Calculation Rulesof the Baseand Multipleof Punitive Damages for Intellectual Property

Tang Yujiao,Ge Zhangzhi,Duan Yuzhen,2

(1.Intellectual Property Research Institute,University of Science and Technology of China,Hefei230026,China;2.College of Economic and Management,Anhui Open University,Hefei230022,China)

Abstract:Punitive damages for intellectual property is a civil compensation system that imposes excessive compensation for the infringement of intellectual property to achieve such functions as punishment.The method of punitive damages for intellectual property in China has been basically established,but there are still many problems with judicial application.Firstly,it is difficult to calculate the base of damages,and the applicable proportion of legal compensation is too high.To determine the bottom of injuries,we should abandon the idea of directly applying for statutory compensation due to inaccurate base calculation or adopting the multi-factor estimation rules.Secondly,the factors for determining the multiple of compensation are messy and lack levels and standards.The multiple determination element is actually a secondary consideration of subjective and objective elements and needs to be determined gradually by classification and grading.Subjective and objective elements should be integrated:Introduces the concept of malice in the subjective aspect to determine the basic interval and then refine the interval of the multiple according to the objective circumstances.

Keywords:intellectual property;punitive damages;base and multiple of damages

1 Introduction

At present,there are frequent cases of infringement of intellectual property in China,and malicious infringement and repeated infringement have occurred frequently[1-3].China's laws have basically established the rules of punitive damages for intellectual property.After Article 179 ofthe Civil Code of the People's Republic of Chinastipulates eleven main ways of civil liability performance,such as stopping infringement and compensating for losses,it defines punitive damages as one of the statutory ways of bearing civil liability.At the same time,Article 1185 gives the obligee the right to claim punitive damages and establishes two constituent elements:intentional and serious,jointly establishing the system of punitive damages for intellectual property in China together with Article 63 ofthe Trademark Law of the People's Republic of Chinaand Article 17 ofthe Anti-Unfair Competition Law of the People's Republic of Chinarevised in 2019,Article 71 ofthe Patent Law of the People's Republic of Chinaand Article 54 ofthe Copyright Law of the People's Republic of Chinarevised in 2020,and Article 72 ofthe Seed Law of the People's Republic of Chinarevised in 2021.

Scholars have long discussed the system of punitive damages.Zhuang Xiufeng[4],Wen Shiyang and Qiu Yongqing[5]and Luo Li[6]all proposed that punitive damages should be introduced into the field of intellectual property.At the same time,scholars have also studied penal damages systems in foreign countries like the US.For example,Wang Liming focused on the historical origin,institutional structure,characteristics and significance of punitive damages in the US[7],and Zhu Guangxin further elaborated on the development,applicable requirements and special system of punitive damages in the US[8].In addition,after punitive damages were introduced into the field of intellectual property,scholars discussed the applicable elements of punitive damages for intellectual property.For example,Zhang Guangliang proposed that the subjective elements of punitive damages for intellectual property should be unified as intent,and the circumstances should include the subjective and objective aspects of the infringer[9].However,despite the basic establishment of the rules of the system of punitive damages for intellectual property in China,there is still confusion in the judicial application process and obviously insufficient description of determining the base and multiple of damages.

2 Judicial Application Predicament of Punitive Damages for Intellectual Property

As of March 8,2022,by conducting a full-text search for"punitive damages"on the China Judgement Online website based on case name keywords like"trademarks,trade secrets,technical secrets,patents,inventions,designs,utility models,copyrights,new varieties of plants",and then screening and analyzing pertinent cases,it is possible to see that the difficult calculation of the base of punitive damages was one of the current issues in China's judicial practice,included difficult calculation of the base of punitive damages,and generalized application of the legal compensation;Unclear subjective and objective identification factors of punitive damages,and unreasonable standard to determine the multiple of punitive damages.

2.1 Unreasonable Method of Base Calculation

The Intellectual Property Law of the People's Republic of Chinastipulates that the final amount of punitive damages shall be the number of compensatory damages multiplied by a certain multiple of damages.According to Article 5 of the Judicial Interpretation on Punitive Damages for Intellectual Property of the Supreme People's Court of the People's Republic of China(hereafter referred to as the Interpretation on Punitive Damages for Intellectual Property),the basis for calculating punitive damages for intellectual property is either the plaintiff's actual losses,the defendant's infringement profits,or a multiple of the right license fee.

However,in judicial practice,due to the inability to calculate the number of compensatory damages for most cases,the infringer may commit intentional infringement with serious circumstances,and the obligee fails to obtain punitive damages,for statutory damages are applied instead of punitive damages.The generalized application of statutory compensation has expanded the judge's discretion,and the system of punitive damages has been put on the shelf without exerting any effect.

In addition,boththe Patent Law of the People's Republic of Chinaandthe Copyright Law of the People's Republic of Chinagrant the obligee the right to choose any calculation method of infringement loss or infringement profit to calculate the compensatory compensation.The Trademark Law of the People's Republic of Chinaandthe Anti-Unfair Competition Law of the People's Republic of Chinastipulate that the compensatory compensation can only be calculated based on the infringement profit when the actual loss cannot be calculated.Hence,there are no uniform rules.

