InsummaryDamagesawardsarekeyissuesthatrightholderscareabout,especiallyafterChinesecourtshaveimplementedpunitivedamagessince2013.Recently,therehavebeensomemajorcasesinChinathathavegrantedaveryhighnumberofdamagesawards.ThisarticlemainlyintroducessometypicalcasesinthepastyearandtheChineselawsandregulationsondamagesawardsandpunitivedamages,whicharehelpfulforrightsholderstocollectevidenceandclaimpunitivedamagesinatrademarkinfringementcivillawsuit.DiscussionpointsRecenttrademarkinfringementcasesinChinawithhighdamagesawardsMethodsofcalculatingbenefitsobtainedbytheinfringersintrademarkinfringementcasesConsiderationsofChinesecourtsondamagesawardsApplicationofpunitivedamagesEvidencecollectiontoprovedamagesinpracticeReferencedinthisarticleChineseTrademarkLawSupremePeople'sCourtInterpretationontheApplicationofPunitiveDamagesinCivilCasesofIntellectualPropertyInfringementSupremePeople'sCourtProvisionsonSeveralIssuesConcerningEvidenceinCivilLitigationofIntellectualPropertyRightsChateauLafitePanPanSiemensArticle63oftheChineseTrademarkLawstipulatesthefollowingwaystocalculatedamages:theactuallossessufferedbytherightsholder,thebenefitsgainedbytheinfringersduetotheinfringementandareasonablemultipleofthetrademarklicensingfee.Theabovecalculationmethodsshouldbeappliedinorderandaresubjecttofivetimesofpunitivedamagesatmostiftheinfringementissevereandofbadfaith.Ifallmethodsarenotabletodeterminethedamages,thecourtshallawardcompensationbydiscretionintherangeofunder5millionyuan(statutorydamages).[1]Inpractice,statutorydamagesaremostlyapplied.After2019,punitivedamageshaveincreasinglybeenappliedbythecourts.Whencalculatingdamages,themostcommonlyapplicablemethodiscalculatingthebenefitsgainedbytheinfringers.Inthepastyear,therewereseveralhighdamagesawardscasesinChina,andtheyapplieddifferentmethodstocalculatethedamagesamounts,whichdemonstratesthecurrentjudicialtrendtowardspunishinganddeterringinfringers.Belowarethreetypicalcases,whichwerelistedinthenationaltop10ofintellectualpropertycasesorthelocaltop10ofintellectualpropertycases.ChateauLafitecaseTheplaintiffwasthetrademarkholderof‘LAFITE’and‘CHATEAULAFITEROTHSCHILD’forwine.[2]Theinfringersregisteredandusedthetrademarks‘CHATEAULAFITEinChinese’and‘LAFEIMANOR’forwine.TheCourtdecidedthatbothmarksweresimilartotheplaintiff’smarksandsuchuseconstitutedtrademarkinfringement.Asforthedamagesawards,theplaintiffclaimedtocalculatethembasedonthebenefitsgainedbytheinfringers,namely,salesvolumetimesprofitrate,andclaimedpunitivedamages.TheCourtthoroughlyexaminedalltheevidencesubmittedbyeachpartyandmadethefollowingcalculation.First,basedonthesalesinvoicesandcustomsdeclarationformsofimportingwine,theCourtcalculatedthewholesalesvolumeoftheinfringinggoods.Second,theCourtneededtocalculatetheprofitratebycomparingtheinfringinggoods’sellingpriceandcostprice.Astheinfringinggoodsweresoldindifferentunits,suchasbottle,boxandset,etc,theCourtdecidedtocalculatethesameperbottle,whichistheminimumsellingunit,bydividingthewholesalesvolumeandnumberofsoldbottlesextractedfrominvoices.ThecostpriceofinfringinggoodswascalculatedbasedonthecustomsdeclarationformsasthewinewasimportedtoChina.Pursuanttothepriceofeachlitreofimportedwineandthefactthateachbottleofwinecontains0.75litre,theCourtwasabletocalculatethecostpriceperbottle.Therefore,theprofitrateequalledto:(Sellingpriceperbottle–costpriceperbottle)SellingpriceperbottleThebenefitstheinfringersgainedcouldthenbecalculatedaccordingly.Finally,asfortheclaimofpunitivedamages,theCourtconsideredthehighreputationofLAFITE,theextensivesalesscalesoftheinfringersandthemisleadingadvertisingoftakingafreerideonLAFITE’sreputation,andgrantedtwotimesthepunitivedamages.PanPancaseTheplaintiffwasthetrademarkholderof‘PanPan’,whichisareputablebrandofsecuritydoorsinChina,anditshouselogoisapanda.