Judicial Points

 Where an actor is clearly aware of the infringement but fails to make changes and allows the infringement to persist, the "intentional" requirement for punitive damages is met.

The compensation base shall be accurately determined by distinguishing subjective states and infringement roles. Where the subjective state of an infringing entity shifts from general fault to intent, the compensation amount must be calculated in stages, with punitive damages applicable only to the intentional infringement portion. In cases of joint infringement by multiple parties, different calculation methods are adopted for different infringement roles. For the source creator, compensation is calculated based on the actual loss of the right holder, striving to make the loss whole; for infringers in specific segments of the chain, the portion for which they bear joint and several liability may be calculated based on the infringer's profit, provided the parties submit evidence, so as to accurately determine the compensation amount.

Causality shall be used to constrain the determination of the punitive damages base, with thorough argumentation provided for the grounds for accepting or adjusting base calculation factors. In calculating the infringer's profit, the contribution rate of the infringing content to the overall profit of the infringing work should not be calculated solely based on the word count proportion of the infringing content, but should be adjusted according to the originality and value of the work. In calculating the actual loss of the right holder, cross-medium infringement should involve an analysis of the market substitution effect based on the mode of infringement; judgment should be made as to whether such a substitution calculation is higher or lower than the actual loss of the right holder, using this as the upper or lower limit of the range for further adjustment.

Case Number

First Instance: Shanghai Xuhui District People’s Court (2024) Hu 0104 Min Chu No. 377

Case Summary

The plaintiff, Xia XX, is the copyright holder of the picture book The Beautiful Garland (hereinafter referred to as the "Involved Picture Book"). An editorial committee organized by a secondary college of the defendant, a certain university, adapted the Involved Picture Book into a text-only story of the same name (hereinafter referred to as the "Alleged Story") without authorization. This was compiled into the provincial-level instructional textbook Kindergarten Curriculum Guidance (hereinafter referred to as the "Involved Book"), which was published by the defendant, a certain publishing house. Following enforcement actions by the right holder, the two defendants became aware of the infringing act in 2019. The university requested the publishing house to delete the infringing content, while the publishing house, claiming the production files could not be modified, requested the university to write another story for replacement. Over the next three years, the Involved Book was sent for printing five more times. Xia XX contended that the two defendants infringed upon his copyright in the Involved Picture Book, requested the application of punitive damages, and sought a court order for the two defendants to eliminate the effects and compensate for economic losses of RMB 1 million and reasonable expenses of over RMB 100,000.

The court of first instance held upon trial that: First, the two defendants committed copyright infringement. Their subjective state of failing to make changes and allowing the infringing results to persist for three years after knowing the acts constituted infringement amounted to intentional infringement. Given the serious circumstances of the infringement in this case, punitive damages are applicable. Second, the university was at the upstream of the infringement chain; since its profits from infringement were difficult to calculate, the method of the right holder's actual loss could be adopted. The publishing house participated in the reproduction and distribution segments and should bear joint and several liability for that portion. Given that the publishing segment, the role played, and the specific rights infringed by the publishing house were different from those of the university, and that it provided sufficient evidence of profit, the portion for which it bears joint and several liability could be calculated using the infringer's profit method. Specifically: 1. For the university, the compensation amount was calculated based on the actual loss of the right holder. This case involved adapting a picture book with both text and illustrations into a text-only story for a textbook, which was not a direct market replacement or displacement of the Involved Picture Book. Multiplying the sales volume of the infringing copies by the price of the Involved Picture Book would be higher than the actual loss of the right holder, and thus could serve as the upper limit of the range. After the university became aware of the infringement, the number of copies of the Involved Book printed accounted for 16.5% of the total published copies. Punitive damages used the compensation amount for this portion of the infringing acts as the calculation base, and a triple (3x) punitive damages award was added to this portion based on the circumstances of infringement. 2. For the publishing house, the amount for which it bears joint and several liability was calculated based on the infringer's profit. The publishing house's claim that the contribution rate should be 0.15% based on word count proportion was deemed unreasonable. Considering the high originality and value of the Alleged Story, the contribution rate of the infringing content to the infringing profit in this calculation method should be increased. After the publishing house became aware of the infringement, the number of copies of the Involved Book printed accounted for 61.5% of its total published copies. Accordingly, the profit during the period of intentional infringement could be converted proportionally. Considering the contribution rate of the infringing content to the profit of the Involved Book, the court determined the profit amount attributable to the Alleged Story and added a triple (3x) punitive damages award based on the circumstances of intentional infringement to calculate the portion for which the publishing house bears joint and several liability. The court ruled that the two defendants shall publish an apology in newspapers and eliminate the effects; the university shall compensate for economic losses of RMB 97,000, with the publishing house bearing joint and several liability for RMB 20,000 thereof; and the two defendants shall respectively compensate for reasonable rights protection expenses of RMB 35,000 and RMB 20,000.

After the first-instance judgment, neither party filed an appeal, and the first-instance judgment has entered into force.