2.2 Unclear Subjective and Objective Identification Factors

In 2020,the Patent Law of the People's Republic of China,the Copyright Law of the People's Republic of Chinaand other intellectual property laws introduced the system of punitive damages.It uniformly stipulated that the premise of applying the system of punitive damages shall be to meet both subjective and objective requirements.However,the Patent Law of the People's Republic of Chinaandthe Copyright Law of the People's Republic of Chinastipulate that the subjective components are malicious.In contrast,the Trademark Law of the People's Republic of Chinaandthe Anti-Unfair Competition Law of the People's Republic of Chinastipulate that the subjective components are malicious.As for the distinction between intention and malice,Article 1 of the Interpretation on Punitive Damages for Intellectual Property stipulates that intention includes malice but just simplifies the legal identification from the legislative perspective,failing to indicate the essential difference between malice and intent.

Article 3 of the Interpretation on Punitive Damages for Intellectual Property stipulates that the determination of subjective intent can be based on the comprehensive consideration of object type,right status,popularity and the relationship between the parties.If the infringement continues after the warning is given,the parties'business contacts,labor relations and other relationships,and the defendant's acts of piracy and counterfeiting of evil trademarks can be preliminarily determined as intention.Article 4 of the Interpretation on Punitive Damages for Intellectual Property stipulates that if the circumstances are serious,the means,frequency,time,geographical scope,scale,consequences,litigation and other factors shall be comprehensively considered.If there are repeated infringements,and the infringement losses or profits are large by taking the infringement as the business,the infringement may endanger national security,public interests or personal health,and the infringer forges,destroys and conceals evidence,refuses to implement the preservation ruling,the above situations can be identified as the gravity of the circumstances.

The existing judicial judgment directly obtains the multiple of compensation and the final amount of compensation by listing the subjective,objective,and multiple determination elements in the judge's reasoning part and the mixed elements lack reasoning.It is imperative to specify the identification elements of intent and serious circumstances,clearly identify the probative force of each element of intent,and clearly identify whether the serious events only need to have any aspect that can be identified as serious circumstances as specified in the judicial interpretation,and clearly identify the impact of elements that can be identified as severe circumstances as not specified in the judicial interpretation,such as the scale and time of infringement on the identification of serious circumstances.Clarify the relationship among the identification elements of intent,severe cases,base and multiple.

2.3 Failure to Specify Multiple of Punitive Damages

According to Article 6 of the Interpretation on Punitive Damages for Intellectual Property,the multiple of punitive damages must be determined while taking into account the subjective fault of the defendant and the seriousness of the infringement.However,the article does not specify how to calculate the multiple of punitive damages based on the defendant's subjective fault and the seriousness of the objective circumstances.Refining the calculation standard of punitive damages and establishing a relatively specific and reasonable indicator system is essential.

Although the Interpretation of Punitive Damages for Intellectual Property has played a guiding role in judicial practice,it is still challenging to achieve judicial application.It has been more than a year since the introduction of the judicial interpretation of punitive damages,and a large number of legal damages are still applicable to intentional infringement in judicial practice.

3 Clarify the Base of Punitive Damages

The base of punitive damages,also known as the number of compensatory damages,is calculated by the multiple infringement losses,infringement profits and licensing fees[10],aiming to make up for the victim's loss.In theory,the compensation amount is calculated by means of the infringement loss,namely,interest backfilling,and the reasonable use fee,namely,interest withdrawal.However,it is not easy to calculate the infringement loss,and the laws of most countries also take the infringement profit and the multiple of license fees as the calculation method of compensatory compensation.Moreover,the Patent Law of the People's Republic of Chinaandthe Copyright Law of the People's Republic of Chinagive the right of choice to the obligee when calculating the compensatory compensation,whilethe Trademark Law of the People's Republic of Chinaandthe Anti-Unfair Competition Law of the People's Republic of Chinastipulate that the compensatory compensation can only be calculated based on the infringement profits when the actual losses cannot be calculated.The difficulty of proving the obligee's loss in patent and copyright infringement cases is not greater than in trademark infringement cases.It is unreasonable to grant the obligee the right of choice only in patent infringement and copyright infringement cases.The system and rules should be unified,and the order restrictions should be removed.

3.1 Clarify the Statutory Compensation System

Infringement losses,profits and royalties in the field of intellectual property are not easy to calculate.Therefore,in judicial practice,most cases simply list some subjective and objective elements and apply statutory compensation to obtain the amount of compensation.For example,in the case King tai fook Trademark Infringement,the court held that the base could not be determined,based on brand awareness and reputation;The relationship between the plaintiff and the defendant;The distributor's business time,business place and infringement circumstances;Contribution rate of infringement marks to operating profits;The final compensation amount determined by reasonable expenditure is 1.05 million yuan①The case of trademark infringement dispute of King tai fook Co.,Ltd.and ShenzhenKing tai fook Chain Co.,Ltd.,(2021)Final Trial of Henan Civil Case(No.100)..For another example,in the case Patent Infringement of Eubiq,the court held that the base could not be determined and shall apply for legal compensation.Considering that the nature of the infringement was an invention patent,the market value was high,and the duration of infringement was long and large,the final amount of compensation was determined to be 400,000 yuan②The case of dispute over infringement of inventor's patent rights between Yiyoubi Technology Holdings(Zhuhai)Co.,Ltd.and Taipu(Shanghai)International Trade Co.,Ltd.,(2021)Final Trial of Civil Case of Supreme People's Court(No.39)..

