China Punitive Damages in IP and Product Cases: When Courts Multiply the Award

Introduction

Punitive damages are no longer a foreign idea in Chinese litigation. Over the past decade the legislature has added them, statute by statute, to the IP field and to product liability, and courts now regularly multiply awards against deliberate infringers. The system is formulaic, not discretionary: a base amount, a fault requirement, and a multiplier capped by statute. For a rights holder or a defendant, the first question is always the same — which statute applies, and what does it require.

The Five Statutory Bases You Need to Know

• Civil Code, Article 1185 — for intentional (故意) infringement of intellectual property rights, the injured party may claim punitive damages where the circumstances are serious;
• Trademark Law, Article 63(1) — for infringement in bad faith (恶意) with serious circumstances, punitive damages of one to five times the base amount;
• Patent Law, Article 71(1) — for intentional infringement with serious circumstances, punitive damages of one to five times;
• Copyright Law, Article 54(1) — for intentional infringement with serious circumstances, punitive damages of one to five times;
• Civil Code, Article 1207 — for knowingly producing or selling a product with a defect that causes death or serious harm to health, the injured party may claim corresponding punitive damages — the product-liability counterpart.

What a Court Actually Requires

The statutes share a two-part test. First, the fault element: the infringement must be intentional (or, in trademark, in bad faith) — negligence is not enough. Second, the gravity element: the circumstances must be serious, which courts measure by factors such as the infringer's knowledge, the scale and duration of the infringement, repeat conduct, and the harm caused. A plaintiff who proves infringement but not intent walks away with compensatory damages only. Courts also require the base amount — the actual loss, the infringer's profits, or a licensable royalty — to be established before any multiplier is applied.

The 2025 Trade-Secret Change

The Anti-Unfair Competition Law was revised in 2025, effective 15 October 2025. Under the revised law, punitive damages for trade-secret misappropriation sit in Article 22(3), and they apply only where the infringement was intentional and the circumstances serious. A drafting point that matters: the provision is confined to trade secrets — it does not sweep in other unfair-competition acts by way of an open-ended "and the like". Anyone drafting a claim or a defence should cite the 2025 text, not the pre-revision numbering.

The Multiplier Rules Under the SPC Interpretation

The mechanics are governed by the Supreme People's Court's interpretation on punitive damages in IP cases. The operative document is now 法释〔2026〕7号, effective 1 May 2026, which replaced the earlier 法释〔2021〕4号. Two of its rules decide most outcomes:

• Statutory damages cannot be the base. Under Article 9, the base for the multiplier must be the actual loss, the infringer's profits, or a royalty — a court cannot take a statutory-damages figure and multiply it;
• The total award is capped. Under Article 12, the final award — base plus punitive amount — may not exceed five times the base.

A Practical Playbook

1. Identify the correct statute and its fault standard — intent (or bad faith in trademark), not negligence.
2. Build the base first. The multiplier only operates on an established loss, profit or royalty; evidence the base as carefully as the fault.
3. Plead and prove "serious circumstances" with concrete evidence — scale, duration, repeat conduct, harm.
4. For trade secrets, cite the 2025 law and note that Article 22(3) is confined to trade secrets.
5. Check the operative interpretation. Apply 法释〔2026〕7号 — statutory damages as base are out, and the five-times cap is in.

For how infringement claims are run in practice, see China IP Litigation for Foreign Companies, and for the trademark side, China Trademark Squatting and Bad-Faith Filings. This summary reflects the position as of the date of writing; confirm the operative texts before filing.

How Tianni Law Firm Can Help

Tianni Law Firm (江苏天倪律师事务所), based in Nanjing, Jiangsu, advises rights holders and defendants on IP and product disputes in China. Our work includes infringement and unfair-competition litigation, trade-secret misappropriation, damage quantification, and the strategic use — or defence — of punitive-damages claims.