China: Ten Typical Cases of Punitive Damages Released by the Shanghai High People’s Court

On December 12, 2025, the Shanghai High People’s Court released, via the official “Shanghai High Court” WeChat public account, the “Typical Cases and Adjudication Essentials of Punitive Damages in Intellectual Property Cases Handled by Shanghai Courts”. Ten cases were selected from punitive damages judgments that have taken effect since 2024, with the aim of providing more operable adjudicative pathways and responding—through higher-quality damage awards—to the ongoing real-world challenge that “intentional infringement with serious circumstances” continues to occur.

The normative foundation of the punitive damages system in the field of intellectual property has become quite clear. On the one hand, Article 1185 of the Civil Code establishes the general rule of “intentional infringement of intellectual property rights under serious circumstances”. On the other hand, in 2021 the Supreme People’s Court promulgated and implemented the Interpretation on the Application of Punitive Damages in the Trial of Civil Cases Involving Infringement of Intellectual Property Rights (hereinafter referred to as the “Judicial Interpretation on Punitive Damages”), which provides systematic guidance on key issues such as the presumption and assessment of “intent” and “serious circumstances”, methods for determining the base amount and multiplier, and segmented calculation. The ten cases released by the Shanghai High People’s Court this time concretely implement, through reusable adjudicative techniques, solutions to three major practical difficulties in punitive damages: “how to prove intent/malice”, “how to accurately calculate the base amount”, and “how to balance punishment and compensation”.

The following sections provide a relatively detailed reconstruction of the facts, a review of the adjudicative logic, and professional commentary on each of the ten cases, and conclude with a summary of direct implications for rights holders’ enforcement strategies and corporate compliance.

I. Trademark Squatting to Seize Major Transaction Opportunities: Responding to Malicious Competition with “Huge Single-Transaction Amount + High Multiplier” (Case 1)

This case centers on the well-known trademarks “海德鲁 / Hydro / 海德鲁”. The rights holders are a renowned Norwegian aluminum company and its affiliated enterprises, which have long used these marks in fields such as aluminum profiles and metal doors and windows, thereby establishing high market recognition. The defendants, on the one hand, maliciously applied for or acquired a large number of trademarks containing “海德鲁” or “HYDRO” over an extended period, many of which were either not approved for metal door and window products or were later revoked or declared invalid. On the other hand, in specific major door and window supply projects, they asserted ownership of the brand to project owners, resulting in the project owners not contracting with the original supplier (an affiliate of the rights holder) but instead entering into and performing contracts with the defendants, with the final completion and settlement amount exceeding RMB 24 million. During the litigation, the defendants further filed cancellation applications against the rights holders’ trademarks on the grounds of “non-use for three consecutive years”.

The core highlight of the judgment lies in the determination of the “base amount”. Where the infringing profits were difficult to ascertain precisely, the court used the ascertained infringing transaction amount as the basis and, in combination with a discretionary infringement profit margin (20% in this case), calculated the compensation base. Given factors such as a high degree of malice, a long duration of infringement, and an extremely large single-transaction amount, the court applied a fivefold punitive damages multiplier, ultimately ordering the three defendants to jointly compensate economic losses exceeding RMB 24 million and to bear reasonable expenses.In essence, this case treats the chain of “trademark squatting—complaints/assertion of rights—interception of transaction opportunities” as an integrated scheme of malicious competition. Trademark squatting alone does not necessarily trigger punitive damages, but when it is used in real transaction scenarios to exclude genuine rights holders through “false rights”, causing substantial transactional losses, the court elevates it to “malicious infringement of trademark rights with serious circumstances”. In addition, for rights holders, this case demonstrates that in scenarios where “transaction opportunities are intercepted”, if key evidence such as project contracts, completion settlements, and payment flows can be secured, the base amount may still be determined through the path of “transaction amount × reasonable profit margin”, even where infringing profits cannot be precisely calculated, thereby supporting claims for high-multiple punitive damages. For defendants, the most fatal issue often lies not in the “use of similar marks” itself, but in the compounded lack of good faith formed by the overlay of squatting, complaints, and cancellation applications, which necessitates regulatory intervention.
II. Online Games “Failing to Delete After Settlement and Instead Increasing Infringement”: Identifying Repeated Infringement Through Contractual Purpose Interpretation and Refining Base Amount Factors (Case 2)
This case involves online game infringement. Since 2016, the rights holder has exclusively owned the online game adaptation rights to four Jin Yong novels and the television series My Own Swordsman. Since 2017, the two defendants have operated a martial arts-themed online game that extensively used original plots and elements from the works at issue. In 2021, the parties reached a settlement in a prior infringement lawsuit, under which the defendants undertook to delete the infringing content. However, they not only failed to fully remove such content thereafter, but also added multiple new infringing elements in a 2024 version update.