Scholars have different views on whether the statutory compensation system is used as the base for the calculation of punitive damages or is recognized and applied independently of punitive damages[11-13].However,it can be clear that the massive application of statutory compensation will weaken the significance of the existence of the system of punitive damages.It is necessary to clarify the relationship between punitive damages and statutory compensation and establish reasonable rules for the calculation of the base of punitive damages.

The author believes that,under the legal doctrinal interpretation,statutory compensation has both compensation and punishment system functions.Article 71 ofthe Patent Law of People's Republic of China,Article 54 ofthe Copyright Law of People's Republic of China,Article 63 ofthe Trademark Law of People's Republic of China,and Article 17 ofthe Anti-Unfair Competition Law of People's Republic of Chinaall state that the court may determine a compensation amount of 30,000 to 5 million yuan when it is impossible to calculate the infringement losses,profits,and licensing fees.It can be seen that when the case evidence cannot calculate the compensatory compensation amount,the legal compensation bears the compensatory compensation liability,and when it is unable to calculate the compensatory compensation amount and the infringer intentionally infringes and cause serious circumstances,the statutory compensation shall bear the punitive liability(see Table 1).Therefore,whether statutory compensation is applied as the base of punitive compensation or directly instead of punitive compensation,even if the legal compensation is applicable,the final compensation amount can be reasonably obtained as long as the court gives up the statutory compensation system as a safe haven to reduce the judge's responsibility and workload when determining the amount of statutory compensation,abandons the understanding that legal compensation is applied instead as long as infringement losses,infringement profits or licensing fees cannot be accurately calculated,and strictly follows the requirements of compensatory compensation and punitive compensation for subjective and objective elements,and reasonably calculates the infringement loss,infringement profit and license fee.Of course,since the law introduces the system of punitive damages into the field of intellectual property,the application of legal compensation with strong arbitrariness in serious infringement will lose its necessity,and the application of legal compensation also results from the difficulty in calculating the base of damages.Therefore,in the future,legal compensation can be limited to the upper and lower limit of the amount when the base of damages is difficult to calculate,thereby avoiding excessive expansion of judges'discretion.

Table 1 Relationship between Statutory Compensation,Compensatory Compensation and Punitive Damages

Table 2 List of Factors Determining Punitive Damages for Intellectual Property.

3.2 Reasonably Determine the Calculation Rules of the Base of Damages

It is generally believed that the system of punitive damages has two functions:One is to punish and contain,and the other is to make up for the current situation of insufficient compensatory damages.Since punitive damages are intended to make up for the insufficient calculation of compensatory damages,why is it necessary to emphasize the improvement of the calculation method of compensatory damages when the system of punitive damages is fully incorporated into the field of intellectual property?The author believes that the application of punitive damages needs to meet the two major requirements of subjective intent and serious objective circumstances of the obligee.Still,total compensation should also be given for violations that do not meet the requirements.Therefore,the introduction of the system of punitive damages cannot make up for the lack of compensation function,but the expansion of the multiple of punitive damages puts forward higher requirements for the calculation of infringement losses and profits.

Articles 14 and 15 of the judicial interpretation ofthe Trademark Law of the People's Republic of Chinastipulate that the loss of trademark infringement is the reduction of sales volume multiplied by the profit of the obligee's single product or the infringer's sales volume multiplied by the profit of the obligee's single product.The profit from trademark infringement is equal to the sales volume of the infringer multiplied by the yield from a single infringing product or the sales volume of the infringer multiplied by the profit from a single product of the obligee.There are similar provisions in the judicial interpretations ofthe Copyright Law of the People's Republic of Chinaandthe Patent Law of the People's Republic of China.It can be seen that China's laws and judicial interpretations provide a simple calculation method with few considerations,and it is often difficult to calculate infringement profits when infringement losses cannot be calculated.The above calculation method of infringement loss directly attributes all the consequences caused by infringement to the decline of product sales,ignoring other factors that affect sales and losses other than sales.

