China has recently made some changes to the legal system allowing up to five times the punitive damages for intentional and serious intellectual property infringement. This is part of an ongoing commitment to making a more favorable environment for trade, investment, and innovation.
When can punitive damages be applied? When the defendant has been determined to have intentionally infringed IP rights and the circumstances were deemed serious.
Intentional infringement includes factors such as:
Continuation of infringement after having been notified and warned;
There have been any of a number of legal connections between the plaintiff and defendant;
Piracy of false use of registered trademarks;
Other circumstances that can be regarded as intentional infringement.
The seriousness of the infringement will consider factors such as continual infringement even after having been punished or deemed liable by the court, forgery, destruction or concealment of evidence of infringement, huge profits obtained from the infringement or huge losses suffered by the right-holder, endangering of national security, public interests, or personal health, etc.
Evidence of IP infringement is often difficult to get, and can cleverly hidden in a variety of ways, making it even more difficult for the rights-holder to obtain. Under the revised system, the method for calculating punitive damages is done with a proof obstruction system. Refusals by defendants to cooperate with providing the required records will constitute obstruction and they will bear adverse legal consequences.
The court go through a six-step process for determining punitive damages:
1) Determine if the IP right has been infringed
2) Review of punitive damages were requested
3) Determining if infringement was intentional
4) Determine if serious circumstances were involved
5) Determining the amount of punitive damages
6) Determine the multiple of the punitive damages
China has now provided a clear system to the courts for determining and applying punitive damages. This reduces the burden of proof of rights holders, and ultimately strengthens the protection of IP rights.