The Interpretation was passed at the 1,831st meeting of the Judicial Committee of the Supreme People’s Court on 7 February 2021. It came into effect on 3 March 2021.
Among the provisions of the Interpretation are the creation of specific provisions on the scope of application of punitive damages in civil cases of IP rights and the determination of intentional and serious cases, along with the base calculation and multiple determination, etc. The aim of the Interpretation is to guide courts to accurately apply punitive damages and punish serious infringement of IP rights by clarifying the judgment standards.
In general, when trademark holders initiate lawsuits with the court and apply to the IP punitive damages system, the plaintiff compiles evidence for the tort. If the court ascertains the defendant’s tort, and the defendant fails to carry out the action in the court’s judgment, the plaintiff can apply to the court for compulsory execution.
Under specific circumstances, the court may, at the request of the other party:
order the preservation of the property of the other party;
order the other party to perform a certain act; or
prohibit the other party from performing a certain act in a case where the execution of the judgment may be difficult or other damage may be caused to the party because of the act of one party or other reasons.
By adopting preservative measures, the court may request the applicant to provide security. After accepting an application, if the case is urgent, the court must issue an order within 48 hours. An order for the adoption of preservative measures will be executed immediately.
To ensure the correct implementation of the IP punitive damages system and to avoid abuse in practice, the applicable elements of punitive damages must be clarified. The Interpretation clearly stipulates the scope, request content and time, subjective elements, objective elements, base calculation, multiple determination, etc.
Another way to ensure correct implementation is to strengthen guidance through typical precedents. Although the courts will usually make judgments on a case-by-case basis, to ensure the examination criteria is consistent, the Supreme People’s Court will regularly publish typical precedents and guide all courts to correctly adapt to the interpretation.
In the future, the Supreme People’s Court will continue to summarise and share trial experience, promote the improvement of the punitive damages system and effectively deter serious IP infringements.
Unauthorised internet commerce
According to Article 25 of the E-Commerce Law, e-commerce operators must provide relevant e-commerce data and information if requested to do so by the competent authorities. The competent departments must take necessary measures to protect the security of the data and information provided by ethe operators. They must ensure that personal information, privacy and business secrets are kept strictly confidential and are not divulged, sold or illegally provided to third parties.
Online investigation strategies
A combination of intelligent automatic monitoring tools and regular manual online searches can detect counterfeits. Once infringement activity has been found, online evidence should be fixed using time stamps or notarisation.
The investigator can pose as a customer and contact the infringer to uncover the specifics of the targeted infringement under the guise of purchasing products and negotiating business. Certain details must be ascertained, such as whether the target is a seller or manufacturer, whether there is only an online store or a physical shop, and the price, type and sales volume of the infringing products of the target. Only once the aforementioned details have been ascertained can the appropriate rights protection strategy be formulated.
Article 36 of the Tort Liability Law states that internet users and internet service providers (ISPs) will bear tort liability if they use the internet to infringe the civil rights and interests of others. If an internet user uses an internet service to commit an infringement, the infringed party has the right to notify the ISP to take necessary measures, such as deleting, blocking or disconnecting the link. The ISP will be jointly and severally liable with the infringing internet user for the damage if it fails to take the necessary measures in a timely manner after receiving the notification.
In 2020, platform enterprises earnestly fulfilled their obligations, building IP protection platforms and continuously refining the IP protection functions within those platforms. The number of IP protection system holders on major e-commerce platforms continues to increase.
Use of local counsel and investigators
Generally speaking, it is beneficial to seek assistance from local counsel and investigators because they are familiar with the characteristics of the local market and infringing activities, as well as local policies and businesses. This knowledge will be useful in discovering signs of infringement and providing tailored strategies to stop infringements and recover losses in an efficient way.
With the boom of internet and artificial intelligence in mainland China, most local counsel and investigation teams will also provide an online platform for clients to conduct infringement monitoring, as well as investigative services through one-stop and regular services. After sending the instructions, the local counsel and investigators can proceed with regular monitoring services and provide relative legal monitoring reports, including the signs of infringement discovered on the website, shopping platforms, social media, physical stores, etc.
Control of contractual relationships with third parties
As a preventive measure, especially for international trade businesses, it is strongly recommend to clearly indicate the rights and obligations with the manufacturers, agencies and licensee in the cooperation agreement.
It would be useful to pay attention to the following aspects:
strengthening of the brand shield (eg, defensive applications for Chinese names, more relative goods and services, and various IP rights) before cooperation with third parties to reinforce the legal basis and prevent the business partners from rush-registering or infringing rights;
explicit prohibition for the business partners from registering the brands as their trade name to lower the likelihood of confusion among customers;
strict indication of the authorised business cooperation scope, authorised products, authorisation duration, usage manners, advertising and packages design, usage in promotional activities, etc;
explicit prohibition from using or assisting others to use the brands, copyrighted works or other IP rights without the prior consent of the real holders; and
cooperation with the business partners to monitor potential infringement or competitors in the market and to take actions together in advance.
Effective use of technology, authentication and monitoring
Most the professional legal firms have committed to the development and operation of online infringement monitoring, covering online e-business platforms (Alibaba, Taobao, JD.com, etc), social media (WeChat, Weibo, Douyin, Redbook, etc) along with physical stores of targeted competitors.
In addition, online e-commerce platforms (eg, Alibaba) provide efficient support and impeccable regulations for authentication and monitoring, including legal prosecution. This will be helpful for brand holders in defending their IP rights and cracking down counterfeiting.
Cooperation with national anti-counterfeiting agencies
There are several anti-counterfeiting and IP protection agencies in China, such as the Beijing Anti infringement and Anti-counterfeiting Alliance and the Alibaba Anti-counterfeiting Alliance. These agencies fight against counterfeiting by promoting cooperation between e-commerce platforms and enterprises, holding regular exchange meetings and reporting the latest progress in judicial protection in the industry. Companies can protect their IP by cooperating with these institutions.