Scholars proposed corresponding methods for calculating the base of damages.For example,Wang Yanjie proposed that the profit margin of trademark infringement can be determined from the perspective of financial accounting[14],and Lin Ping and Miao Fei proposed that the degree of market competition should be introduced into the calculation of infringement losses and profits[15].Although the above views have certain reference values,the complexity of calculation of infringement losses and profits in the field of intellectual property cannot be covered only by financial accounting or considering the degree of market competition.The author believes that all losses lost by the obligee due to infringement should be compensated by the infringer,including monetary losses and losses that will be transferred to financial losses in the future.There are mainly the following factors:First,the price factor.The entry of infringing products into the market will affect sales in the short term,but in the long term,it may lead to the obligee being forced to reduce the price because the infringing products occupy the market at a low price.Second the goodwill factor.The consumers'good understanding of the quality assurance and performance specifications represented by intellectual property is obtained at the cost of the obligee.The inflow of infringing low-quality products into the market will damage the goodwill of the obligee,which may be partly internalized by the reduction of the price and sales of the obligee's products.Still,sometimes the impact is delayed,so it may not be possible to compensate for the loss of goodwill only by relying on the infringer's apology in the newspaper.Third,R&D cost factors.The cost of intellectual property R&D cannot be directly shown on the book,which is prone to infringement,but the sales volume,price and profit in the book have not decreased.It is necessary to ensure that the amount of compensation paid by the infringer is greater than the cost of R&D.Fourth,market factors.For valuable patents and other intellectual property,the market is in a rising state in the early stage,and the price and sales volume will continue to rise.Even if they are infringed,the book's sales volume and price may not decrease.Therefore,when determining the infringement loss,the product of sales volume and profit should be used only when the obligee's profit and sales volume are in a stable state.In an unstable state,quasi-profitability should be taken into account.

It is a common fault that the amount of damages in the field of intellectual property is difficult to calculate.The system of aggravated damages stipulated in Article 284 of the Patent Act of the US can provide a reference for solving this problem.The object of intellectual property is intangible and non-material.The identification of actual loss is not only the identification of facts but also the evaluation of the value of the law itself.Although there is no system to increase compensation in China,the court should abandon the understanding of striving to calculate the amount of damage compensation accurately and integrate multiple factors such as sales volume,price,research and development cost and market factors.When the evidence is insufficient,the system of evidence hindrance[16]should be used to estimate the maximum amount of damages.The judgment of the Tinci Case also clearly pointed out that although the proven evidence could not fully calculate the obligee's loss,the existing evidence could calculate part of the loss,and the final amount of compensation should be determined based on the existing evidence③The case of Guangzhou Tinci Materials Technology Co.,Ltd.,Supreme People's Court(2019)Final Trial of Civil Case of Supreme People's Court(No.562)..

4 Clarify Subjective and Objective Identification Factors

Intention and serious circumstances are the premises of applying punitive damages and also the factors to determine the final multiple.It is very important to clarify which acts are subjective elements,which acts are objective elements,and which acts can determine punitive damages.

4.1 Clearly Determine the Subjective and Intentional Identification Factors

What kind of psychology does the infringer have to impose punitive damages is a problem that needs to be considered in the legislation of various countries.Negligence and intention are common classifications of subjective mental states.At present,most countries have stipulated that the application of punitive damages requires the infringer to have a subjective intentional or malicious psychological state when infringing.

4.1.1 Subjective Intention and Malice

From the perspective of substantive fairness,fairness is a relative concept,and the principle of full compensation for compensatory compensation seeks to completely compensate for the loss of the victim,which is not fair under any circumstances.Filling compensation rules under the existing legal basis.Under simple values,when the intentional behavior of the infringer causes the infringement damage,its behavior is more legally responsible than negligence infringement.Intention and negligence get the same compensation,which violates the basic psychological norms of human beings,but it is unfair.When the infringer is subjective,the compensation system beyond the loss takes into account the nature of human nature,so as to correct the illegal act in a real sense and restore the orderly state.

From the perspective of economic efficiency,the less the prevention cost of the infringer is than the loss multiplied by the probability of occurrence[17],the more reasonable it is to impose compensation liability on the plaintiff.For intentional infringement,the prevention cost of the infringer is zero,and the application of punitive damages is self-evident.However,for negligent infringement,the infringer needs to prevent costs.Therefore,under what circumstances should the infringer be held liable for damages and under what circumstances should the punitive liability be held liable for damages?It needs to be considered comprehensively according to the cost of infringement prevention,loss and probability of occurrence.The system of punitive damages aims to improve the level of attention of the infringer.The higher the number of punitive damages,the higher the infringer's attention level.At present,the system of punitive damages has just been established,and judicial practice has not yet had time to test the situation,including negligence into the subjective constituent elements will excessively increase the duty of care of the infringer and increase the cost of prevention.Therefore,we should carefully expand the subjective requirements of punitive damages.It is reasonable not to include the negligent act in the applicable elements of punitive damages.However,with the continuous examination of judicial practice,negligence is not,as most scholars have said,completely unreasonable for the application of punitive damages.

