On the Comprehensive Introduction and the Construction of Legislation of Punitive Compensation system for Intellectual Property Rights in China

Abstract

The punitive compensation system was first introduced byConsumer Rights and Interests Protection Law of China in the 1990s, and has since been established in a number of legislations, such as the Product Quality Law, the Food Safety Law, the Tort Liability Law, and so on, which has played a role in punishing and curbing the existence of a large number of fraudulent consumers and malicious infringements in society. Against the background of China’s full implementation of the Outline of the National Intellectual Property Strategy, Article 63 of the Trademark Law, which was revised in 2013, for the first time introduced punitive damages in the field of intellectual property rights, and pioneered the system of punitive compensation in the field of intellectual property rights in China. Subsequently, the Article 76 of China’s Copyright Law (Amendment Draft for Review) in 2014 and the Article 65 ofChina’s Draft Amendments to the Patent Law (Draft for Comments) in 2015 both plan to introduce punitive damages. At present, Article 961 of the Civil Code Tort Liability (Draft Second Review Draft) is being compiled to introduce punitive damages into the field of intellectual property infringement, and to make the system of punitive compensation for intellectual property rights a new subject in the system of compensation for intellectual property damages.
The punitive compensationsystem has three functions: punishment, prevention and compensation. Among them, the function of punishment is the primary function of punitive  compensation, the preventive function is the core function of punitive compensation, and the function of compensation is the basic function of punitive compensation. The achievement of fairness and justice through private law is the philosophical basis for the introduction of punitive compensation of intellectual property rights. Reducing the cost of defending rights, raising the cost of infringement, and not benefiting from illegal acts has laid the economic foundation for the introduction of punitive compensation for intellectual property rights.Only by introducing punitive compensation in the field of intellectual property can we make up for the difficulties of public law governance and the relief defects of compensatory compensation system, and become an effective way to crack the recurrence of malicious infringement of intellectual property rights.
With the rapid development of the socialist market economy with Chinese characteristics and the in-depth promotion of the "Belt and Road" strategy, it has become the general consensus of all sectors of society and all countries in the world to increase the illegal cost of intellectual property rights and strengthen the legal protection of intellectual property rights. The construction of China’s intellectual property punitive compensation system should be based on Article 961 of the People’s Civil Code of the People’s Republic of China, and supplemented by the relevant punitive compensation provisions of the Trademark Law, the Copyright Law and the Patent Law, and supplemented by special provisions of other intellectual property rights. In judicial practice, the relationship between punitive compensation and compensatory compensation should be properly handled, and the applicable conditions of punitive compensation should be strictly qualified from the subjective "intentional" and objective "circumstances, scale, damage results and other factors.
The calculation base of punitive damages for intellectual property rights in China shall include the actual loss of the victim, the benefit obtained by the infringer, the license fee for knowledge products, and the amount of discretionary compensation. In order to increase the illegal cost of the infringer, the victim can be given the right to choose the compensation base, the victim can choose from the actual loss, the infringer’s benefit, knowledge product license fee to choose the calculation base which is conducive to obtaining more compensation. Regarding the calculation ratio of punitive compensation, it is appropriate to refer to the calculation standard of punitive damages abroad, and the judge should make a discretion arying comprehensive judgment according to the subjective and objective factors of the tort. Punitive damages is a "double-edged sword" and should be alert to its abuse and general use in the field of intellectual property rights.