Addition of punitive damage system in Trademark Law a breakthrough

Article 63 of the new Trademark Law expressly adds the punitive damage system, namely, where the exclusive right to use a trademark is infringed in bad faith and the circumstances are serious, the measure of damages may be determined at not less than the amount of, and not more than three times, the loss incurred by the rights holder as a result of the infringement, the benefit derived by the infringer as a result of the infringement or the licensing fee for the registered trademark, and the measure of damages should also include the reasonable expenditures incurred by the rights holder in halting the infringement.

Furthermore, where the above-mentioned three bases cannot be ascertained, the upper limit on the statutory measure of damages that the court can decide at its discretion has also been increased from RMB500,000 (US$81,000) to RMB3 million.

Punitive damages

The term “punitive damages”, also called “exemplary damages” or “vindictive damages”, are the damages assessed by the court over and above the actual amount of damage incurred, that is to say that the damages are not only compensation for the rights holder, but also penalisation of the perpetrator, who acted wilfully.

The punitive damage system, as a basic system of legal remedies, is widely applied by common law countries. The punitive damage system and the actual loss compensation principle followed in infringement law in the civil law system are of completely different character. That China, as a traditional civil law country, has introduced from the common law system the system of imposing punitive damages for infringement committed in bad faith has a historical reason. For a long time, the actual loss principle adopted in China’s current Trademark Law has left the courts shackled when faced with particularly egregious cases of trademark infringement.