Beijing Municipal Higher People's Court, Determination of the Liability for Damages for Copyright Infringement Guiding Opinions

(Issued by the Beijing Municipal Higher People's Court on, and effective as of, January 11 2005.)

Jing Gao Fa Fa [2005] No.12

Pursuant to the PRC Civil Law General Principles, the PRC Copyright Law and the Supreme People's Court, Several Questions on the Application of Law in Trial of Copyright Civil Dispute Cases Interpretation and while taking into account the realities encountered by Beijing municipal courts in trying copyright cases, we hereby set forth the following opinions on determining liability for damages for copyright infringement, in order to genuinely safeguard the lawful rights and interests of copyright holders and copyright-related rights holders, effectively sanction acts of infringement, regulate the order in the culture market and unify law enforcement standards.

Determination of Liability for Damages

Article 1: When a defendant, due to a fault on his part, infringes the lawful rights of a copyright holder or a copyright-related rights holder and causes him to incur damage, he shall be civilly liable to compensate for losses. The plaintiff shall submit evidence relating to the infringement by the defendant. If the defendant asserts that he is not at fault, he shall bear the burden of proof, failing which he will be required to bear the adverse legal consequences.

Article 2: The defendant may be deemed at fault if:

(1) the rights holder gave him an evidence-backed warning, but he nevertheless failed to halt his actions without just cause;

(2) he failed to duly carry out his checking obligation as specified in laws, regulations and administrative rules;

(3) he failed to duly carry out his obligation of reasonable care appropriate to a citizen of his age, educational level, profession, social experience or legal person scope of business, industry requirements, etc.;

(4) in the course of performing a contract or after the termination of a contract he infringed upon the other party's copyright or copyright-related rights; or

(5) he committed another act that can be determined as being a fault.

Article 3: If a defendant is not at fault but infringes the lawful rights of a copyright holder or a copyright-related rights holder, causing such rights holder to incur damage, he shall not be liable for damages, but may be ordered to refund the profits he derived from the infringement. If the profit derived from infringement by a defendant is relatively large, or if he has caused the plaintiff to incur a relatively large loss, based on the principle of fairness, consideration may be given to ordering him to pay the plaintiff appropriate compensation.

Article 4: If joint defendants have jointly committed infringement, they shall bear joint and several liability for damages.

If someone knew or ought to have known that another was committing infringement but nevertheless provided him a place of business or other assistance, he shall bear joint and several liability for damages. If a trademark licensor or a franchisor knew or ought to have known that the licensee/franchisee was committing infringement and if he had the obligation and the capacity to halt such infringement but failed to take effective measures to do so, he shall bear joint and several liability for damages. If two or more defendants have committed infringement, but are not jointly at fault, they shall each bear liability for damages separately.

Principles and Methods for Determining Damages

Article 5: The measure of damages determined for infringement shall be capable of comprehensively and fully making up the losses incurred by the plaintiff due to infringement.

Within the scope of the amount claimed by the plaintiff, if there is evidence indicating that the income derived by the defendant from the infringement was greater than the plaintiff's actual loss, such income may serve as the measure of damages.

Article 6: The principal methods of determining the measure of damages for trademark infringement are:

(1) the actual loss of the rights holder;

(2) the illegal income of the infringer; and

(3) statutory compensation.

When applying the foregoing calculation methods, the reasonable expenditures incurred by the plaintiff in halting the infringement shall be included within the scope of the compensation and described in the main body of the judgment together with the other losses forming the measure of damages. Where the actual losses of the rights holder and/or the illegal income of the infringer can essentially be ascertained or where the measure of damages can be determined based on the specific circumstances of the case and sufficient evidence and by using market patterns, the statutory compensation method shall not be applied directly.