[3]Theinfringersregisteredacompanywiththetradename‘XinPanPan’engaginginthesamebusinessofconstructionmaterials,includingsecuritydoorsandwindows.Theinfringersalsoprominentlyused‘XinPanPan’asatrademarkextensively,includinginthedomainname,website,WeChataccount,app,advertisingbrochuresandofflineshops.TheCourtdecidedthatbothparties’marksweresimilarandwereusedonsimilargoods.Theinfringers’behavioureasilycausedconfusionandconstitutedtrademarkinfringement.Inthiscase,theplaintiffwasnotabletocollecttheinfringers’salesdata,andtheinfringersstatedtherewerenoproperfinancialdocumentstocalculatetheirprofitsduringtheinfringingperiod(2017–2019).Underthiscircumstance,althoughtheevidencesubmittedbytheplaintiffwasnotverysufficientoraccurate,itcouldbeusedasvalidevidenceoftheinfringers’profits.Theevidencesubmittedbytheplaintiffmainlyincludedadvertisingmaterialin2018inwhichtheinfringersdeclaredtheywouldreachonebillionyuaninproductionvalueanda50percentgrowthrateperyearinthenextfiveyears.Basedontheaforesaidstatistics,theCourtwasabletofigureoutthetotalsalesvolumefrom2017to2019tobe361millionyuan.Asfortheprofitrate,theCourtadoptedanationalaverageprofitrateof7.5percentinthefurnituremanufacturingindustryin2017.Therefore,theprofitgainedfromtheinfringementwas27.075millionyuan(361times7.5percent).TheCourtgrantedfourtimesthepunitivedamagesinthiscase,duetothefollowingconsiderations:thelegalrepresentativeoftheinfringershadbusinessrelationshipwiththeplaintiffandshouldhaveknownabout‘PanPan’trademark;theinfringersnotonlyplagiarisedthe‘PanPan’mark,butalsousedasimilarpandalogo;theinfringerssometimesomittedthe‘Xin’characteranddirectlyused‘PanPan’;evenafterthe‘XinPanPan’markwasinvalidated,theinfringersstillcontinuedtheinfringement;andtheinfringers’businessexpandedto12provincesand180distributorsandnearly100offlineshops.Thedamagesawardsweredeterminedtobe108.3millionyuan(27.075times4)andmorethantheplaintiff’sclaimof95millionyuan.Therefore,theplaintiff’sclaimwasfullysupportedbythecourt.SiemenscaseSiemensisafamousbrandofhouseholdelectricappliance.Theinfringersused‘ShanghaiSiemensElectricsCo,Ltd’(ashellcompanyregisteredinSeychelles)onitswashingmachines.TheCourtdecidedtheabovecompanynamewasusedasatrademarkwiththefunctionofidentifyingthesourceand‘Siemens’wasthedistinctivepart,whichwasidenticalwiththeplaintiff’smark.Suchbehaviourconstitutedtrademarkinfringementandtheuseof‘Siemens’astradenameconstitutedunfaircompetition.[4]Theplaintiffclaimeddamagesawardsof100millionyuanbasedontheinfringers’benefitsduetotheinfringement.