Academic circles have reached a consensus on the inclusion of intention in punitive damages,but they have different opinions on the difference and correlation between intention and malice.The subjective component of punitive damages inthe Patent Law of the People's Republic of Chinaandthe Copyright Law of the People's Republic of Chinais intentional,but the subjective component of punitive damages inthe Trademark Law of the People's Republic of Chinaandthe Anti-Unfair Competition Law of the People's Republic of Chinais malicious.On March 3,2020,Reply to the Supreme People's Court on Judicial Interpretation on Punitive Damages for Intellectual Property

The Questioner believes that both intent and malice should be considered as intent.In 2020,the Judicial Interpretation of the Interpretation of the Beijing Higher People's Court about Punitive Damages held that"malice"was"direct intent".According to the author,from the perspective of textual interpretation,the"malice"specified inthe Trademark Law of the People's Republic of Chinaandthe Anti-Unfair Competition Law of the People's Republic ofChinais not the same as the"intention"specified inthe Civil Code of People's Republic of China,the Patent Law of the People's Republic of China the Patent Law of the People's Republic of Chinaandthe Copyright Law of the People's Republic of China,which is in violation of the provisions of those laws.In the field of civil law,malicious collusion and other contexts mean to know and should know,and malicious registration and other contexts express intent,motivation and purpose.According to the identification of intention in the legal principle of our country,the intention has direct intention and indirect intention.Indirect intention refers to the conscious judgment that should pay attention,can pay attention but not pay attention,and pursues cognitive judgment rather than will judgment.The direct intention has obvious intention,motivation and purpose.Indirect intention can reach the standard of knowing clearly,but direct intention requires not only knowing factors but also will factor to pursue the occurrence of infringement.Therefore,malice is similar to direct intent,and trademark infringement does not require a higher subjective standard than other types of intellectual property.Therefore,the subjective elements ofthe Trademark Law of the People's Republic of Chinaand other intellectual property laws should be unified as intent in the rules to solve the problem of inconsistent rules.

4.1.2 Factors of Subjective Determination

The subjective element of punitive damages is to infer the infringer's inner activities when infringing through objective behavior.The subjective psychological state can be proved by objective evidence,and the degree of proof can vary from large to small and can be mutually verified to increase the degree of proof.It mainly includes:

1.Infringement after notification,warning,settlement agreement,administrative punishment and judicial judgment

Generally speaking,it can be basically determined as the subjective intention of the infringer to continue the infringement after the judicial judgment or punishment.After the obligee has sent the lawyer's letter and the infringement warning notice to the infringer,and the infringer still goes his own way,it can be preliminarily determined that the infringer has a clear and clear understanding of his own infringement,but the infringement warning has the risk of being abused.Its determination effect is different from that of the settlement agreement,court judgment and administrative punishment.The continued infringement after the notice and warning is only high proof.However,it is necessary to combine other evidence to infer the subjective intention of the infringer.When both parties have reached a settlement agreement due to infringement,it can be generally recognized as intentional infringement by the infringer,and its evidential force is only slightly less than that of the court judgment and administrative punishment.In addition to the contrary evidence,it can be used as evidence to prove that the second infringement of the infringer is subjectively known well.

2.Relationship between the plaintiff and defendant

If the plaintiff and the defendant have labor relations,contractual relations,business contacts,etc.,it is generally preliminarily determined that the infringer"is fully aware".The impact of the special relationship on the ease of the infringer's access to and comprehension of intellectual property is the key to the inference of the relationship between the plaintiff and defendant on the subjective mindset of the infringement.The specific presumption must take the defendant's potential access to intellectual property into account.

3.The defendant's intellectual property is identical to the plaintiff's,but the defendant cannot prove its legal source

For trademarks,copyrights,patents and other intellectual property,if the infringer's intellectual property is completely or highly similar to the plaintiff's,it can be preliminarily identified as"being fully aware".Although the boundaries of patents tend to be difficult to judge,if the patent by the infringer is identical with the obligee,the infringer's subjective intention can be basically determined.The implementation of piracy and counterfeiting of registered trademarks means that the object of infringement is completely the same as others,and the subjective intention of the infringer can also be directly presumed.

4.Type of object of plaintiffs,popularity of related products,and state of right

It is not reasonable to regard the type of object as a factor of intentional identification in judicial interpretation.There is no distinction between trademark,patent,work,etc.,that the infringer is determined to be intentional.Among patents,utility model,invention,and appearance patents are also.Whether the awareness of relevant products is high and the state of right is stable and clear can be taken as the factors to determine the subjective status of the infringer,but the awareness and state of right are not evidence to infer the subjective knowledge of the infringer.The stability of the infringer's rights status and the high popularity of patents,trademarks,works and products can only prove that an infringer is a person of the same trade,and the intellectual property is easier to recognise and understand.However,it needs to be combined with other evidence to prove the subjective state of the infringer comprehensively.The main basis for judging whether the right status is stable includes whether it is substantively reviewed and whether the validity of the intellectual property has been determined by previous judgments.

5.The defendant applied for relevant intellectual property but was rejected

In the field of patent rights and trademark right,the obligee needs to apply to the State Intellectual Property Office for registration or examination to obtain relevant rights.If the obligee still conducts infringement after being rejected in the process of registration examination,it can be preliminarily recognized as"being fully aware".

6.The defendant's obstruction of civil action

The defendant's obstruction of civil action in the court trial was not the direct evidence of intent.Many courts are willing to use the words that the defendant did not actively respond to the lawsuit,made untrue statements in the lawsuit,concealed adverse evidence,and made contradictory statements,so the subjective malicious degree is obvious.But in theory,the psychological judgment of the infringer is based on the judgment when the infringer executes the tort,and the behavior in the lawsuit is not direct evidence.It is only indirect presumption evidence,that is,if the infringer believes that the act belongs to negligence,he does not need to do any act to hinder the proceedings in the proceedings.

