Source: China Daily

The introduction of a punitive damages system for intellectual property rights violation has won huge acclaim among industry insiders after Premier Li Keqiang proposed the move in his Government Work Report for the year, delivered on March 5.

Such punitive damages would involve compensation that exceeds the plaintiff's actual loss, creating a greater deterrence against such violations.

It is the first time such a system has been mentioned in the Government Work Report, which called for strengthened IP protection.

"We will see that the strong protection of property rights and the fluid flow of production enable a significant increase in market dynamism and public creativity," Premier Li said in his report.

The current compensatory damages system, aiming only to cover the losses of the rights owners, "results in too light a punishment and too little compensation to eliminate infringement", said Ge Suhua, a senior partner at Yingke Law Firm in Shenzhen, Guangdong province.

In many previous cases, rights violators have acquired higher profits than the compensation they had to pay the rights owners.

"Punitive damages mean fortified protection and more severe punishments agree with the judicial spirit," Ge told 21st Century Business Herald.

She also said that the compensation in lawsuits involving IP infringement has been "rising gradually" in the past two years, after the Beijing Intellectual Property Court - the country's first dedicated IP court - decided to sharply increase compensation in 2016.

The introduction of a punitive damages system shows the resolve of the top authorities to fight counterfeiting, said Zhang Deqin, deputy general manager of Kweichow Moutai, one of the nation's top liquor brands.

He said Moutai has invested heavily in developing anti-forgery techniques, but copycats always come out soon after they release new packaging, because the profit margin of such illegal activity is huge.

A bottle of genuine Moutai liquor sells at more than 1,000 yuan ($158), while a fake one costs only about 70 yuan to make.

"We should treat counterfeits as we treat fake money and drink driving," Zhang said, adding that companies have many limitations and rely heavily on legislation and the government.

Zhou Qiang, head of the Supreme People's Court, said in his work report on March 9 that the judicial authorities will use the punitive damages system in future trials to resolve the problem that rights violation incurs low costs while defending IP rights brings about high costs.

Courts nationwide have heard about 683,000 IP-related cases over the past five years, according to Zhou's work report.

In addition to establishing a punitive damages system, China will also see multiple departments working together to provide diverse IP protection channels, including administrative and judicial methods as well as mediation, said State Intellectual Property Office Commissioner Shen Changyu.

2018-03-15