The first major difficulty concerned the interpretation of the settlement agreement. The court emphasized that where contractual provisions conflict, they should be interpreted as a whole in light of the background of execution and the contractual purpose. Where the settlement agreement does not explicitly authorize continued use of infringing content, it should be presumed that its purpose is to cease infringement rather than to grant disguised permission. On this basis, continued use after settlement constituted repeated infringement, satisfying the prerequisites for applying punitive damages.

The second difficulty concerned determination of the base amount. The court held that, in online game copyright infringement cases, the punitive damages base may comprehensively consider factors such as operating revenue, net profit margin, the contribution rate of the infringing content to revenue, and the duration of infringement, and may be reasonably determined by cross-checking audit reports and referencing industry average profit margins and operational cycle characteristics. Notably, the court also took into account that the rights holder failed to promptly notify the defendants to delete content as agreed in the settlement, which objectively may have contributed to an expansion of losses. Accordingly, the court set a “rectification grace period” within the punitive damages period to balance the interests of both parties, ultimately awarding more than RMB 3 million in economic losses and reasonable expenses.

From a professional perspective, this case sends a very clear signal to the industry: settlement does not mean “buying out infringement risk”. Unless the agreement clearly grants a license in an explicit manner with commensurate consideration, “cessation of infringement” remains the core of any settlement. For rights holders, settlement clauses must specify, at an executable level, the scope of deletion or modification, acceptance standards, version iteration mechanisms, breach liability, and evidence preservation. For infringers, the conduct pattern most likely to trigger punitive damages is “knowing infringement—promising rectification—actually failing to rectify and even expanding infringement”, as such subjective malice is almost indefensible under the framework of the judicial interpretation.
III. Using Ascertained Partial Infringing Profits as the Base for Punitive Damages: Coordinating with Statutory Damages Within the Same Case (Case 3)
The attachment of high-profile Chinese IPs such as “Mango TV” and Who’s the Murderer to script-killing games and business developments scenarios has become a common infringement pattern in recent years. In this case, four defendants operated “Mango Detective Pavilion” script-killing businesses, extensively using marks identical or similar to the rights holders’ trademarks in business developments, promotion, physical stores, and online platforms, and falsely claiming cooperative relationships with the rights holders. The court found that this constituted trademark infringement and unfair competition through false advertising. Given that the defendants continued infringing despite reminders or warnings, rejection of trademark applications, and even refusal to comply with behavior preservation rulings, the court determined that subjective intent was evident and the circumstances were serious.

The methodological value of this judgment lies in coordinating the application of punitive damages and statutory damages under conditions of “divisible infringement”. Specifically, for the franchise revenue portion that could be ascertained, the court calculated infringing profits of RMB 1 million based on the defendants’ admissions regarding the number of franchise stores and franchise fees, used this amount as the base, and applied a twofold punitive damages multiplier. For the portion of directly operated business revenue that could not be ascertained, the court determined statutory damages by comprehensively considering trademark recognition, directly operated store revenue, and the contribution rate of the IP to offline script-killing activities. The total compensation awarded amounted to RMB 3 million.