4.2 Define the Criteria for Identifying Objective Factors

Based on judicial interpretation,through the analysis of judicial cases,the following three aspects should be considered for the serious circumstances of the system of punitive damages for Intellectual property:First,social harmfulness.Second,the severity of infringement activities,comprehensive considerations include the time of infringement,the scope of infringement,amount of infringement losses and profits,the number of infringements,whether to engage in infringement,the severity of infringement means and the nature of infringement.Third,the infringer's attitude to responding to the lawsuit and the subsequent remedies.Social harmfulness is the overall evaluation standard,including adverse effects on innovation,consumers and social interests.The severity of infringement activities,the attitude of the defendant to respond to the lawsuit,and the remedy afterwards are the specific judgment elements.The attitude of the defendant to respond to the lawsuit and the remedy afterwards,as the specific judgment elements,are intended to stimulate the infringer to respond to the lawsuit actively and take remedial measures.

4.2.1 Social Hazard

The specific identification factors of serious circumstances are based on the summary and induction of existing judicial cases,which are lagging behind and insufficient.Therefore,while specifying specific identification factors,it is necessary to provide miscellaneous provisions.Specific judgment elements will change with the emergence of new cases and social phenomena,but they are all undoubtedly socially harmful behaviors.

It can be seen from the product punitive liability stipulated in Article 1027 ofthe Civil Code of the People's Republic of China,the ecological punitive liability stipulated in Article 1232 ofthe Civil Code of the People's Republic of China,whether it is unqualified products,food,or the ecological environment,it is different from other infringement damages and has obvious social harmfulness,according to the operator punitive liability stipulated inthe Law of the People's Republic of China on the Protection of Consumer Rights and Interestsand the food punitive liability stipulated in Article 184 ofthe Food Safety Law of the People's Republic of China.From the standpoint of social interests,intellectual property infringement can result in a win-win scenario,a double loss,or a zero-sum game.There is only a need for compensatory reimbursement for the third party and the social harmless infringement.Naturally,in order to accurately calculate the infringement loss and make up for the loss,all elements must be considered.Only when the infringer's violation hurts both the obligee's interests and the social and public interests may punitive damages be used.

Social public interest is a macro concept,and intellectual property has economic and social characteristics.The main function of the intellectual property system is to encourage the public to participate in creative behavior extensively,form innovative consciousness,and promote the progress of social science and art.The social harmfulness of intellectual property infringement is multifaceted,which is reflected in the negative impact on consumers and the public.Specifically,it can be divided into whether the infringement reduces the market innovation power and harms the public interest.Generally speaking,if the infringing products have quality problems,and endanger the personal safety and national security,they can be directly identified as social hazards.As a dynamic identification factor[18],social harmfulness is a comprehensive identification factor of punitive damages,which aims to adapt flexibly to social development.

4.2.2 Typical Circumstances

Article 4 of the Interpretation on Punitive Damages for Intellectual Property clearly stipulates that the factors determining the seriousness of the circumstances include the number of times,the length of time,the size of the scope,the seriousness of the consequences,the severity of the means,and the obstruction of litigation,and lists the relevant circumstances that can be identified as serious.From the perspective of the current case,the relevant circumstances listed in the interpretation that can be identified as serious are basically the worst infringement in the infringement case.It is obviously unreasonable to understand that it is necessary to meet all circumstances to identify serious circumstances.Whether punitive damages can be applied only needs to meet the subjective intent and any circumstances that can be identified as serious,such as deliberately infringing on business,gradually adding repeated infringements,intentionally adding huge amounts,and deliberately adding obstruction to litigation.For the infringement of a long time,large geographical scope and scale,a large amount but not huge,bad means,etc.,it should be determined that the circumstances are serious through comprehensive consideration.

At present,the nature of infringement is only distinguished in patent infringement,that is,manufacturing,sales,import and other acts.What are the different natures of trademark,copyright,and other infringement acts,which are not mentioned in judicial interpretations and judgments,and the severity of manufacturing,sales,import and other acts cannot be clearly distinguished,so it is necessary to consider comprehensively when determining the seriousness of the case.The property status of the infringer is not the reason for the infringer to evade the liability for compensation.For patent R&D costs and patent licensing fees,as long as it is ensured that the infringer's damages,namely,the infringement cost is greater than the R&D cost,and the infringer's damages,namely,the infringement cost is greater than the implementation license fee,so as to reduce infringement,stimulate innovation,and promote transactions,it can be directly considered in the calculation of infringement losses.

