To fully leverage the significant role of the punitive damages regime, ongoing efforts are being made to summarize the “Interpretation of the Supreme People’s Court on the Application of Punitive Damages in Civil Cases Involving Infringement of Intellectual Property Rights” (Fa Shi…). [2021 ] Since the implementation of Article 4, in response to new developments and emerging issues, the Supreme People’s Court has further refined the rules governing the application of punitive damages in the field of intellectual property. Following thorough investigations and research, extensive consultations, and repeated deliberations, it has drafted the Interpretation.

The Interpretation adheres to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly studies and implements Xi Jinping’s Thought on the Rule of Law, and earnestly carries out the spirit of the 20th National Congress of the Communist Party of China and the resolutions of all plenary sessions of the 20th Central Committee. It upholds the principle of imposing strict legal penalties for serious infringements of intellectual property rights, addresses the key and difficult issues in the judicial application of punitive damages, further refines and improves the standards for applying the law, enhances the operability of punitive‑damage adjudication, ensures uniformity in the criteria for rendering judgments, provides clear procedural guidance to the parties, and offers the market predictable expectations regarding conduct, thereby guaranteeing the effective implementation of the system of punitive damages for intellectual property infringement.

First, further refine the criteria for determining “intentional conduct” and “serious circumstances.” It has added circumstances—such as “repeatedly engaging in the same or similar infringing acts after reaching a settlement with the plaintiff and agreeing to cease the infringement”—that may be deemed to demonstrate the defendant’s intentional infringement of intellectual property rights. Furthermore, it has clarified the meaning of “engaging in the business of infringing intellectual property rights” and, in accordance with the law, refined the criteria for identifying serious infringements of intellectual property rights.

Second, the method for calculating the base figure has been further clarified. Where the punitive damages are expressly calculated on the basis of the defendant’s unlawful gains or infringing profits, such a base may be determined by reference to operating profit; if the defendant’s business consists of infringing intellectual property rights, the calculation may be based on sales profit. If the profit margin cannot be ascertained, it may be computed by reference to the average profit margin for the same period and industry published by statistical authorities, industry associations, or other relevant bodies, or to the rights holder’s own profit margin. It is also clarified that the statutory damage award may not serve as the base for calculating punitive damages. These provisions help address the practical difficulty of determining an appropriate base amount.

Third, the methodology for determining the multiplier has been refined. In accordance with the principle of proportionality between the offense and the penalty, where a party has already been subjected to a fine or criminal penalty for the same tortious act and such penalty has been fully enforced, the people’s court shall take this into account when determining the multiple for punitive damages, without requiring the party to make a specific request.

People’s courts at all levels must thoroughly implement the CPC Central Committee’s decisions and arrangements on punitive damages, strictly apply the system of punitive damages for intellectual property rights in accordance with the law, and impose severe legal penalties on serious infringements of intellectual property rights, ensuring that infringers bear substantial costs. In doing so, they should actively foster a rule-of-law environment that incentivizes and safeguards innovation, thereby promoting high-quality development.

Interpretation of the Supreme People’s Court No. 7 of 2026

Supreme People's Court

On the Adjudication of Civil Disputes Involving Infringement of Intellectual Property Rights

Interpretation on the Application of Punitive Damages

(Adopted at the 1972nd Meeting of the Judicial Committee of the Supreme People’s Court on April 7, 2026, and effective as of May 1, 2026)

In order to punish, in accordance with the law, serious infringements of intellectual property rights and to ensure the strict implementation of the system of punitive damages for intellectual property infringement, this Interpretation is hereby formulated, based on relevant provisions of the Civil Code of the People’s Republic of China, the Copyright Law of the People’s Republic of China, the Trademark Law of the People’s Republic of China, the Patent Law of the People’s Republic of China, the Anti-Unfair Competition Law of the People’s Republic of China, the Seed Law of the People’s Republic of China, the Civil Procedure Law of the People’s Republic of China, and other applicable laws, and in light of judicial practice.

Article 1 Where the plaintiff alleges that the defendant has intentionally infringed upon the intellectual property rights legally enjoyed by the plaintiff and that the circumstances are serious, and requests that the court order the defendant to bear liability for punitive damages, the people’s court shall adjudicate the case in accordance with the law.

Article 2 Where the plaintiff seeks punitive damages, they shall set forth a specific amount of compensation, the method for calculating such amount, and the facts and grounds on which such claim is based.

Article 3 If the plaintiff adds a claim for punitive damages before the conclusion of the first-instance court debate, the people’s court shall grant such request. If a claim for punitive damages is added during the second instance, the people’s court may, in accordance with the principle of party autonomy, attempt mediation; if mediation fails, the claim shall not be upheld.

Article 4 Where, in an intellectual property infringement action, the plaintiff seeks compensation for damages but does not seek punitive damages, and, despite being duly advised by the people’s court, still fails to make such a request, any subsequent lawsuit filed after the conclusion of the proceedings—based on the same infringing facts and seeking punitive damages—shall not be accepted by the people’s court.

Article 5 Where the plaintiff seeks punitive damages for the defendant’s unfair competition acts other than intentional infringement of trade secrets, the people’s court shall not grant such relief, unless otherwise provided by law.

Article 6 With respect to the determination of intent in cases of intellectual property infringement, people’s courts shall comprehensively consider factors such as the type of the intellectual property object, the status and renown of the right, and the relationship between the defendant and the plaintiff or any interested party.

