A Japanese chemical company sued a Guangzhou biotech firm for manufacturing and selling tuberculosis nucleic-acid test kits that copied its patented method for synthesizing polynucleotides, an improvement on LAMP (loop-mediated isothermal amplification) technology. The Guangzhou Intellectual Property Court found the infringement willful and serious and applied a 2x punitive multiplier, but only to sales that took place after China's Civil Code came into force on January 1, 2021. For foreign patent holders, this "segmented calculation" method decides how much of a damages claim gets multiplied, and the case has been selected for the China Courts 2026 Annual Cases.

Punitive damages are a recent addition to Chinese IP law. Before the Civil Code, patent infringement in China was compensated on a make-whole basis. The 2008 Patent Law, in Article 65, let courts fix damages by the patentee's losses, the infringer's profits, a reasonable royalty, or statutory damages of RMB 10,000 to RMB 1 million. There was no punishment on top.

That changed on January 1, 2021. Civil Code Article 1185 created punitive damages for intentional infringement of IP rights where the circumstances are serious. The revised Patent Law, effective June 1, 2021, carried the same idea into Article 71, allowing courts to multiply damages by one to five times for willful, serious infringement. The Supreme People's Court then issued an interpretation on punitive damages in IP cases, effective March 3, 2021, setting out how the base amount and multiplier are determined.

The problem this case resolves is the transition. A patent infringer who began selling infringing goods in 2019 and kept selling through 2021 straddles two legal regimes. Do you punish all of it, none of it, or only part? The Guangzhou court's answer has become the reference point.

The plaintiff, a Japanese chemical corporation, accused a Guangzhou biotech company of making and selling a tuberculosis test kit that fell within its invention patent from January 2019 to September 2021. It demanded RMB 28.5 million in economic loss and reasonable expenses.

The court refused to apply punitive damages to the whole period. Its reasoning ran through three exceptions to the non-retroactivity principle, each drawn from the Supreme People's Court's Interpretation on the Time Effect of the Civil Code.

First, the court asked whether the infringement was one continuing legal fact. If so, the Civil Code would apply to the entire span. It concluded the manufacturing, sales, and bid submissions were repeated legal facts separated by time intervals, not a single continuing fact. They could not pull pre-2021 conduct into the Civil Code's punitive regime.

Second, it considered whether favorable retroactivity applied. The relevant provision allows applying the Civil Code to pre-Code disputes only when doing so better protects the lawful rights of civil subjects. The court read "civil subjects" as plural: retroactivity must benefit all parties, or at least one without harming another. Punishing the defendant for pre-2021 conduct would help the patentee but strip the defendant of rights it held when it acted. That failed the test.

Third, it asked whether punitive damages were a new provision with no prior equivalent, which would permit blank retroactivity. The court held they were not new but an aggravation of an existing liability rule. The 2008 Patent Law already dealt with compensation; Civil Code Article 1185 simply made the consequences harsher. Blank retroactivity did not apply.

The result was a split. Infringement before January 1, 2021 was valued under the 2008 Patent Law. Infringement after that date was valued under the Civil Code, with the court deriving the base amount from the parties' agreed sales figures, the operating profit margin of comparable listed companies, and the patent's contribution rate, then applying a 2x multiplier.

The final award: RMB 2,247,547.24 in economic loss, plus RMB 150,000 in reasonable enforcement costs. The Supreme People's Court dismissed the appeals of both sides and affirmed on June 27, 2024.

Two things stand out. The segmenting cut the award hard. A 2x multiplier over the full period would have produced far more than the RMB 2.4 million actually granted. Patentees who assume punitive damages stretch across an entire infringing period will overestimate what they can recover.

But the case also confirms that Chinese courts will grant punitive damages in cross-border disputes. The plaintiff here was foreign, the defendant domestic, and the court still applied the multiplier to post-2021 sales once the base amount and intent were proven. That is the more important signal for a foreign brand deciding whether Chinese litigation is worth the cost.

The distinction between repeated and continuing infringement carries practical weight too. A product line kept on the market year after year may look like one continuing wrong, but this ruling treats discrete manufacturing and sales batches as separate, repeated acts. That affects how far back your damages can reach.

If you are preparing or defending a patent case in China, the segmented rule should shape how you frame the damages.

For patentees, document the infringer's conduct before and after January 1, 2021 separately. The post-Code portion is where the multiplier lives. Prove willfulness and seriousness with concrete evidence: cease-and-desist letters the defendant ignored, its knowledge of your patent, and the scale and duration of sales. Then build the base amount from the defendant's actual sales and a defensible profit margin, since the court anchored its calculation there rather than on a speculative royalty.

For defendants, push back on any attempt to apply punitive damages to the pre-2021 period. This case gives you the exact authority: Civil Code Article 1185 is an aggravation of existing liability, not a new rule, so it cannot reach conduct before the Code took effect. If the claimant cannot segregate pre- and post-Code sales, argue that the whole punitive claim should fall.

The practical outcome, a RMB 28.5 million claim reduced to about RMB 2.4 million, shows how much the segmented calculation can move the number.

China's punitive damages regime is real, and it is being applied in cross-border patent disputes. But it is not a blunt instrument. The multiplier is earned through proof of intent and serious circumstances, applied to a base amount the court derives from actual sales and profit evidence, and confined to conduct after January 1, 2021.

For a foreign company with Chinese patent exposure, the message is straightforward. Track when the infringing conduct happened. Treat January 1, 2021 as the line between compensatory and punitive damages. And if you hold patents covering products sold in China, the fact that a foreign patentee just secured punitive damages against a domestic competitor is reason enough to audit where your enforcement risk and recovery actually sit.

Need to assess how this rule applies to a specific dispute, whether you hold Chinese patents or face an infringement claim? We advise foreign companies on China patent enforcement and cross-border IP strategy. Get in touch for a case-specific read.