Judging whether the infringer is intentional is the subjective element for applying punitive damages,but judging the infringer's subjective intention requires objective evidence to prove it.This objective evidence often overlaps with the elements for determining the seriousness of the objective circumstances.The objective circumstances of punitive damages cover a wide range,basically including all the elements that a tort case needs to consider.Therefore,when identifying the subjective and objective elements,we should discuss them separately according to different purposes of proof and should not mix them together with unclear logic.The relevant circumstances can prove that the subjective intention is the evidence to prove the subjective intention,and the serious circumstances can be identified as the identification factors of the serious circumstances.They are not relevant and are identified independently.Among them,repeated infringement and taking infringement as a profession are serious elements of the circumstances,and also objective evidence to identify the subjective intent of the infringer,but they do not affect their identification as serious elements of the infringement circumstances.Although the act of impairing civil action can only indirectly infer the mental state of the infringer when infringing,it can be used as an objective circumstance for applying punitive damages.

4.3 Establish an Interval System of Punitive Damages Indicators for Intellectual Property

The judge has the discretion to deal with the changes of objective phenomena,but a certain rigid index is also necessary[19].The academic and judicial circles also put forward their own solutions to determining the multiple punitive damages.Some scholars believe that serious circumstances can be described as serious circumstances,especially serious circumstances and other levels[20],but have not pointed out what is serious,what is particularly serious,what conditions are serious and what conditions are particularly serious.A simple introduction is difficult to give the court a reference in judicial decisions.Some researchers also proposed that the ladder type multiple of compensation can be confirmed through the"factor accumulation method"[21],but the qualitative and quantitative logic is unclear,subjective and objective elements are mixed,and only the subjective and objective elements are given to specific multiples,which is too arbitrary,and the subjective elements are intended to prove the subjective psychology of the infringer,and should not be used as a factor of multiple superpositions.It is unreasonable to add multiple compensation when one more subjective element is added.

The author believes that the determination of the number of punitive damages should be qualitative before quantitative,that is,first determine whether punitive damages are applicable.The elements of qualitative judgment and quantitative judgment are independent of each other,and then gradually determine the multiple of punitive damages in specific cases according to the classification and grading of subjective intent,malicious degree and seriousness of the circumstances.Using the concept of interval,taking subjective intention as the basic interval,and gradually reducing the multiple intervals according to the severity of the circumstances,we can effectively solve the problem of random multiple assignment of specific factors and the mixture of subjective and objective factors in the existing multiple determination methods.

4.3.1 Subjective Criteria

The unification of subjective elements as intention does not mean that malice has no legal significance in the field of punitive damages.The principle of liability fixation for infringement in the field of intellectual property in China is the principle of fault liability,that is,the subjective psychological state of liability fixation for compensatory compensation is a fault.If it is determined that the infringer has a subjective fault,it is necessary to bear the tort liability and compensate the plaintiff for the infringement losses.Suppose the subjective psychological state reaches the intentional level.In that case,it is necessary to bear the punitive damages liability,and 1 to 5 times of compensation is determined on the basis of the infringement losses.Therefore,when determining whether punitive damages are applicable,it is only necessary to prove the infringer's subjective intent,that is,whether the infringer is aware of the subjective intent.However,when determining the multiple based on the subjective intent,the multiple of compensation should be increased maliciously according to the subjective will,such as motivation and purpose.Among them,the subjective determination standard of multiple of damages is that the higher the subjective malignancy is,the higher the multiple of damages is,as shown in Figure 1.

Figure 1 Attention Level Function between the Infringer and Infringement Damages

As far as intention is concerned,the psychological state and objective plot are two sides in one.Intention should be regarded as two criteria for dividing multiple intervals.According to the different degrees of malice represented by indirect intention and direct intention,the multiple ranges should be stepped up.That is,the indirect intention is about 1 to 3 times,and direct intention is about 3 to 5 times.

4.3.2 Objective Criteria

As far as the seriousness of the circumstances is concerned,the factors determining the severity of the multiple should include the number of infringements,the time of infringement,the scope of infringement,the loss and profit of infringement,the attitude of the defendant to respond to the lawsuit,the adoption of remedial measures,and whether to take infringement as a profession.Among them,duration,regional scope and infringement scale are the factors to consider in calculating infringement losses and gains,while infringement losses and gains are the calculation methods of a base of punitive damages and the calculation standards of multiple of punitive damages.Each element should be clearly distinguished and defined separately.

Serious circumstances are the objective aspect of determining whether punitive damages are applicable,and also the objective aspect of determining the multiple of compensation,but social harmfulness is not the element of determining the multiple of punitive damages.Social harmfulness is a universal concept.Multiple determination requires clear identification elements.Each identification element should be juxtaposed as far as possible to ensure the rationality of multiple increases.Multiple calculations should not and cannot be added before new situations occur.Neither the nature of the infringement nor the severity of the means of infringement can be quantified.The severity of the means of infringement is also reflected in whether there are repeated infringements,the length of time,and the size of the scale.It cannot and need not be used to determine the multiple.