[5]However,theplaintifffailedtosubmitfinancialinformationoftheinfringerstoprovethis.TheCourtdemandedtheinfringerssubmittheiraccountbookstoascertainthefacts,buttheinfringersdidnotcooperate.TheCourtthusconsideredthefollowingpointstodeterminethedamages:SiemenswasanenterpriseintheFortuneGlobal500anditstrademarkhadacquiredahighreputation.TheinfringersobviouslyactedinbadfaithastheyshouldhaveknownaboutSiemens,andtheyalsoplagiarisedotherbrands,suchasPhilipsandAOSmith.Thescaleofinfringementwasextensive,consideringtheplaintiffdiscoveredinfringingwashingmachinesinmanyprovinces,andtheinfringersclaimedtohavemorethan1500distributors,withsalesvolumesof1.5billionyuanperyear,andtheirbusinesslastedforaroundfiveyears.Referringtotheannualreportsofotherpeeroperatorsintheindustryofwashingmachines,theCourtadmittedanaverageprofitrateof35percent.Outofthetotalsalesvolumeof1.5billionyuanforallwashingmachines,theCourtdecided1/15ofthemwerebrandedwithaninfringingmarkbydiscretion.Hence,theinfringers’benefitswouldbe1.5billiontimes1/15times35%times5,namely,175millionyuan,whichwasbeyondtheplaintiff’sclaim.Basedontheabove,theplaintiff’sclaimof100millionyuanshouldbefullysupported.CalculationofbenefitsobtainedbyinfringersDamagesawardsareanimportantpartofincreasingthedeterrenceofcivilaction.Ifinfringerscouldmakemoreprofitsthandamagesawards,civilactionwouldcertainlynotbeabletostopinfringement.Ontheotherhand,ChineselawsfollowthePrincipleofIndemnitythatdamagesawardsshouldcovertherightholders’lossesbutshouldnotbemore,topreventmaliciouslawsuits.Inpractice,ithasalwaysbeenachallengeforrightholderstocollectsufficientevidencetoaccuratelycalculateinfringers’benefits,andthecourtisusuallyinclinedtodecidedamagesawardsbydiscretion,whichiseasierwithoutmanycalculations.Theabovethreecasessharethefollowingcommonpointsthatallowthecourttodetermineveryhighdamagesawards:therightholdershadsomebasicevidencetoprovetheinfringers’benefits,suchasinvoices,customsdeclarationforms,statementsfromtheinfringersinsomeadvertisingmaterials;andthebenefitswereclearlymuchmorethanthestatutoryamount(5millionyuan).Undersuchcircumstances,itwouldbeunconscionabletodecidethedamagesawardsundertherangeof5millionyuan.Thereisanotherproductivewayforrightholderstoclaimdamagesbyrequiringinfringerstoprovidefinancialstatistics.TheChineseTrademarkLawstipulatesthat:Inordertodeterminetheamountofdamages,whentherightholdershavemadeeveryefforttoprovideevidence,andtheaccountbooksandmaterialsrelatedtotheinfringementaremainlyinthepossessionoftheinfringers,thecourtmayordertheinfringerstoprovidesuchaccountbooksandmaterialsrelatedtotheinfringement;iftheinfringersdonotprovidethesameorprovidefalseaccountsandmaterials,thecourtmayrefertotherightsholders’claimsandprovidedevidencetodeterminetheamountofdamages.[6]Furthermore,theSupremePeople'sCourtProvisionsonSeveralIssuesConcerningEvidenceinCivilLitigationofIntellectualPropertyRightsstipulatesthat:Thecourt,inaccordancewiththelaw,requiresthepartiestosubmitrelevantevidence.Ifapartyrefusestosubmitwithoutjustifiablereasons,submitsfalseevidence,destroysevidence,orengagesinotheractsthatrendertheevidenceunusable,thecourtmaypresumethattheclaimsoftheotherpartyconcerningthematterstobeprovedbysuchevidenceareestablished.[7]TheabovelawsandregulationsbasicallyformthesystemofproofimpairmentinChinaandareveryhelpfulforrightholderstoreducetheirliabilityofproof.Withtheabovesupport,therightholdersfirstcollectsomebasicevidenceoftheinfringers’profits,suchas:salesdatadisplayedone-commerceplatforms;theinfringers’self-admissionatsomeeventorinadvertisingmaterials(especiallyTikTokvideosandLittleRedBookposts);andtheaveragerateofprofitintheindustry.Basedonthisevidence,therightholdersfurtherfilearequestwiththecourtforaccountbooksandmaterialsrelatedtotheinfringementfromtheinfringers.Iftheinfringersdonotcooperatewiththecourt’sorder,theyshallbearthenegativeconsequences,andtherightholders’evidenceandcalculationswillbeverylikelytobeadmittedbythecourt.PunitivedamagesPunitivedamagesarearelativelynewsysteminChina.