In the fourth amendment of China's "Patent Law" in 2020, a punitive damages system for patents was introduced. Additionally, the Supreme People's Court issued the "Interpretations on Several Issues Concerning the Application of Law for Punitive Damages in Intellectual Property Infringement Cases," which provides unified and clear legal standards for punitive damages in patent infringement cases. This article provides an analysis of the necessity of introducing punitive damages into the patent protection system.

Overview of Punitive Damages System

Punitive damages refer to compensation awarded by the court that exceeds the specific amount of damage suffered. Compensatory damages are intended to compensate victims for their losses, while punitive damages, in addition to compensating for the harm caused to the victim, increase the amount of compensation to deter the infringing party from future misconduct.

Traditional civil law systems primarily follow the "compensatory principle" in which compensation aims to fill the actual loss suffered by the victim, attempting to restore the injured rights to their pre-infringement state. So, what is the relationship between compensatory damages and punitive damages? Punitive damages are conditional on compensatory damages and are considered as a form of compensation. Punitive damages are imposed only after compensatory damages have been determined. As a result, punitive damages not only serve as additional compensation but also act as a deterrent and can have a preventive effect on potential infringers.

In legal provisions, punitive damages are often significantly higher than compensatory damages. This extra punitive component can be linked to the cost and benefits of the wrongful conduct. Once infringers realize that punitive damages make their actions unprofitable or even result in a loss, they may be discouraged from further wrongdoing, achieving the purpose of deterrence.

The Necessity of Introducing a Punitive Damages System in China's Patent Law

To begin with, patent rights pertain to intangible intellectual achievements and involve going through a high-threshold, sophisticated process to be obtained. For instance, invention patents require compliance with not only formal requirements but also the substantive criteria of novelty, inventiveness, and practicality. This raises the standard for obtaining patent rights and places greater demands on patent applicants. To ensure and secure the ability of patent holders to continue innovating, therefore, robust patent protection is necessary.

Secondly, enforcing patent rights can be challenging, especially when it comes to gathering evidence. Patent holders must meet the burden of proof in enforcement proceedings. However, patent infringement methods can be complex, sometimes remote and highly concealed, making the collection of evidence a challenging task. In the era of the internet, obtaining evidence of infringement for invention patents can be extremely difficult. Some operations behind software programs are hidden, and even technical experts or lawyers may struggle to investigate them. The high costs of enforcement can lead patent holders to abandon their rights or, even if they obtain compensatory damages, these may not fully compensate for the actual losses incurred during the enforcement process, making the process unfavorable to them.

Lastly, the introduction of a punitive damages system aligns with China's social need to encourage innovation. President Xi emphasized the importance of protecting intellectual property rights during the China International Import Expo in November 2018. He called for "resolutely punishing acts that infringe upon the legitimate rights and interests of foreign investors, especially those that violate intellectual property, improving the quality and efficiency of intellectual property examination, and introducing a punitive damages system." China places a strong emphasis on the protection of intellectual property rights, and punitive damages play a crucial role in deterring wrongdoing.

Conclusion

As part of China's commitment to enhancing intellectual property protection and promoting economic transformation, introducing punitive damages into the "Patent Law" is a necessary step. This not only strengthens the protection of patent holders but also serves as an effective deterrent for potential infringers.