This approach resolves a common dilemma in practice. If punitive damages are entirely avoided in pursuit of “precision”, sanctions against malicious infringement may be insufficient; if conjecture is used to cover all infringing profits in pursuit of “severity”, the rigor of fact-finding may be compromised. By applying “punitive damages to the ascertained portion and statutory damages to the unascertained portion”, Shanghai courts have achieved a balance among evidentiary rules, efficiency, and fairness, offering strong replicability.
IV. Continuing to Apply for and Use Similar Trademarks After Invalidity: Supporting Punitive Damages Through “Active Intent + Adverse Inference from Evidence Obstruction” (Case 4)
This case arose in the supermarket and convenience store service sector. The plaintiff’s “Lianhua Supermarket” trademarks were registered and protected in Class 35 services. The defendant initially used “Lianhua Life Pavilion” and, after the trademark was declared invalid, switched to “Zhongshu Lianhua”. The “Zhongshu Lianhua” trademark was likewise declared invalid. Nevertheless, the defendant continued to prominently use marks containing “Lianhua” on store signage, cashier systems, receipts, and other materials, and licensed multiple supermarkets to use such marks, with a long duration of infringement and an obvious expansion of scope.

In identifying “malice”, the court focused on a key point: once the defendant’s registered trademark had been declared invalid due to its principal elements being identical to another’s trademark, the subsequent application for and use of another trademark containing the same principal elements no longer constituted mere negligence, but rather active intentional infringement, which should be deemed malicious infringement of trademark rights. Furthermore, with respect to accounting records, the court emphasized that where an infringer refuses to submit account books and materials related to infringement, the court may estimate infringing revenue based on available revenue data, combined with industry gross margins and trademark contribution rates, and use this as the base for punitive damages.

