For cases governed by Chinese IP punitive damages rules, Interpretation No. 7 of 2026 takes effect on May 1, 2026. It does not create new liability or set award amounts; it refines 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 Is and When It Takes 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 takes 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 applies to civil IP infringement disputes in which punitive damages are available under Chinese IP law. It does not by itself create a new cause of action or set award amounts; it clarifies how courts should assess intent, serious circumstances, the compensation base and the multiplier.
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, this means settlement agreements, cease-and-desist exchanges, and evidence of post-settlement sales or marketing may be important. The supplied source excerpt summarizes these points and does not include the complete list of factors, so readers should review the full text before relying on any single example as exhaustive.
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.
This provision does not state that the multiplier must be reduced, and the supplied sources do not explain how prior penalties are weighed. But both plaintiffs and defendants should gather executed fine or monetary penalty records for the same conduct, because such records may affect the court's multiplier analysis.
Pre-Litigation Preparation Checklist for U.S. Companies
Before May 1, 2026 or in any post-effective case, U.S. companies can use this checklist to organize evidence and instructions to China counsel.
Confirm the claim and infringement conduct fall after the May 1, 2026 effective date, and ask counsel whether any transitional rules apply.
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 is based solely on the two official SPC pages supplied for this update: the full-text release page and the press release. The available summaries do not include every article, exception or transitional rule, and no prices, damages outcomes or case results are supplied.
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. Because the interpretation has only recently taken effect, monitor early court application after 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