[8]Theyarepredicatedontheplaintiff'srequest,andthecourtmustnotapplypunitivedamagesonitsowninitiative.Punitivedamagesmustbeclaimedbeforetheconclusionofthecourtdebateinthefirstinstance.Applyingpunitivedamagesrequirestwopreconditions:theinfringementissevereandinbadfaith(intentional).TheSupremePeople'sCourtInterpretationontheApplicationofPunitiveDamagesinCivilCasesofIntellectualPropertyInfringement(theJudicialInterpretationonPunitiveDamages)explainsindetailtheapplicationofpunitivedamages.In‘severe’cases,theJudicialInterpretationonPunitiveDamagesliststhefollowingconditions:committingthesameorasimilarinfringementagainafterbeingadministrativelypenalisedoradjudicatedbythecourtforinfringement,theinfringeragaincommitsthesameorasimilarinfringement;engagingintheinfringementofintellectualpropertyrightsasabusiness;abricating,destroyingorconcealingevidenceoftheinfringement;refusingtocomplywithpreservationrulings;theprofitsobtainedfromtheinfringementorlossessufferedbytherightholderaresubstantial;theinfringementmayendangernationalsecurity,publicinterestorpersonalhealth;andothercircumstancesthatcanbedeterminedassevere.[9]Inbadfaithcases,theJudicialInterpretationonPunitiveDamagesliststhefollowingconditions:theinfringercontinuestocommittheinfringementafterbeingnotifiedorwarnedbytherightholderoraninterestedparty;theinfringeroritslegalrepresentativeoradministratoristhelegalrepresentative,administratororactualcontrolleroftherightholderoraninterestedparty;thereexistsalabour,service,cooperation,licensing,distribution,agency,representationorothersuchrelationshipbetweentheinfringerandtherightholderoraninterestedparty,andtheinfringerhashadaccesstotheinfringedintellectualproperty;therehavebeenbusinessdealingsornegotiationsforthepurposeofreachingacontractbetweentheinfringerandtherightholderoraninterestedparty,andtheinfringerhashadaccesstotheinfringedintellectualproperty;theinfringerengagesinpiracyorcounterfeitingregisteredtrademarks;andothercircumstancesthatcanbedeemedasbadfaithorintentional.[10]Ifatrademarkinfringementcasemeetstheaboverequirements,thenpunitivedamagescanbeconsidered.Thepunitivedamagesarecalculatedbybasenumbertimesamultiple.Asmentionedabove,thebasenumbershouldbedeterminedbytheactuallossessufferedbytherightholder,thebenefitsgainedbytheinfringerduetotheinfringementandareasonablemultipleofthelicensingfeeforthetrademark.Asforthemultiple,theJudicialInterpretationonPunitiveDamagesstipulatesthefactorstoconsider,namely,thedegreeoftheinfringers’subjectivefaultandtheseverityoftheinfringementact,etc.[11]Theseconsiderationsarequitegeneral,soinpracticethemultipleismainlydecideddiscretionarilybythecourt,andthemultipledoesnothavetobeaninteger,accordingtotheunderstandingandapplicationoftheJudicialInterpretationonPunitiveDamages.