Sunday, 16 August 2026
China’s Supreme People’s Court has introduced revised judicial guidance on the application of punitive damages in intellectual property infringement disputes, signalling a continued effort to strengthen protection for rights holders and tighten enforcement against repeat or deliberate infringers.
The new judicial interpretation, issued on 20 April 2026 and effective from 1 May 2026, replaces the previous framework introduced in 2021. The updated rules are intended to clarify how courts should handle claims for punitive damages in civil intellectual property disputes and to provide more consistent standards for determining compensation.
According to figures released by the Supreme People’s Court, Chinese courts concluded 1,471 intellectual property cases involving punitive damages between 2021 and 2025. Punitive damages were ultimately awarded in 505 of those cases, with total compensation reaching approximately RMB 1.8 billion in 2025 alone. Authorities said the revised interpretation reflects the growing use of the mechanism and the need to address new forms of infringement.
One of the main procedural changes concerns the timing of punitive damages claims. Under the revised rules, rights holders are generally expected to raise such claims before the end of first-instance oral proceedings. Claims introduced for the first time during appeal proceedings may only proceed through mediation if both parties agree. If mediation fails, courts are instructed to reject the request, and the claimant will not be allowed to file a separate lawsuit based on the same infringement.
The interpretation also narrows the application of punitive damages in unfair competition cases. Courts clarified that punitive damages remain available primarily in trade secret infringement disputes and do not generally apply to other unfair competition matters such as misleading advertising, commercial defamation or acts causing market confusion unless separate legislation specifically provides for it.
The revised framework further expands the circumstances in which courts may determine that infringement was intentional. In addition to previously recognised scenarios such as continued infringement after warnings or cases involving counterfeiting, the interpretation now includes situations where parties resume infringing activity after reaching settlement agreements with rights holders. Courts may also consider attempts to avoid liability through affiliated companies, nominee structures or changes in legal representatives as evidence of intentional misconduct.
Chinese courts were also given more detailed guidance on assessing whether infringement reaches the threshold of “serious circumstances”, a key condition for punitive damages. The new rules specify that infringers who derive most of their income from unlawful activities or effectively operate infringement as their principal business activity should automatically meet the seriousness requirement.
The interpretation additionally refines how damages are calculated. Courts are instructed to base punitive damages on actual losses, illegal gains or profits generated through infringement. Statutory damages may no longer serve as the calculation basis for punitive awards, reflecting an effort to distinguish punitive compensation from standard judicial compensation mechanisms.
In cases where infringement forms part of a company’s primary business activity, courts may use gross profit rather than operating profit as the basis for calculation, potentially increasing the level of compensation awarded.
Another notable revision concerns the multiplier applied to punitive damages. Chinese courts are no longer restricted to whole-number multiples and may apply more flexible calculations depending on the severity of the conduct and the level of fault involved. However, the total award remains capped at five times the calculation base, excluding reasonable enforcement expenses such as legal and notarisation costs.
The Supreme People’s Court said the revised interpretation is intended to improve consistency in judicial practice while strengthening deterrence against deliberate intellectual property violations. Legal observers expect the changes to increase pressure on businesses operating in China to strengthen compliance procedures and manage intellectual property risks more carefully.
Source: CMS
