China’s Supreme People’s Court (“SPC”) has issued a new judicial interpretation on the application of punitive damages in civil intellectual property disputes: Fa Shi [2026] No. 7, the Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Civil Disputes Involving Infringement of Intellectual Property Rights. The interpretation was adopted on April 7, 2026, will take effect on May 1, 2026, and will simultaneously repeal the SPC’s 2021 interpretation on the same subject.
The new interpretation is intended to strengthen judicial protection for intellectual property rights and to ensure stricter and more consistent application of China’s punitive damages regime against intentional and serious IP infringement. It is grounded in the Civil Code, the Copyright Law, the Trademark Law, the Patent Law, the Anti-Unfair Competition Law, the Seed Law, and the Civil Procedure Law.
A plaintiff seeking punitive damages must clearly state the specific amount claimed, the method of calculation, and the supporting facts and reasons. If the plaintiff adds the punitive damages claim before the close of debate in the first-instance trial, the court must allow it. If such a claim is first raised on appeal, the appellate court may mediate on a voluntary basis, but if mediation fails, the new claim will generally not be supported.
The interpretation also closes the door on claim-splitting. Where a plaintiff sought damages in the original IP infringement action but did not claim punitive damages, and still failed to do so after the court’s clarification, the plaintiff may not later file a separate lawsuit based on the same infringing conduct solely to seek punitive damages.
The interpretation provides that, except where the law otherwise specifically provides, punitive damages are not available for unfair competition claims other than trade secret infringement. This confirms that punitive damages in unfair competition matters remain relatively narrow in scope.
The SPC gives courts a more concrete framework for determining whether infringement was intentional. Courts are instructed to consider factors such as the type of IP right involved, its legal status and market reputation, and the relationship between the parties.
The interpretation further lists a number of circumstances under which intent may be found, unless rebutted by contrary evidence. These include, for example:
The interpretation also elaborates on what constitutes “serious circumstances,” requiring courts to consider the means, frequency, duration, geographic scope, scale, consequences, and the defendant’s attitude toward the infringement.
In addition, certain situations must be treated as serious, including:
The interpretation emphasizes that punitive damages must be calculated based on one of the legally recognized bases: the plaintiff’s actual losses, the defendant’s illegal gains, or the benefits obtained from the infringement. Reasonable expenses incurred by the right holder to stop the infringement are excluded from that base and are calculated separately.
Where these figures are difficult to determine, the court may reasonably determine the base by reference to a licensing fee. Importantly, the SPC expressly states that statutory damages may not serve as the calculation base for punitive damages, which is one of the interpretation’s most important clarifications.
Where illegal gains or infringing profits are used as the base, courts may refer to operating profit. If the defendant is essentially in the business of IP infringement, courts may instead refer to sales profit. If the profit margin cannot be determined, courts may rely on average profit margins published by statistical authorities or industry associations, or on the right holder’s own profit margin.
The interpretation also strengthens adverse evidentiary consequences for non-cooperative defendants. If the court orders the defendant to produce account books or other materials relating to the infringement and the defendant refuses without justification, or provides false materials, the court may determine the calculation base based on the plaintiff’s assertions and the evidence on record.
When determining the multiplier for punitive damages, courts should consider the degree of subjective fault and the seriousness of the infringement. The interpretation expressly states that the multiplier may be set within the statutory range and does not need to be a whole number.
At the same time, the SPC sets a clear overall cap: the total amount of punitive damages may be up to five times the calculation base. Reasonable expenses incurred to stop the infringement are recoverable in addition to that amount.
If the defendant has already been subject to an administrative fine or criminal fine for the same infringing conduct, and that penalty has already been enforced, the court should take that into account when setting the punitive multiplier.
The 2026 interpretation reflects the SPC’s effort to make punitive damages in IP litigation more predictable, more enforceable, and more uniform across courts. Compared with the 2021 version, it provides more explicit procedural rules, more detailed standards for proving intent and seriousness, and more practical guidance on the calculation base and multiplier. The SPC has indicated that the revision was made in light of judicial practice since the 2021 interpretation came into force.
For rights holders, the interpretation should make it easier to frame and support punitive damages claims in strong cases. For defendants, it underscores the importance of preserving evidence, complying with court orders, and addressing infringement allegations promptly, as concealment, repeated infringement, and evasive conduct may significantly increase exposure.
The interpretation will take effect on May 1, 2026. From that date, the SPC’s 2021 interpretation on punitive damages in IP civil cases will be repealed. The new interpretation does not apply to cases in which effective judgments had already been rendered before it came into force, even if such cases later enter retrial procedures.