Article 7: "The actual loss of the rights holder" mentioned in Item (1) of the first paragraph of Article 6 hereof may be calculated by any of the following methods:

(1) the amount by which the defendant's infringement caused the plaintiff's profits to decrease;

(2) if the defendant committed the infringement by way of newspaper, periodical or book publication or other similar means, reference may be made to relevant state provisions on author's remuneration;

(3) the reasonable royalty charged by the plaintiff;

(4) the product derived from multiplying the number by which the sales volume of the plaintiff's reproductions decreased by its profit per reproduction;

(5) the product derived from multiplying the quantity of the defendant's infringing reproductions by the plaintiff's profit per reproduction;

(6) the forecast loss in profits arising due to the defendant's infringement that caused the plaintiff's licence contract to become unperformable or difficult to perform normally;

(7) the loss arising due to the defendant's infringement causing the value of the plaintiff's work to decrease; or

(8) another method of determining the actual loss of the rights holder.

Article 8: "The illegal income of the infringer" mentioned in Item (2) of the first paragraph of Article 6 hereof includes:

(1) profits on product sales;

(2) operating profit; and

(3) net profit.

Generally, the defendant's operating profit shall serve as the measure of damages.

If the circumstances or consequences of the defendant's infringement are serious, the profits on product sales may be taken as the measure of damages.

If the circumstances of the infringement are negligible and the defendant halted the infringement of his own accord while the court action was pending, the net profit may be taken as the measure of damages.

When applying the aforementioned methods, the plaintiff shall present preliminary evidence evidencing the defendant's income derived from the infringement or state reasonable grounds, after which the defendant shall present counter-evidence. If the defendant has no evidence or if his evidence is insufficient to substantiate his factual claims, the plaintiff's claims may be upheld.

Article 9: If the "statutory compensation" mentioned in Item (3) of the first paragraph of Article 6 hereof is to be applied, the measure of damages shall be comprehensively determined based on the following factors:

(1) the plaintiff's potential loss or the defendant's potential profit under normal circumstances;

(2) the type of work, reasonable royalty, renown and market value of the work, renown of the rights holder, the degree of originality of the work, etc.; and

(3) the subjective fault of the infringer and the method, time, scope, consequences, etc. of the infringement.

Article 10: When applying the statutory compensation method, the unit of calculation shall be each work.

Article 11: If the plaintiff makes a nominal claim for damages, it shall be upheld if the infringement is upheld and the basic facts of the plaintiff's having incurred actual losses are ascertained.

Article 12: If the alleged infringement persists while the court action is pending and the plaintiff presents a claim for additional compensation and provides relevant evidence before the conclusion of arguments in the court of first instance, the additional loss incurred by the plaintiff while the court action was pending shall be included in the scope of compensation.

If additional losses incurred by the plaintiff while the court action at second instance was pending need to be included in the scope of compensation, the court of second instance shall attempt mediation in respect of the measure of damages. If mediation is unsuccessful, a new judgment on the measure of damages may be rendered and the reason therefor stated in the judgment.

Article 13: The term "reasonable expenditures" used in the second paragraph of Article 6 hereof includes:

(1) lawyers' fees;

(2) notary fees and other expenses incurred in investigation and gathering evidence;

(3) auditing fees;

(4) transportation, meal and lodging expenses;

(5) expenses for printing trial materials; and

(6) other reasonable expenditures incurred by the rights holder in halting the infringement or in connection with the court action.

An examination of the reasonableness and necessity of the aforementioned expenditures shall be conducted.

Article 14: For the purposes of Item (1) of the first paragraph of Article 13 hereof, the term "lawyers' fees" means the lawyers' fees agreed upon and determined by the concerned party and his legal counsel in accordance with the law. The measure of damages to be upheld may be determined in accordance with the following principles:

(1) the genuine necessity to retain a lawyer(s) for the court action due to the technical nature or complexity of the case;

(2) if the defendant's infringement is essentially upheld and the defendant is required to bear liability for damages, the lawyers' fees to be awarded shall be determined based on the ratio of the measure of damages determined in the judgment to the amount claimed; additionally, if the judgment upholds other claims, the measure of damages shall be increased appropriately; or

(3) if the defendant is not liable for damages but is ordered to bear such civil liability as halting the infringement, apologizing, etc., consideration shall be given to awarding lawyers' fees based on the extent to which the plaintiff's claims were upheld, provided that, in general, the amount shall be no higher than one-third of the lawyers' fees.

