New Civil Code to Reinforce Intellectual Property Protection in China

On May 28, 2020, China’s National People’s Congress passed the first Chinese Civil Code. While the code does not take effect until January 1, 2021, Article 1185 is gaining substantial buzz within the Intellectual Property industry.

Article 1185 introduces punitive damages “for those who willfully infringe other’s intellectual property, and when the circumstance is serious, the infringed has the right to claim for punitive damages.”

Founders Legal’s retained associates, Chofn IP relay their eagerness for the new article, advising, “although the Article is short, it clearly shows the resolution of legislators and the government to reinforce the IP protection in China.” to the actual loss suffered by the infringed, and could hardly exceed that amount. As a result, quite commonly, even though some IP owners triumphed in IP litigations, they have unfortunately lost the market. Due to an unreasonably low price for copying, compensatory damages were usually not effective for suppressing IP infringement behaviors.

Among all IP-related laws, Chinese Trademark Law was the first one to have introduced a punitive damage system. Back to 2013, in order to effectively curb the rampant trademark infringement, the lawmakers adopted the punitive damage system, and further decided to increase the possible punitive damages to five-fold in maximum in 2019. The same five-fold punitive damages were also made possible under the new Anti-Unfair Competition Law.

By virtue of Article 1185 of the Civil Code, it is foreseeable that courts would now have a legitimate basis to grant more punitive damages in the near future against those malicious IP copycats. In addition, Article 1185 sets a cornerstone for other IP-related laws, such as Patent Law and Copyright Law, to set forth their respective standards on punitive damages.

From our perspective, ‘punitive damages’ will be an effective weapon to create deterrence to IP infringers and copycats, and will have a great significance to strengthen the IP enforceability in China. We hope the punitive damages, collectively with other measures for safeguarding intellectual properties, will help to build up a harmonious society with a healthy and fair business environment in China.”
Your intellectual property may be secure here at home, but protecting and enforcing your Intellectual Property Rights in other jurisdictions requires proper planning and management. At Founders Legal, we can help you develop a strong IP strategy to safeguard your business’ most valuable assets overseas.

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