Viewpoint | Punitive damages may be claimed for resale of infringing products after assuming civil liability

After Zhan and Zhang were sentenced to criminal punishment, the trademark right holder filed a civil compensation lawsuit in July 2020. On December 31, 2020, the court based on the facts determined by the criminal judgment, in the absence of evidence to prove the loss of the right holder and the profit of Zhan and Zhang, comprehensively considering the popularity of the trademark of the right holder, Zhan and Zhang's infringement and other circumstances discretionary compensation for the economic losses and reasonable expenses of the right holder totaling RMB 70000.

In September 2020, Zhan was again seized by the public security organs for selling counterfeit auto parts, and was detained and arrested in accordance with the law because of the large number of infringing product brands, types and quantities, suspected of constituting the crime of selling counterfeit registered trademarks. On August 4, 2021, the court found that Zhan was sentenced to two years' imprisonment, suspended for three years and fined on January 8, 2018 for the crime of selling goods with counterfeit registered trademarks. He committed a new crime during the probation period, and the probation should be revoked, and finally sentenced to four years' imprisonment and a fine.

In October 2022, the obligee filed a civil compensation lawsuit, believing that Zhan and a self-employed auto parts (the operator is Zhang) continued to commit infringement after being sentenced to criminal punishment, which is intentional infringement and repeated infringement, and requested the application of punitive damages, with 70000 yuan as the compensation base (the amount is based on the amount of compensation awarded by the court when Zhan and Zhang infringed for the first time, which has strong reference nature), punitive damages of 2 times shall be applied, with a total amount of 210000 yuan. In this case, the obligee's claim of 200000 yuan shall be fully supported.

After hearing, the court held that Zhan, a self-employed auto parts company, was not identified in the criminal judgment, so he was not a qualified defendant in this case and should not bear tort liability. According to the evidence in the case, it is impossible to determine the actual losses suffered by the obligee due to the infringement and the benefits obtained by Zhan due to the infringement. Therefore, the compensation amount shall be determined according to the circumstances of Zhan's infringement in accordance with the provisions of the third paragraph of Article 63 of the Trademark Law. Judging from the facts on file, first of all, Zhan has been selling infringing goods for a long time and a large number, and continues to commit infringement after being sentenced to criminal punishment, which belongs to intentional infringement and repeated infringement, and the circumstances of the infringement are serious; secondly, the accused infringing goods sold by Zhan are auto parts, which are related to the safety of public life and property, and their infringement is more harmful to the society; again, the registered trademark of the right holder involved in the case has a high reputation, and the protection of the trademark should be strengthened. Finally, although the plaintiff did not submit relevant evidence of reasonable rights protection expenses, according to common sense, the rights holder will inevitably spend relevant expenses on activities such as infringement investigation and hiring a lawyer to appear in court. Therefore, when determining the amount of compensation, reasonable rights protection expenses should be properly considered. To sum up, the court has comprehensively considered the popularity of the trademark involved, the nature of the infringement, Zhan's scale of operation, time and scope, Zhan's subjective fault and other circumstances, as well as the relevant reasonable expenses incurred by the right holder for safeguarding the rights in this case, and decided that Zhan should compensate the right holder for the economic losses and reasonable expenses for safeguarding the rights, totaling RMB 120000 yuan.

First of all, Article 179 of the Civil Code, the way to bear civil liability, the law provides for punitive damages, in accordance with its provisions; Article 185, intentional infringement of the intellectual property rights of others, the circumstances are serious, the infringed has the right to request corresponding punitive damages. Secondly, in the first paragraph of Article 63 of the Trademark Law, if the circumstances are serious for malicious infringement of the exclusive right to use a trademark, the amount of compensation may be determined at more than one time and less than five times the amount determined in accordance with the above-mentioned methods. Finally, the "Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights" (hereinafter referred to as the "Interpretation of Punitive Damages for Intellectual Property Rights"), the judicial interpretation clarifies the subjective intention and the circumstances of punitive damages for intellectual property infringement Serious identification, calculation base and factors to be considered when determining multiples. For example, in Article 3 of the Interpretation of Punitive Damages for Intellectual Property Rights, for the determination of intentional infringement of intellectual property rights, the people's court shall comprehensively consider the type of the object of the infringed intellectual property rights, the status of rights and the popularity of related products, and the defendant and the plaintiff or interested parties. The relationship between the people's court shall comprehensively consider the means and times of infringement for the determination of serious infringement of intellectual property rights, the duration of the infringement, geographical scope, scale, consequences, the infringer's behavior in the lawsuit and other factors.