Where the defendant falls under any of the following circumstances, the people’s court may find that the defendant acted with intent to infringe intellectual property rights, unless the party concerned presents contrary evidence sufficient to rebut such finding:

(1) Where, after being duly notified by the plaintiff or an interested party, the infringing act is nevertheless continued;

(2) The defendant, or its legal representative or administrator, is the legal representative, administrator, or de facto controller of the plaintiff or an interested party, and knows or ought to know of the infringed intellectual property right;

(3) There exists an employment, service, cooperation, licensing, distribution, agency, or representation relationship with the plaintiff or an interested party, and, by virtue of such relationship, the person has had access to the infringed intellectual property.

(4) Having engaged in business dealings with the plaintiff or an interested party, or having conducted negotiations to conclude a contract, and, on the basis of such relationships, having come into contact with the infringed intellectual property;

(5) Engaging in acts of piracy, counterfeiting registered trademarks, or impersonating another party’s patents;

(6) After reaching a settlement with the plaintiff and agreeing to cease the infringing acts, repeatedly engaging in the same or similar infringing conduct;

(7) Concealing the actual control relationship by establishing affiliated companies, changing the legal representative or controlling shareholder, or setting up a company under an alias, or entering into exemption agreements in order to evade legal liability for infringement of intellectual property rights involved in the case;

(8) Other circumstances that may be deemed intentional.

Article 7 With regard to the determination of serious infringement of intellectual property rights, people’s courts shall comprehensively consider such factors as the methods and frequency of infringement, the duration, geographical scope, scale, and consequences of the infringing acts, as well as the infringer’s awareness of and fundamental attitude toward the infringing conduct.

If the defendant falls under any of the following circumstances, the people’s court shall deem the circumstances to be serious:

(1) Where, after having been subject to administrative penalties or a court judgment imposing legal liability for infringement, the same or a similar infringing act is committed again;

(2) Refusing to comply with a preservation order without justifiable grounds;

(3) Falsifying, destroying, or concealing evidence of infringement;

(4) Those whose primary business is engaging in infringing acts, or whose principal source of profit is derived from infringement, and who thus engage in the business of infringing intellectual property rights;

(5) Where the infringer has obtained substantial profits from the infringement, or where the infringing act has caused serious harm to the rights holder’s goodwill, market share, or other interests;

(6) Where the infringing act harms or may harm national interests or the public interest;

(7) Other circumstances that should be deemed to constitute serious circumstances.

Article 8 When determining the amount of punitive damages, the people’s court shall, in accordance with the relevant laws, take as the base for calculation either the plaintiff’s actual losses, the defendant’s illegal gains, or the benefits obtained through the infringement. The base for calculation shall not include the reasonable expenses incurred by the plaintiff to stop the infringement. Where the law provides otherwise, such provisions shall prevail.

Where the amount of actual damages, the amount of illegal gains, and the profits obtained through the infringement are all difficult to calculate, the people’s court shall, in accordance with the law, reasonably determine the base for calculating the punitive damages by referring to the royalty rate for licensing the right.

The statutory damage award may not serve as the base for calculating punitive damages.

Article 9 Where the defendant’s illegal gains or infringing profits are used as the base for calculating punitive damages, such base may be determined by reference to operating profit. If the defendant engages in the infringement of intellectual property rights as a business activity, the calculation may be based on sales profit. Where the profit margin cannot be ascertained, it may be calculated by reference to the average profit margin for the same period and industry published by statistical authorities, industry associations, or other relevant bodies, or to the right holder’s own profit margin.

Article 10 Where the people’s court, in accordance with the law, orders the defendant to produce books of account, documents, and other materials in its possession that are relevant to the infringing act, and the defendant, without justifiable reason, refuses to produce such materials or produces false ones, the people’s court may, based on the plaintiff’s claims and the evidence on record, determine the base for calculating the amount of punitive damages in accordance with the law. If the circumstances set forth in Article 114 of the Civil Procedure Law are met, legal liability shall be pursued in accordance with the law. Where otherwise provided by law, such provisions shall prevail.

Article 11 When determining the multiplier for punitive damages, the people’s court shall comprehensively consider factors such as the defendant’s degree of subjective fault and the severity of the circumstances of the tort. The multiplier for punitive damages shall be set within the statutory range and need not be an integer.

Article 12 The total amount of damages awarded by the people’s court pursuant to punitive damages shall not exceed five times the base amount. Reasonable expenses incurred by the rights holder to stop the infringing act shall be calculated separately and in addition to such total amount.

Article 13 Where the same infringing act has already been subject to a fine or penalty and such sanction has been fully enforced, the people’s court shall take this into account when determining the multiplier for punitive damages.

Article 14 This Interpretation shall take effect as of May 1, 2026.

Upon the entry into force of this Interpretation, the “Interpretation of the Supreme People’s Court on the Application of Punitive Damages in Civil Cases Involving Infringement of Intellectual Property Rights” (Fa Shi [2021] No. 4) shall be concurrently repealed.

For cases in which a final judgment was rendered prior to the entry into force of this Interpretation, this Interpretation shall not apply if, after its entry into force, a party applies for retrial or a retrial is ordered pursuant to the trial supervision procedure.

( Reposted from: Supreme People’s Court)