This reasoning closely aligns with the judicial interpretation’s inclusion of “litigation conduct” in assessing “serious circumstances”. Refusal to submit accounting records does not reduce liability; on the contrary, it may trigger more adverse presumptions and harsher responsibility assessments. Moreover, this case signals that, from a corporate compliance perspective, continued use of core similar elements after failure of trademark confirmation (invalidity or cancellation) escalates risk from “cessation of infringement + ordinary compensation” to “punitive damages + more severe adverse evidentiary consequences”.
V. Multi-Channel Online and Offline Sales of Infringing Goods: Constructing an Operable Base Using E-Commerce “Listed Price / Sales Volume / Reviews” (Case 5)
This case is based on the “BMW” series trademarks, with infringement concentrated in the field of children’s electric toy cars. The defendant not only used similar marks on products and promotional materials, but also labeled factory promotional images with “BMW” and “Mercedes-Benz officially authorized”, and sold the products simultaneously through multiple e-commerce platforms and offline channels. Even after receiving cease-and-desist letters, the infringer denied infringement and continued sales. The court found malicious infringement of trademark rights with serious circumstances and applied punitive damages.
In determining the base amount where the infringer sold through multiple channels and failed to submit valid sales data, the court held that it could, based on the rights holder’s claims and existing evidence, calculate sales amounts using the listed or sale prices displayed on e-commerce platforms together with the indicated cumulative sales volume or number of reviews, and then multiply by a reasonable profit margin to determine the compensation base. Ultimately, the court applied a twofold punitive damages multiplier and awarded RMB 10 million in economic losses, together with reasonable expenses.
For rights holders, this case provides a clear path for organizing e-commerce evidence. Where infringers “do not submit accounts” or submit “unreliable accounts”, platform page records—such as price, sales or reviews, SKU matrices, and store affiliation relationships—may serve as “available evidence” to construct the base amount. The key lies in standardized evidence preservation (notarization, timestamps, platform evidence tools) and reasonable explanation and adjustment of the distinction between “reviews ≠ sales”. For defendants, failure to provide true and complete sales and cost evidence will incline courts toward estimation methods that are unfavorable yet still reasonable.
VI. Coordinated Application of Punitive and Statutory Damages Within the Same Case: “Precise Punishment” for Ascertainable Portions (Case 6)
This case involves the authorization and enforcement of the “Delta” trademark. The defendant used the terms “Delta” and “Shanghai Delta” on online 1688 store pages and offline materials, and had successor relationships with affiliated entities previously adjudicated by final judgments as constituting unfair competition. The court thus determined that the defendant acted with intent to infringe and under serious circumstances.
In adjudication, the court distinguished between infringing acts with ascertainable online sales amounts and those with unascertainable offline sales data. For the online portion, it determined the punitive damages base using store sales amounts and profit margins of similar products, and applied a threefold multiplier based on subjective fault and circumstances. For the offline and unfair competition portions, it applied statutory damages through comprehensive discretion. The final award amounted to RMB 500,000.Together with Case 3, this case forms a mature Shanghai court paradigm of “multiple methods within the same case” for damage calculation. Punitive damages do not require that all infringing profits be calculated down to the decimal point; rather, they emphasize “severe punishment where ascertainable and statutory determination where not”, thereby ensuring both deterrence and enforceability.
VII. Systematic Infringement Within a Franchise Network: Locking in the Base with Franchise Fees and Extending Joint Liability to Franchisees (Case 7)
This case features the highest compensation amount and the greatest social impact among the ten. Against a background where the defendant had previously been authorized to sell LEGO Education products, with contracts expressly prohibiting misleading use of marks such as “LEGO Activity Center” or “LEGO Education” for unauthorized promotion and enrollment, the defendant nonetheless used “LEGO Education” and “LEGO Courses” as core selling points for franchise招商, building a franchise network of over 200 stores nationwide. The defendant prominently and extensively used “LEGO” and “LEGO Education” marks on official websites, official WeChat accounts, store signage, promotional materials, and staff uniforms. The court found trademark infringement with prominent malice and particularly serious circumstances and consequences.
With respect to infringing profit evidence, the defendant refused to submit key financial account books, bank statements, franchise contracts, and related materials. The court therefore treated franchise fees as the primary manifestation of infringing profits and used them to determine the compensation base, ultimately ordering compensation of RMB 35 million in economic losses. Numerous franchisees were ordered to bear joint and several liability in amounts ranging from over RMB 1 million to several million, with reasonable expenses allocated and joint liability rules specified. The second-instance court upheld the original judgment.This case carries strong compliance warnings for franchise and chain business models. Where headquarters use others’ trademarks as core selling points for business development and systematically output store images and promotional scripts, infringement is not a series of isolated acts but rather organized, large-scale systemic infringement. By using franchise fees as the base, the judiciary captured the true source of profits under this model and avoided evidentiary quagmires at the level of retail turnover across numerous stores. For brand enforcement strategies, focusing on evidence of the headquarters’ business development mode—such as franchise manuals, training materials, contract templates, payment paths, website filings, and unified store materials—often strikes more directly at the core than store-by-store evidence collection.
VIII. Differentiating Infringing Roles and Changes in Subjective States: A Refined Model of “Segmented Calculation + Causation Constraints” in Punitive Damages (Case 8)
