The judiciary in China has been researching and exploring, over the years, the indemnity regime of intellectual property cases, as well as unfair competition cases. In April 2020, Beijing High Court IP Tribunal releases an 8–chapter Guidelines in an effort to establish unified jurisprudence and an indemnity regime that could reflect the market value of intellectual property right, so as to ramp up the intellectual property protection.

The first chapter sets forth the basic rules as regards the indemnity principle, damage calculations, application of discretionary, statutory and punitive damages, determination on “malicious infringement” and “serious circumstances”, as well as the damage proof issues, among others. The basic rules, which is applicable to almost all intellectual property cases, could serve as a point of reference in judiciary practice. The chapter clarifies several longtime ambiguities, including inter alia that the application of discretionary damages cannot be equated with the application of statutory damages; the punitive damages shall not be offset by administrative or criminal fines imposed on defendant for the same litigious act. The chapter affirms several usual practices, like the parameters for determination of the “malicious” and “serious circumstances”; the scope, parameter, and consequence of the obstruction of proof. It also addresses several new considerations, such as the contractual compensation shall be supported, monetary compensation shall be awarded if personal right is infringed in parallel with copyright infringement, and the request for confidentiality over damage proof involving trade secrets shall be supported.

The second chapter to the sixth chapter focus on certain criteria applicable for the determination of the compensation below the statutory limit of RMB 500, 000 in Copyright Law. Popular copyrighted works that are addressed in these chapters include written works, musical works, and works of the fine arts, photographic works, and cinematographic works and works analogous to cinematography. Pursuant to the characteristics of each type of works, these chapters lay out criteria that can be referenced where courts need to exercise discretion in deciding damages below the ceiling of statutory damage. In practice, the compensation awarded by courts in copyright infringement are usually low, in part because in most scenarios it is very difficult to calculate the actual damage or illicit profit when a copyrighted work is infringed. The Guidelines innovatively set a minimum compensation amount per piece of work (e.g. RMB 800 per art work; RMB 500 per fragment of cinematographic work, etc.) and the criteria of discretionary augment and reduction.

The seventh chapter and the eighth chapter address criteria widely used by complainants in claiming damage below the statutory limit of RMB 5 million for cases of trademark infringement and certain acts of unfair competition (copycats, trade secrets, defamation, and online unfair competition conduct). The guidelines affirmatively recommend leveraging evidence including the sales volume, numbers and profit recorded in the platforms operated by a third party; the average price in compliance with the industry practices; a third party’s sales statistics which are comparable with that of the defendant, among others.

Contributed by: Cindy Zhen