China’s Supreme People’s Court Issues Judicial Interpretation on Punitive Damages in Intellectual Property Civil Cases
Published 21 April 2026
Yu Du
On 20 April 2026, the Supreme People’s Court (SPC) issued 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 will take effect on 1 May 2026.
This new interpretation builds upon the 2021 version and responds to developments in judicial practice over recent years. As the use of punitive damages in intellectual property cases has increased, courts have encountered practical challenges, particularly in determining intent, assessing the seriousness of infringement, and calculating damages.
The 2026 Interpretation aims to address these issues by refining legal standards, improving consistency in adjudication, and enhancing the deterrent effect of punitive damages. It provides clearer guidance for both courts and litigants, while also helping shape more predictable expectations for market participants.
Key Highlights of the New Interpretation
1. Refined standards for “intent” and “serious circumstances”
The Interpretation provides more concrete guidance on identifying intentional infringement and “serious circumstances.”
Under Article 6, courts may infer intent in several newly clarified situations, including where the defendant resumes the same or similar infringing conduct after reaching a settlement and agreeing to cease infringement. Other indicative factors include prior notice, business relationships giving access to the IP, and acts such as counterfeiting or piracy.
Article 7 further elaborates on “serious circumstances”, requiring courts to consider factors such as duration, scale, and consequences of infringement. It also explicitly includes scenarios such as repeat infringement after administrative or judicial penalties, refusal to comply with preservation orders, and engaging in infringement as a business (i.e., using infringement as a primary source of revenue).
2. Clearer methodology for determining the calculation base
Article 8 confirms that the base should be calculated based on the right holder’s actual losses, the infringer’s illegal gains, or the benefits obtained from infringement, and explicitly excludes reasonable enforcement costs. It also makes clear that statutory damages cannot serve as the calculation base.
Article 9 further specifies that, where illegal gains or infringement profits are used, courts may refer to operating profit, or sales profit where infringement constitutes the defendant’s main business activity. If profit margins cannot be determined, courts may rely on industry averages or the right holder’s profit margin.
Article 10 strengthens evidentiary rules by allowing courts to shift the burden of proof where defendants refuse to provide or falsify financial records, enabling courts to determine the base amount based on the plaintiff’s claims and available evidence.
3. More structured and proportional approach to the multiplier
Article 11 provides that the multiplier should be determined within the statutory range based on factors such as the degree of fault and the severity of the infringement, and confirms that it need not be an integer.
Article 12 caps the total punitive damages at up to five times the calculated base, with reasonable enforcement costs awarded separately.
Article 13 introduces an important proportionality mechanism: where the defendant has already been subject to administrative fines or criminal penalties for the same act of infringement and has fulfilled those penalties, courts must take this into account when determining the multiplier, even without a request from the parties.
Comment
This Interpretation makes the existing framework more workable in practice. The main issue with punitive damages has long been uncertainty—how to prove intent, define “serious” conduct, and calculate reliable figures. By clarifying these points, the SPC signals that punitive damages should be applied consistently and in a practical way. For rights holders, this brings stronger and more predictable protection.
This new interpretation builds upon the 2021 version and responds to developments in judicial practice over recent years. As the use of punitive damages in intellectual property cases has increased, courts have encountered practical challenges, particularly in determining intent, assessing the seriousness of infringement, and calculating damages.
The 2026 Interpretation aims to address these issues by refining legal standards, improving consistency in adjudication, and enhancing the deterrent effect of punitive damages. It provides clearer guidance for both courts and litigants, while also helping shape more predictable expectations for market participants.
Key Highlights of the New Interpretation
1. Refined standards for “intent” and “serious circumstances”
The Interpretation provides more concrete guidance on identifying intentional infringement and “serious circumstances.”
Under Article 6, courts may infer intent in several newly clarified situations, including where the defendant resumes the same or similar infringing conduct after reaching a settlement and agreeing to cease infringement. Other indicative factors include prior notice, business relationships giving access to the IP, and acts such as counterfeiting or piracy.
Article 7 further elaborates on “serious circumstances”, requiring courts to consider factors such as duration, scale, and consequences of infringement. It also explicitly includes scenarios such as repeat infringement after administrative or judicial penalties, refusal to comply with preservation orders, and engaging in infringement as a business (i.e., using infringement as a primary source of revenue).
2. Clearer methodology for determining the calculation base
Article 8 confirms that the base should be calculated based on the right holder’s actual losses, the infringer’s illegal gains, or the benefits obtained from infringement, and explicitly excludes reasonable enforcement costs. It also makes clear that statutory damages cannot serve as the calculation base.
Article 9 further specifies that, where illegal gains or infringement profits are used, courts may refer to operating profit, or sales profit where infringement constitutes the defendant’s main business activity. If profit margins cannot be determined, courts may rely on industry averages or the right holder’s profit margin.
Article 10 strengthens evidentiary rules by allowing courts to shift the burden of proof where defendants refuse to provide or falsify financial records, enabling courts to determine the base amount based on the plaintiff’s claims and available evidence.
3. More structured and proportional approach to the multiplier
Article 11 provides that the multiplier should be determined within the statutory range based on factors such as the degree of fault and the severity of the infringement, and confirms that it need not be an integer.
Article 12 caps the total punitive damages at up to five times the calculated base, with reasonable enforcement costs awarded separately.
Article 13 introduces an important proportionality mechanism: where the defendant has already been subject to administrative fines or criminal penalties for the same act of infringement and has fulfilled those penalties, courts must take this into account when determining the multiplier, even without a request from the parties.
Comment
This Interpretation makes the existing framework more workable in practice. The main issue with punitive damages has long been uncertainty—how to prove intent, define “serious” conduct, and calculate reliable figures. By clarifying these points, the SPC signals that punitive damages should be applied consistently and in a practical way. For rights holders, this brings stronger and more predictable protection.