[12]Technically,punitivedamagesonlyapplywhenthedamagescanbecalculatedbytheactuallossessufferedbytherightholder,thebenefitsobtainedbytheinfringerduetotheinfringementorthemultipleofthelicensingfeeforthetrademark.Ifthecourtappliesstatutorydamages,punitivedamagesshouldnotbeadopted.Thisismainlybecauseoftheconsiderationthatwhenthecourtdecidestheamountofstatutorydamageswithinthe5millionyuanlimit,itshouldhaveconsideredthefactorsofthereputationoftherightholder,theseverityoftheinfringementandthebadfaithoftheinfringer,etc,whichalreadyincludethefactorsofpunitivedamages.Inthepastfewyears,therehavebeensomecasesthatadoptpunitivedamagesandstatutorydamagesatthesametime.Thatistosay,forthedamagesthatcanbecalculatedandascertained(withevidencesuchassalesdata),thecourtcalculatesthesameandrulespunitivedamagesaccordingly;forthedamagesthatcannotbeaccuratelycalculated(withoutsufficientevidence),thecourtdecidestheamountatitsdiscretion.Thefinaldamagesawardswillbethesumoftheabovetwoparts.[13]Thismainlyhappenswhentheinfringementissevere,andeachpartofdamagesalonemaynotbeabletocovertherightholders’lossesortodetertheinfringers.Thisisanewandmeaningfulexplorationofthedamagesawardssystemthatcanhelptherightholderstoreducetheirburdenproofandbetterdefendtheirinterests.Asweknow,itischallengingforrightholderstohavetheexactfinancialinformationoftheinfringers,especiallyconsideringthatmanyinfringersinChinaarerathersmall-scale,withnostandardisedfinancialmanagement.Therefore,withthisnewtendency,punitivedamagescanbeusedmoreoftenandplayamoreimportantroleinfuturetrademarkinfringementcases.Currently,theexaminationcriteriaofdamagesawardsandpunitivedamagesstillvariesindifferentprovincesandcourtsinChina,especiallywhentheevidenceisinsufficienttocalculatethedamagesfrominfringers’benefitsaccurately.Somecourtssticktothestatutorydamagesandhaveahighstandardforevidence,somearemoreopentodiscretionarydamagesandarewillingtoapplypunitivedamageswhenthereisonlybasicevidence.Forrightsholders,itisadvisabletoarrangeathoroughinvestigationagainsttheinfringersbeforeinitiatingthelawsuitandtrytoestablishjurisdictioninthemoreopencourts.Herearetwoinsightsfortherightholdersindefendingtheirrightsthroughtheabovethreetypicalcasesandthejudicialinterpretationonpunitivedamages:Theyshouldactivelydefendtheirrights,suchasfilingoppositionsorinvalidationsagainstmalicioustrademarks,orsendingdemandletterstoinfringers,becausethesemeasurescanleadtotheinfringers’activitiesbeingconsideredrepeatedinfringements,whichcanthenbesubjecttopunitivedamages.Theyshouldfullyutilisesalesdatadisclosedbyinfringersthroughtheirwebsiteandotherpublicchannelstoproveinfringers’profits.[1]Article63oftheChineseTrademarkLaw.[2]Oneofthenationaltop10intellectualpropertycasesinChinain2023,[2022]ZuiGaoFaMinZhongNo.313.[3]Oneofthetop10intellectualpropertycasesinJiangsuProvincein2023,[2022]ZuiGaoFaMinZhongNo.209.[4]Oneofthenationaltop10intellectualpropertycasesinChinain2023,[2022]ZuiGaoFaMinZhongNo.312.[5]Theplaintiffclaimeddamagesbasedonunfaircompetition,notthetrademarkinfringement.Butconsideringthespiritoftrademarklawandanti-unfaircompetitionlawondamagesawardsisthesame,andthiscaseisratherrepresentative,itisincludedinthearticle.[6]Article63ofChineseTrademarkLaw.[7]Article25oftheSupremePeople'sCourtProvisionsonSeveralIssuesConcerningEvidenceinCivilLitigationofIntellectualPropertyRights.[8]PunitivedamageswereincludedinChineseTrademarkLawin2013whenthemultiplewasthreetimesatmost.In2019,theChineseTrademarkLawwasamended,andthemultiplewasraiseduptofivetimes.In2021,punitivedamageswereaddedintoCivilCode.[9]Article4oftheJudicialInterpretationonPunitiveDamages.[10]Article3oftheJudicialInterpretationonPunitiveDamages.[11]Article6oftheJudicialInterpretationonPunitiveDamages.[12]https://www.court.gov.cn/zixun/xiangqing/297121.html.[13][2022]Hu73MinZhongNo.187.[2020]Yue0104MinChuNo.46217.