Article 15: If the "notary fees" mentioned in Item (2) of the first paragraph of Article 13 hereof satisfy the following conditions, they shall be borne by the defendant:

(1) the infringement is essentially upheld; and

(2) the notarized proof served as evidence in determining the facts of the case.

Article 16: The "auditing fees" mentioned in Item (3) of the first paragraph of Article 13 hereof shall be awarded in proportion to the claimed amount accounted for by the measure of damages determined in the judgment.

Article 17: If a defendant's criminal, administrative or civil liability for infringement of copyright or rights relating to copyright has been pursued two or more times previously, a heavier measure of damages shall be determined within the limit of the measure of damages determined in accordance herewith.

Article 18: The degree of detail of the explanation of the measure of damages in the judgment shall be determined based on such specific factors as the complexity of the case, the magnitude of the dispute between the parties, etc.

Article 19: If the defendant has committed any of the infringing acts specified in Article 47 of the Trademark Law, if the circumstances thereof are serious and if such act has damaged the public interest, the following civil sanctions may be imposed on him:

(1) a fine: the amount of which may not be higher than three times the measure of damages determined in the judgment;

(2) confiscation and destruction of the infringing reproductions; and

(3) confiscation of the materials, tools, equipment, etc. chiefly used in producing the infringing reproductions.

Article 20: If a plaintiff has fabricated facts and instituted a court action for illicit ends and its court action or claims are rejected, he may be ordered to bear the reasonable expenses incurred by the defendant in connection with the court action, including:

(1) lawyers' fees;

(2) transportation, meal and lodging expenses;

(3) expenses incurred in investigation and gathering evidence;

(4) compensation for time off work; and

(5) other reasonable expenditures incurred in connection with the court action.

Damages for Mental Anguish

Article 21: If the moral rights of the author or performer are infringed and the circumstances of such infringement are serious and if application of halting of the infringement, elimination of the effects and an apology are insufficient to console the plaintiff for mental anguish suffered, the defendant shall be ordered to pay the plaintiff damages for mental anguish.

If a legal person or other organization institutes an action claiming compensation for mental anguish on the grounds that its moral rights as an author or performer have been infringed, its petition shall not be accepted.

Article 22: The defendant may be ordered to pay damages for mental anguish if:

(1) without the permission of the plaintiff, he seriously contravened the plaintiff's wish by publishing his work and, by doing so, adversely affected the plaintiff's reputation or the public's opinion of him;

(2) he has copied a large quantity of the plaintiff's works, the influence of which has been wide-ranging and, as a result thereof, enabled the defendant to gain a relatively good reputation;

(3) he seriously distorted and/or altered another's work;

(4) without permission, he released in his own name a cooperative work in which the plaintiff had a principal creative role, thus enabling the defendant to gain a relatively good reputation;

(5) he did not participate in the creation of a work but, with a view to obtaining personal gain, he signed his name on the plaintiff's work;

(6) he seriously distorted the performance image, thereby adversely affecting the public image of the plaintiff;

(7) he produced and/or sold works passed off as those of the plaintiff, and such works have had a relatively large influence; or

(8) he has done something else that merits the payment to the rights holder of damages for mental anguish.

Article 23: The measure of damages for mental anguish shall be comprehensively determined based on such factors as the extent of the defendant's fault, the method of infringement, the circumstances of the infringement, the scope of influence, the profit derived from the infringement, the defendant's capacity to bear liability for damages, etc.

In general, damages for mental anguish shall not be less than Rmb2,000 or more than Rmb50,000.

Article 24: If, after the death of a copyright holder or performance rights holder, his/her immediate family institute a court action and claim damages for mental anguish on the grounds that the infringement by the defendant of the moral rights of the author or performer has caused them to suffer mental anguish, the case shall be accepted.

