China increases punitive damages in Intellectual Property Rights infringements

On May 28, 2024, Ding Guangyu, Deputy Director of the Third Civil Division of the Supreme People's Court (SPC) of China, reported a significant rise in the number of cases involving punitive damages handled by courts across the country. 

Specifically, courts handled 319 cases involving punitive damages, representing a 117% increase compared to the previous year.

This increase reflects a growing emphasis on the use of punitive damages as a legal remedy in China, particularly in cases involving intellectual property rights infringement, product liability, and consumer protection. The sharp rise in such cases indicates a stronger enforcement environment and a heightened awareness of the deterrent effect that punitive damages can have on wrongful conduct.

Punitive damages are designed to go beyond mere compensation for the plaintiff's losses by punishing the defendant for particularly serious behavior and deterring similar actions in the future. The significant year-on-year increase suggests that Chinese courts are increasingly recognizing the role of punitive damages in maintaining market order and protecting the rights of individuals and businesses.

The surge in punitive damages awarded by Chinese courts underscores a significant shift in the judicial approach toward intellectual property (IP) protection and other areas involving serious misconduct. 

In 2023, the total amount awarded in punitive damages cases reached 1.16 billion yuan, marking a 3.5-fold increase from the previous year. This substantial rise reflects the increasing cost of infringement and illegal activities in China, signaling a tougher stance by the judiciary against violations of the law.

In particular, the average punitive damages awarded in technical cases, such as those involving intellectual property, reached approximately 12.41 million yuan (1.73 million US$) per case. 

This figure highlights the Chinese courts' growing emphasis on protecting intellectual property, especially in key sectors such as emerging industries and critical core technologies. The courts are sending a clear message that infringements in these areas will be met with severe financial penalties, thus elevating the cost of such illegal activities and strengthening the overall deterrent effect.

The increased use of punitive damages also aligns with China's broader goals of fostering innovation, ensuring fair competition, and protecting the rights of businesses and consumers in an increasingly sophisticated and technology-driven economy. The heightened judicial protection of IP, particularly in strategically important sectors, reflects China's commitment to upholding the rule of law and creating a more secure environment for innovation and investment.