Introduction
The punitive damages system for trademark infringement serves as an important legal mechanism to combat malicious conduct and protect brand value. Although both China and the United States employ punitive damages as a mechanism to deter intentional infringement, their approaches differ significantly due to distinct legal traditions and policy objectives, particularly in legal foundations, calculation methodologies, and judicial application.
The Statutory Framework in China
China has established a statutory, formulaic framework centered on a “base amount × multiplier” model. The legal foundation is primarily built upon the Trademark Law, which mandates “malice” and “serious circumstances” as prerequisites. The Supreme People’s Court has clarified these terms through judicial interpretations, specifying scenarios like “repeated infringement” or “engaging in infringement as a business.” Despite this clear statutory design, courts still face challenges in applying the rule. They often struggle to determine the base amount for calculation, as it may be based on the right holder’s actual loss, the infringer’s profit, or a reasonable license fee, each of which requires solid evidence that is often difficult to obtain. For example, in Wyeth, the court had to rely on e-commerce sales to estimate the infringer’s profits because complete financial records were unavailable. The court then applied the maximum five-fold multiplier to reflect the infringer’s bad faith. This case highlights both the determination to punish malicious infringement and the practical difficulties in the base calculation process.
Another inconsistency lies in whether the multiplied amount includes the base compensatory damages. Some courts, as in the Nature’s Home case, use “base × multiplier” as the total award, while others adopt “base + (base × multiplier).” This inconsistency has led to unpredictability and potential forum shopping. Empirical studies indicate a relatively low application rate for punitive damages in China, largely because of evidentiary difficulties and the lack of a unified calculation standard.
The Common Law Approach in the United States
By contrast, the United States adopts a more flexible system rooted in common law, with the Lanham Act providing a statutory foundation. Section 35(a) of the Lanham Act (15 U.S.C. § 1117) authorizes courts to increase damages up to three times the actual amount for willful infringement according to the circumstances of the case. It is important to note that these “treble damages” are generally considered an enhancement of compensatory damages rather than a separate punitive damages award as understood in common law tort cases. However, what counts as “willful” has evolved through case law that, while sometimes arising in other intellectual property contexts, has been highly influential in trademark jurisprudence. A critical example of this cross-disciplinary influence is the Supreme Court’s decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. The Court reshaped the doctrine by rejecting the rigid “objective recklessness” standard. The Court held that enhanced damages should depend on the infringer’s subjective bad faith rather than on mechanical tests. The ruling also lowered the burden of proof from “clear and convincing evidence” to a “preponderance of the evidence,” making it easier for plaintiffs to obtain punitive relief.
In the U.S. system, the fact-finders, which are often juries in contested trademark cases, play a central role in evaluating the infringer’s intent and determining the amount of punitive damages, based on their assessment of the defendant’s willfulness and culpability. A clear example is Adidas America, Inc., et al. v. Payless Shoesource, Inc., where internal company documents revealed that Payless intentionally copied Adidas’s “three-stripe” mark. The jury found willful infringement and awarded substantial enhanced damages. This case illustrates how juries link evidence of deliberate misconduct to the decision to impose punitive damages.
Although juries have wide discretion, their awards are subject to judicial review for reasonableness. The leading case BMW of North America, Inc. v. Gore established three factors for assessing whether punitive damages violate the Due Process Clause of the U.S. Constitution: (1) the degree of reprehensibility of the defendant’s conduct, (2) the disparity between the actual or potential harm and the punitive damages award, and (3) the comparison between the award and statutory penalties for similar misconduct. Later, in State Farm Mut. Automobile Ins. Co. v. Campbell, the Court reaffirmed that punitive damages should maintain a reasonable relationship to compensatory damages and generally should not exceed a single-digit ratio. Scholars often refer to this concept as the “proportionality” principle, which aims to ensure that punitive damages remain sufficiently deterrent yet not excessive.
Conclusion
This comparison shows how legal traditions fundamentally shape the enforcement of trademark rights. China’s statutory system provides predictability through clear legislative standards but faces practical challenges due to evidentiary difficulties and inconsistent application. In contrast, the U.S. common law system relies on jury discretion and evolving case law, balanced by constitutional safeguards against excessive punishment. Neither system offers a perfect solution, as each must navigate the tension between deterrence and fairness within its own legal framework.