According to the summary of existing cases,the infringement losses and profits can be divided into a large amount of infringement(10 000～100 000 yuan),a large amount of infringement(100 000～1 000 000 yuan),a huge amount of infringement(1 million～10 million yuan),and an especially huge amount of infringement(more than 10million yuan).If the amount of infringement is less than 10 000 yuan,it may not be deemed that the circumstances are serious if the amount of infringement is larger,and the multiple is not calculated④The civil judgment of the second instance of the civil case of trademark infringement dispute between Yibin Wuliangye Co.,Ltd.and Deng Tingjian,(2021)Final Trial of Shanghai Civil Case(No.710).The judgment clearly determined that only a few goods were sold and thesales amount was only afew thousand yuan,which was not considered a"serious circumstance"..The infringement time is usually 1 to 5 years,so the infringement time can be divided into short-term(0.5 to 1.5 years),medium-term(1.5 to 3 years)and long-term(more than 3 years).If the infringement time is less than half a year,it can not be considered as serious,nor can it be counted into multiple.The scale of infringement ranges from region to country,so the scope of infringement can be divided into trans city,trans province and trans country.Cross city infringement refers to large-scale infringement,cross province infringement refers to large-scale infringement,and large-scale cross province or transnational infringement refers to special large-scale infringement.In our judicial case,there are two types of infringement:first infringement and repeated infringement,so the number of infringements can be divided into first infringement and repeated infringement.

4.3.3 Interval of the Multiple

Table 3 shows the interval chart determined according to the above factors and indicators.Firstly,the basic interval of multiple of damages is determined according to whether the infringement is indirect intent or direct intent.This basic interval solves the problem that the overlapping of subjective and objective identification elements leads to the intermingling of multiple determination elements.Then,according to the corresponding factors of serious circumstances,gradually narrow the multiple intervals of punitive damages,so as to obtain a relatively reasonable multiple intervals.As the subjective intention of taking infringement as an occupation is obvious,the defendant's occupation of infringement should be within the range of about 3 to 5 times.If the first infringement and infringement as an occupation,the multiple of damages should be determined based on the first infringement.In case of repeated infringement and infringement as the business,the range of punitive damages shall be reduced by half according to the determining punitive damages.According to Table 3,if the defendant has committed the indirect intentional infringement,first infringement,short-term infringement,large-scale infringement,and a large amount of infringement and has taken remedial measures and actively responded to the lawsuit instead of infringement as the business,the lowest multiple standards shall be applied,and the preliminary determination shall be 1 to 2 times.If the defendant directly intentionally and maliciously infringes,repeatedly infringes,infringes for a long time,or infringes on a particularly large scale,and the amount of infringement is particularly huge,and the defendant is engaged in infringement,but can take remedial measures but does not take them,thus hindering the litigation,the maximum multiple standards shall be applied,and the preliminary determination shall be 4-5 times.

Take the typical case of the Carbopol Case⑤The civil judgment of the second instance of the civil case of technical secret infringement dispute of Guangzhou Tinci Materials Technology Co.,Ltd.and Jiujiang Tinci Materials Technology Co.,Ltd.,(2019)Final Trial of Civil Case of Supreme People's Court(No.562).as an example;in terms of subjective intention,the subjective direct intention is obvious,and the multiple basic intervals are determined to be 3 to 5 times.In terms of objective circumstances,the alleged infringement of technical secrets occurred in the period from 2012 to 2013,about six years,which is a long time.The defendant's sales activities have expanded to more than 20 countries and regions at home and abroad,so the scope of the sales is particularly large.Since the establishment of the plaintiff company,the plaintiff has taken infringing products as its main task and formed an infringement industry.At the same time,the defendant refused to provide evidence without justifiable reasons at the initial trial stage of the case.As the litigation behavior was not active,according to Table 3,the approximate multiple intervals were 4.6 to 5 times.

Table 3 Index Range of the Multipleof Punitive Damages

5 Conclusion

With the introduction ofthe Civil Code of the People's Republic of China,the revision of relevant intellectual property laws,and the introduction of the system of punitive damages for Intellectual property,however,in judicial practice,there are still problems in the application of the intellectual property compensation system,the generalization of legal compensation,the difficulty in calculating the amount of compensatory compensation,the mixture of subjective and objective identification elements and multiple determination elements,and the indicator system of the punitive damages range for Intellectual property has not been established.Therefore,the author clarifies the relationship between legal compensation,compensatory compensation,and punitive damages,abandons the pattern of thinking that relies on the actuarial base of punitive damages,and increases the price,goodwill,R&D cost,market,and other considerations other than sales volume and profit.The author also clarifies malicious intent,subjective identification factors,and the impact of subjective identification factors on multiple determination,clarifies the identification method,introducing the concept of compensation interval while giving up the simple summation multiple determination method,and establishes a reasonable period multiple for different degrees of subjective malice and serious circumstances,aiming to provide feasible references for the judicial application of punitive damages for Intellectual property.

Punitive damages originated in the UK,developed in the US,and is a legal system built under the Common Law System.At present,the phenomenon of intellectual property infringement has been repeatedly prohibited.The system of punitive damages can just correct the social disorder on time,but the excessive amount of intellectual property damages will also lead to malicious litigation.In order to prevent excessive correction,the court should pay attention to reviewing the qualification of the subject when deciding punitive damages;Inspect the quality,implementation and use of intellectual property,as well as the value and popularity of intellectual property;Check the true situation of the lawsuit filed only against the downstream infringer with weak economic strength in the case of the source infringer with economic strength.