enforcement will increasingly depend on early case strategy, robust evidence collection, and careful alignment with the Interpretation’s refined requirements. 

In the long run, the strengthened punitive damages is expected to further deter infringement, enhance judicial predictability, and contribute to a more innovation-friendly business environment in China.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.