Calculating Base Damages and Multipliers in Chinese Trademark Infringement
Base damages under PRC Trademark Law Article 63 follow strict evidentiary priority, with multipliers up to five times applied for willful infringement.
Net Profit Calculation
Meaning
Financial profit assessment in Chinese civil litigation calculates final commercial yield by deducting operating expenses and verified overhead from total revenue. Executing a net profit calculation converts raw factory sales data into the legal baseline used to establish civil restitution under intellectual property statutes. According to Supreme People’s Court judicial interpretations, courts apply this accounting standard to capture the true financial gain extracted from unauthorized manufacturing.
The calculation method stops applying when corporate financial records are fraudulent or incomplete, shifting the court toward statutory damages regimes.
Expense Deductibility
Accounting rules strictly distinguish allowable production costs from general corporate overhead during judicial audits. Factory defendants must produce special value-added tax invoices and raw material procurement ledgers to support claimed deductions. In a net profit calculation, unverified administrative costs or executive bonuses are added back to total income by court auditors.
Excluding non-essential corporate expenses raises the final net yield figure, increasing monetary liability for the factory owners.
Evidentiary Presumption
Refusal to submit corporate financial accounts creates a legal presumption favoring the economic estimates presented by the plaintiff. Courts utilize tax return data or industry profit margins published by government bureaus to reconstruct income figures when factory books are withheld. When foreign rights holders supply third-party customs clearance data, judges multiply shipment volumes by benchmark profit rates to establish liability.
This procedural presumption prevents non-compliant manufacturers from escaping financial exposure through accounting opacity.
Damages Benchmark
Calculated profits serve as the numerical baseline for multiplying statutory punitive awards in willful infringement actions. High profit margins documented during judicial accounting lead directly to elevated financial judgments against contract facilities.