This case arose within the textbook publishing chain. A secondary college of a university organized an editorial committee to adapt a copyrighted picture book into a purely textual story of the same name and included it in provincially guided teaching materials, which were published by a publishing house. After rights enforcement, both defendants became aware of the infringement in 2019, yet the textbooks continued to be printed multiple times over the following three years, forming a typical case of “knowing infringement but failing to cease”. The court thus found the “intent” requirement for punitive damages satisfied, with serious circumstances.The adjudicative techniques employed here merit close attention. First, the court distinguished between the adapter at the front end of the infringement chain (the university) and the publisher at the reproduction and distribution stage, selecting calculation methods suited to their respective roles. For the university, because infringing profits were difficult to calculate, the court adopted the rights holder’s actual loss method and adjusted within a reasonable range based on substitution effects across media, avoiding mechanical equivalence between “sales volume of infringing copies × picture book price” and actual losses. Second, although the publisher bore joint liability, its role and infringing profit evidence were relatively clear, allowing the joint portion to be calculated using the infringing profit method. Third, punitive damages were applied only to the “period of intentional infringement”, using the proportion of print runs after awareness of infringement as the segmentation basis, and applying a threefold multiplier to that portion. Fourth, in determining the “contribution rate”, the court rejected using word-count proportion alone and instead increased the rate by considering the originality and value of the work. Ultimately, the court ordered the university to compensate RMB 97,000, with the publisher jointly liable for RMB 20,000, and each bearing reasonable expenses.
From a systemic perspective, this case demonstrates the “internal checks and balances” between punitive damages, proportionality, and causation. Punitive damages are not a simple multiplication, but are based on attributable losses or gains, and are confined within reasonable bounds through segmentation and contribution rate adjustments. This provides guidance for future cases involving cross-media adaptations, textbook and teaching material infringement, and multi-entity participation in publishing and dissemination.
IX. Repeated Similar Infringement by Different Entities: Piercing the Sole Proprietorship Veil to Identify Repeated Infringement and Apply Punitive Damages (Case 9)
Although the monetary amount at issue in this case is not large, its rule significance is substantial. The rights holder’s “Haobaba” trademark is registered for products such as laundry detergent. The defendant sold infringing detergent products on e-commerce platforms under the name of a sole proprietorship. The operator had previously been found liable for trademark infringement by a final judgment for selling infringing products on another platform, and in this instance repeated similar infringement using a newly established sole proprietorship as the vehicle. The court emphasized that it should pierce the “surface liability subject” of the sole proprietorship, identify the actual controller and intent to evade liability, and apply punitive damages based on subjective malice in repeated infringement and market confusion consequences, ultimately awarding RMB 40,000.
This adjudicative approach is fully aligned in value orientation with the judicial interpretation’s rules that “continued infringement after notice or warning may preliminarily establish intent” and that “the number of infringements, duration, consequences, and litigation conduct” should be considered in determining serious circumstances. It directly targets governance of “shell-switching” and “store-reopening” behaviors on e-commerce platforms, indicating that where infringement shows clear repetitiveness and evasiveness, courts may apply punitive damages even where single-case losses are modest, to correct behavior.
X. Authorized Distributors Infringing the Brand Owner in Reverse: Establishing Intent Through “Access to the IP” and Combining “Partially Ascertainable Base + Statutory Damages” (Case 10)
This case arose in the ceramic tile manufacturing and sales industry. The graphic trademark at issue was registered by a third party, after which the plaintiff obtained exclusive licensing rights and built significant market recognition through long-term operation. The defendant company had previously been an authorized distributor of both the trademark owner and the plaintiff, selling “Roma Tiles” products for an extended period. After its legal representative established an overseas company and registered a similar trademark, the defendant reversed course and authorized itself to use similar marks on tile packaging and招商 promotion. The court held that, as an authorized distributor, the defendant knowingly infringed despite awareness of the registered trademark and authorization relationship, constituting malice through “access to the infringed intellectual property”, thus satisfying the subjective intent requirement.
In calculating damages, the court preliminarily calculated the rights holder’s losses using the quantity of seized infringing goods, industry profit margins, and trademark contribution rates, and used the ascertained portion as the punitive damages base. For other batches of goods and losses from promotional infringement that were difficult to ascertain, statutory damages were separately determined. The final award included over RMB 740,000 in economic losses and over RMB 64,000 in reasonable expenses, with the second-instance court affirming.
For brand owners, this case highlights the non-negligible risk of “channel backlash”. Distributors are most familiar with brand assets and identifiers and best understand how to mislead the market “in a way that looks genuine”. Once they turn to infringement, subjective intent is often more readily established, and compensation consequences more severe. From an evidentiary perspective, “quantifiable infringing goods value” generated through administrative seizure or evidence preservation often serves as the key lever to shift a case from statutory damages into the punitive damage framework.
Conclusion
Taken together, the ten cases show that Shanghai courts’ application of punitive damages is not a simple pursuit of high compensation, but rather a stable methodology centered on three key concepts:
First, constructing findings of “intent/malice” through evidentiary fact chains such as “access + warning + reuse after invalidation + failure to rectify after settlement and even expansion + repeated infringement + evasion of liability”;
Second, extensively employing operable base-determination models such as “transaction amount × profit margin”, “operating revenue × net profit margin × contribution rate × period”, “revenue × industry gross margin × trademark contribution rate”, “franchise fees”, and “e-commerce listed price / sales or reviews”, while offsetting evidentiary asymmetry through adverse inferences triggered by refusal to submit accounts;
Third, in cases involving multiple acts, multiple entities, or cross-media contexts, confining punitive damages within ranges matching attributable harm through refined discretion such as “same-case coordination”, “segmented calculation”, “role differentiation”, and “causation-based constraints on contribution rates and substitution effects”, thereby achieving both punishment and deterrence while maintaining the acceptability and enforceability of judgments.