First of all, according to the provisions of the interpretation of punitive damages for intellectual property rights, if the plaintiff claims that the defendant intentionally infringes upon the intellectual property rights it enjoys according to law and the circumstances are serious, and requests the defendant to bear the liability for punitive damages, the people's court shall examine and deal with it according to law.

In this case, Zhan was seized by the public security organ for selling counterfeit auto parts in August 2017 and was sentenced by the court on January 8, 2018. After the obligee filed a civil compensation lawsuit, the court ruled that Zhan and Zhang decided to compensate the obligee for economic losses and reasonable expenses totaling RMB 70000. After experiencing criminal punishment, Zhan should know the trademark of the right holder and should know that resale of infringing products faces more serious punishment. However, Zhan ignored the existence of the law and continued to commit the infringement after being sentenced to criminal punishment and during the probation period. He had the intention of infringement and constituted repeated infringement. It belongs to the provisions of Article 4 of the interpretation of punitive damages for intellectual property rights. If the circumstances are serious, punitive damages can be applied.

In the case where the application of punitive damages can be requested in this case, the focus is on the issue of determining the basis for punitive damages. According to Article 5 of the interpretation of punitive damages for intellectual property rights, when determining the amount of punitive damages, the people's court shall, in accordance with relevant laws, take the actual amount of the plaintiff's loss, the amount of the defendant's illegal income or the benefits obtained due to infringement as the calculation base. The basis does not include the reasonable expenses paid by the plaintiff to stop the infringement. If it is difficult to calculate the actual amount of loss, the amount of illegal gains and the benefits obtained from infringement as mentioned in the preceding paragraph, the people's court shall reasonably determine the amount of punitive damages by reference to the multiple of the license fee of the right in accordance with the law.

In this case, the actual amount of loss of the obligee, the amount of illegal income of Zhan or the benefits obtained due to infringement can not be calculated clearly, and the obligee does not have the standard of trademark license fee as a reference. Therefore, according to the provisions of Article 5 of the interpretation of punitive damages of intellectual property rights, it is impossible to determine the base of punitive damages. However, this case does have its special features, that is, Zhan was awarded by the court to compensate the obligee for the loss of 70000 yuan for his first tort. The amount of the judgment can be used as the amount of loss for the court's reference, because the amount of the judgment has a certain predictability for Zhan, that is, if Zhan commits the same or similar infringement again, the amount of the court's judgment will not be less than that amount. Therefore, the right holder can use the amount of the first court judgment as the base for applying punitive damages in the case, which can be based on 70000 yuan. In this case, based on the amount of 70000 yuan decided by the first court, twice the punitive damages are requested, that is, the total amount is 210000 yuan. In this case, the right holder claimed 200000 yuan.

Although the court did not support the obligee's request to apply the calculation method of punitive damages, it did consider the spirit of punitive damages and ruled Zhan to compensate the obligee for economic losses and reasonable expenses of 120000 yuan.

For similar cases of repeated infringement, punitive damages are requested, and the Supreme Court has made similar cases. For example, (2022) the Supreme Law knows case No. 871, in the court's opinion, the court made the following analysis:

The Court held that: according to the pleading opinions of the litigants and the facts of the case, the focus of the dispute in the second instance is: (1) whether ParknShop should bear the liability for punitive damages; (II) whether the amount of compensation determined by the original judgment is appropriate.

Whether (I) Baijia Business Department should bear punitive compensation liability

Jin Minhai appealed that it should be liable for punitive damages, citing the existence of repeated infringements in the business department of Baijia. The Court found that the appeal was established in accordance with the law.

