For cases governed by Chinese IP punitive damages rules, Interpretation No. 7 of 2026 took effect on May 1, 2026. It addresses how courts determine intentional infringement, serious circumstances, the calculation base and multipliers. U.S. companies should collect evidence of post-settlement repeat infringement, operating or sales profit data, industry or rights-holder profit rates, and any executed administrative fines or criminal monetary penalties for the same infringement before litigating.
What the Interpretation Covers and When It Took Effect
On April 20, 2026, the Supreme People's Court released Interpretation No. 7 of 2026 on punitive damages in civil intellectual property infringement cases. The interpretation was adopted on April 7, 2026 by the 1972nd meeting of the SPC Judicial Committee and took effect on May 1, 2026. It refines the prior 2021 punitive damages interpretation, identified in the official release as 法释〔2021〕4号, and addresses new issues that have arisen in practice.
The interpretation addresses civil IP infringement disputes in which punitive damages are available under applicable law. It covers intent, serious circumstances, the calculation base, and multipliers. Article 12 states that the total damages amount determined through punitive damages may be at most five times the calculation base, with reasonable enforcement expenses calculated separately outside that total. Applying the rules to a specific claim requires legal and evidentiary analysis.
Intent and Serious Circumstances: The Repeat-After-Settlement Example
The official press release highlights a specific new intentionality example: if the parties reached a settlement and the defendant agreed to stop the infringement, and the defendant then again committed the same or similar infringement, that can support a finding of intentional infringement. The interpretation also refines the meaning of 'infringement as a business' and the rules for serious circumstances.
For U.S. companies, settlement agreements, cease-and-desist exchanges, and evidence of post-settlement sales or marketing may be relevant. Articles 6 and 7 address intent and serious circumstances separately. An example supporting one element does not automatically establish the other, and the applicable factors and rebuttal evidence must be assessed in the particular case.
Calculating the Punitive Damages Base
For the base, if a court uses the defendant's illegal gains or infringement profits, it may refer to operating profit. If the defendant engages in infringement as a business, the court may refer to sales profit. If the profit rate cannot be determined, the court may refer to average profit rates for the same period and industry published by statistics departments or industry associations, or to the rights holder's profit rate.
The interpretation states that a statutory damages amount cannot serve as the calculation base for punitive damages. This addresses a recurring 'difficult base' problem. Litigants should therefore separate evidence supporting the compensatory base calculation from any statutory damages fallback, and gather accounting data, industry benchmarks or rights-holder margin information.
Multiplier Determination and Prior Criminal or Administrative Penalties
On multipliers, the interpretation adopts a proportionality principle. Where the same infringement has already been subject to an executed administrative fine or criminal monetary penalty, the court is required to consider that when determining the punitive damages multiplier, even if no party raises the point.
Article 13 does not prescribe a fixed deduction or automatic reduction for an executed fine or criminal monetary penalty. Both plaintiffs and defendants should preserve records identifying the penalty, the conduct it covered, and whether it was executed, because the court must consider an executed penalty for the same infringement when determining the multiplier.
Pre-Litigation Preparation Checklist for U.S. Companies
U.S. companies can use this checklist to organize evidence and instructions to China counsel under the interpretation now in force.
Ask counsel which rules apply to the procedural posture of the case. Article 14 excludes cases with an effective judgment already issued before May 1, 2026 when retrial is later requested or decided; the infringement date alone is not the full transition test.
Preserve any settlement or undertaking in which the defendant agreed to stop infringement, plus evidence of later same or similar acts.
Determine whether the defendant's operations support 'infringement as a business'; collect operating profit and sales profit data.
If defendant profit rates are unknown, identify official statistical or industry association average profit rates for the same period and industry, and calculate the rights holder's own profit rate.
Separate evidence for the punitive base from any statutory damages claim; do not treat statutory damages as the base.
Check whether the same infringement has been subject to an administrative fine or criminal monetary penalty and whether it has been executed.
Ask China counsel for the full Chinese text of Interpretation No. 7 and, if needed, a certified translation; monitor court practice after May 1.
Limitations and Next Steps
This article is general information, not legal advice. It summarizes selected provisions of the Supreme People’s Court interpretation and accompanying explanation. The two linked official URLs reproduce the same release and full text; they are not independent corroborating sources. The guide does not assess the elements, evidence, procedure, or likely damages for a particular dispute.
Next steps include reviewing the full official interpretation in Chinese with qualified PRC counsel, mapping the specific evidence for intent and serious circumstances, calculating the most defensible base using the profit-reference methods, and assessing prior administrative or criminal monetary penalties. Continue monitoring court application of the interpretation, which has been in force since May 1, 2026.
Official source pages used for this article are the Supreme People's Court full-text release page and the Supreme People's Court press release page.
Full-text release page: https://www.court.gov.cn/fabu/xiangqing/497911.html
Press release page: https://www.court.gov.cn/zixun/xiangqing/497911.html
Sources checked September 7, 2026.