Determination of the Measure of Damages for Frequently Encountered Infringements

Article 25: If the plaintiff's loss is to be determined by the method specified in item (2) of the first paragraph of Article 7 hereof, reference may be made to the following factors and the measures of damages shall be set between two to five times the relevant author's remuneration specified by the state:

(1) the renown of the work and its market influence during the period of infringement;

(2) the renown of the author;

(3) the extent of the fault of the defendant; and

(4) the creative difficulty of the work and the creative costs invested in the work.

If the number of characters in a written work is less than 1,000, it shall be counted as 1,000.

If the plaintiff substantiates the reasonable rate for author's remuneration he charges under comparable circumstances, such rate shall be considered.

Article 26: The measure of damages for works such as written works, works of fine art, photographic works, etc. transmitted on the internet may be determined by making reference to relevant state provisions on author's remuneration.

Article 27: If a written work, work of fine art, photographic work, etc. is used in an advertisement, including a newspaper or periodical advertisement, outdoor advertisement, internet advertisement, store front advertisement, product manual, etc., the measure of damages may be comprehensively determined based on such factors as the advertisement owner's investment in the advertisement, the production fee charged by the advertisement producer, the advertising fee charged by the advertiser as well as the renown of the work, its function in the advertisement, the business scale of the defendant, the method and extent of the infringement, etc.

If the plaintiff substantiates the reasonable royalty he charges under comparable circumstances, such royalty shall be considered.

Article 28: If a written work, work of fine art, photographic work, etc. is used for commercial purposes, e.g. in the packaging dress of merchandise, as the pattern on a piece of merchandise, on negotiable instruments, philatelic products, etc., the measure of damages may be comprehensively determined based on such factors as the renown of the work, its prominence on the product, the business scale of the defendant, the method and extent of the infringement, the profit derived from the infringement, etc. In general, the determined measure of damages shall be greater than the measure of damages determined in accordance with Item (2) of the first paragraph of Article 7 and Article 25 hereof.

Article 29: If copyright in musical works or the rights of an audio and video product rights holder are infringed, the measure of damages may be determined by the following methods:

(1) the reasonable royalty charged by the plaintiff;

(2) if the court action was instituted by a collective copyright management organization, its royalty rate; or

(3) if used for commercial purposes, reference may be made to the method for determining the measure of damages set forth in Article 28 hereof.

Article 30: If the defendant provides a download service for graphics, music, etc., the measure of damages may be determined by the following methods:

(1) the reasonable royalty charged by the plaintiff;

(2) if the court action was instituted by a collective copyright management organization, its royalty rate; or

(3) the profit derived by the defendant in offering the infringing service.

Article 31: If a software end user infringes a computer software copyright, the measure of damages may be determined by the following methods:

(1) the reasonable royalty charged by the plaintiff; or

(2) the market price of the legitimate version of the software.

Article 32: If the measure of damages is determined by the methods specified in Articles 26 to 31 hereof, the specific measure of damages may additionally be determined at two to five times the aforementioned amount based on the factors specified in the first paragraph of Article 25.

Article 33: If the quantity of infringing reproductions indicated in the alleged infringing publication or in advertising and publicity materials is larger than that stated by the defendant during the court action, the quantity indicated in the publication or in the advertising and publicity materials shall serve as the basis for determining the measure of damages unless he presents evidence or reasonable grounds to refute such quantity.

Article 34: If a publisher, reproducer or distributor, etc. of books or audio and video products infringes copyright or rights relating to copyright and ought to be able to provide the specific quantity of relevant infringing reproductions, but refuses to do so, or if the evidence he presents is not credible, the quantity of infringing reproductions may be determined in accordance with the following quantities:

(1) for books, not less than 3,000 volumes; or

(2) for audio and video products, not less than 20,000 pieces.

Supplementary Provisions

Article 35: These Opinions shall be effective as of the date of issuance.