First of all, there is a legal basis for the punitive liability of the business department. Article 1,185 of the the People's Republic of China Civil Code stipulates: "If the intellectual property rights of others are intentionally infringed, and the circumstances are serious, the infringed shall have the right to claim corresponding punitive damages." Paragraph 1 of Article 1 of the interpretation of the Supreme People's Court on the application of punitive damages in the trial of civil cases of infringement of intellectual property rights (hereinafter referred to as the judicial interpretation of punitive damages) stipulates: "if the plaintiff claims that the defendant intentionally infringes upon the intellectual property rights enjoyed by the defendant in accordance with the law and the circumstances are serious, the people's court shall examine and deal with it according to law." Article 4 of the judicial interpretation stipulates: "for the determination of serious infringement of intellectual property rights, the people's court shall comprehensively consider such factors as the means and frequency of infringement, the duration, geographical scope, scale and consequences of the infringement, and the behavior of the infringer in the litigation. If the defendant has the following circumstances, the people's court may determine that the circumstances are serious: (1) the same or similar infringement is committed again after being subject to administrative punishment or a court decision for infringement; (II) to infringe intellectual property rights; (III) to forge, destroy or conceal infringement evidence; (IV) refuse to perform the preservation ruling; (V) the infringement gains or the obligee suffers huge damage; (VI) the infringement may endanger national security, public interest or personal health; (VII) other circumstances that can be considered serious."

Secondly, the punitive liability borne by ParknShop has a factual basis. Before this case, Jin Minhai had filed a patent infringement lawsuit with the original court for the sale of the infringed products by Baijia Business Department. After that, the two parties reached a "settlement agreement". Baijia Business Department promised to stop the infringement and compensate for economic losses and reasonable expenses totaling 30000 yuan. After going through the previous lawsuit, Baijia Business Department knew that Jin Minhai was the patentee involved in the case, and also knew that its sales of the infringed products infringed the patent rights involved in the case. However, after making a promise to stop the infringement and paying compensation in the previous case, it still sold the infringed products again, which had the intention of infringement and constituted repeated infringement, It belongs to "other circumstances that can be determined as serious circumstances" as stipulated in Article 4 of the judicial interpretation of punitive damages ".

In summary, Baijia Business Department subjectively has intentional infringement and the infringement is serious, and should bear the liability for punitive damages. The original trial court found that the alleged infringement of Baijia Business Department did not meet the serious circumstances, did not meet the conditions for the application of punitive damages, and was inconsistent with the facts and legal provisions of the case.

(II) whether the amount of compensation determined by the original judgment is appropriate

The first paragraph of Article 71 of the Patent Law stipulates: "The amount of compensation for infringement of patent rights shall be determined according to the actual losses suffered by the right holder as a result of the infringement or the benefits obtained by the infringer as a result of the infringement; if the losses of the right holder or the benefits obtained by the infringer are difficult to determine, it shall be reasonably determined with reference to the multiple of the patent license fee. For intentional infringement of patent rights, if the circumstances are serious, the amount of compensation may be determined between one and five times the amount determined in accordance with the above-mentioned methods." The third paragraph of the article states: "The amount of compensation shall also include the reasonable expenses paid by the right holder to stop the infringement." In this case, although all parties did not provide evidence to prove the actual loss of the obligee due to the infringement, the infringer's infringement profit or the patent license fee for reference, considering that the parknShop Business Department in this case reached a settlement agreement in the previous case. The infringement occurred again within less than two months, the infringement duration was short, the infringement profit was limited, and the patent involved expired on August 10, 2021, and the case was a batch rights protection nature, as appropriate, the court took the amount of compensation agreed in the settlement agreement as the calculation base, and determined that Baijia Business Department should bear the punitive compensation liability, and compensate Minhai's economic losses and reasonable expenses paid to stop the infringement, totaling 60000 yuan. The court of first instance did not decide that the business department of Baijia should bear the liability for punitive damages. The discretionary amount of compensation was too low, and the court corrected it.