Proving Loss and Profits in China Trademark Litigation

By Pan Jianxing · Published 28 September 2026

Proving infringement and proving its financial consequences are separate tasks. A purchase of counterfeit goods may establish a sale, but it does not establish the seller's total profits or the brand's lost sales. Foreign brand owners should build the damages file while investigating liability, with a calculation that another person can reproduce from the underlying records.

This guide concerns mainland China and was checked on 28 September 2026. The revised Trademark Law takes effect on 1 January 2027. Current claims require the existing law and applicable judicial interpretations, including the new punitive-damages interpretation effective since 1 May 2026.

Choose a supported calculation

Article 63 of the current Trademark Law addresses actual loss, the infringer's profits where loss is difficult to determine, and a reasonable amount by reference to multiples of the trademark royalty where the relevant amounts are difficult to determine. Article 13 of the Supreme People's Court's trademark civil-disputes interpretation, as amended in 2020 also allows calculation using the method selected by the rights holder.

Prepare a primary method and evidence-based alternatives. Do not add actual loss and the infringer's profits together for the same injury. Identify the relevant defendant, products, period and sales channel before putting numbers into a spreadsheet.

Actual loss: connect reduced sales to the infringement

Article 15 of the trademark interpretation provides calculation methods based on reduced sales caused by infringement, or infringing sales volume, multiplied by unit profit on the registered trademark goods. The practical difficulty is explaining the inputs and the causal link.

Collect product-level sales, prices, costs, returns, rebates and margins, together with distributor orders and customer communications identifying substitution or confusion. Compare appropriate periods and markets. Address alternative explanations such as supply shortages, changed distribution arrangements or a discontinued product. A global revenue decline should not be presented as the loss from one Chinese defendant.

The claimant's own use also matters. Under Article 64, where the defendant raises a non-use defence, the court may require evidence of actual use during the preceding three years. Failure to prove that use and failure to prove other loss can defeat a compensation claim. Keep the use records alongside the financial records.

Infringing profits: separate turnover from profit

Article 14 of the trademark interpretation permits infringing sales volume to be multiplied by unit profit; if the infringing product's unit profit cannot be established, the registered trademark product's unit profit is the stated fallback. Identify which transactions actually concern the infringement before choosing a margin.

Preserve seller identities, transaction records, dated listings, price histories and available stock or shipment information. Explain whether a platform counter measures completed sales, reviews or another metric, and whether it combines different products. Remove duplicate orders, cancellations and returns where the data permit. Distinguish observed figures from estimates and state each assumption.

Article 63 permits the court to order production of relevant books and records mainly controlled by the infringer after the rights holder has made its best evidential efforts. Failure to produce them, or production of false records, can allow the court to refer to the claimant's contentions and evidence. Support a focused request by identifying the records, their likely holder and their relevance; merely asserting that the defendant must have earned a large sum is insufficient preparation.

Royalties and statutory damages still need evidence

For a royalty-based calculation, provide the agreement, payment records and evidence that the licence was actually performed. Explain comparability: trademark, territory, products, duration, exclusivity and sales scale. If a package includes technology, artwork or distribution services, explain how the trademark component is identified. An unsigned proposal or unrelated foreign licence needs particular justification.

Where actual loss, infringing profits and the royalty are difficult to determine, Article 63 permits statutory damages of up to RMB 5 million. That is a ceiling for this method, not a standard award or the universal ceiling on proved damages. Evidence of duration, scale, fault, trademark reputation and consequences helps the court assess the amount even where exact accounts are unavailable.

Punitive damages require a separate evidential case

Bad-faith trademark infringement and serious circumstances must both be established. Separate proof of knowledge and deliberate conduct from proof of seriousness. Effective notice followed by continued infringement, prior dealings, repeated infringement after a judgment, or concealed evidence may matter, but their legal significance depends on the established facts.

The Supreme People's Court's 2026 punitive-damages interpretation (Fa Shi [2026] No. 7) requires a specified amount, calculation and factual grounds. Additions are permitted before the end of first-instance oral argument; a new request on appeal is not supported if voluntary mediation fails. Do not reserve the issue for a later case without examining the procedural consequences.

Article 8 excludes statutory damages as the punitive calculation base. Article 9 provides profit and margin rules for establishing that base. Article 12 caps the total damages calculated under the punitive method at five times the base, with reasonable enforcement expenses calculated separately. It is not an automatic entitlement to five times the statutory ceiling, or to a base amount plus another five times that amount. Under Article 14, the 2026 interpretation does not apply to retrials of cases in which an effective judgment was already issued before its commencement.

Make the file usable before the claim is fixed

Maintain separate schedules for loss, profits, royalties and reasonable enforcement expenses, each linked to source documents. Preserve invoices and payment evidence for investigation, evidence collection and legal work; reasonableness and recoverability require assessment. Plan Chinese translations and any evidential formalities for overseas financial records early.

Article 18 of the trademark interpretation generally sets a three-year limitation period running from knowledge, actual or constructive, of the harm and the responsible party. Continued infringement has a specific rule concerning cessation and the damages period. Check the dates and any interruption or suspension before relying on a lookback calculation.

For a damages evidence assessment, provide the registration and use records, infringement chronology, available sales data, licences and an initial calculation with its assumptions. The useful result is a defensible evidence plan and claim, with unresolved figures clearly identified.

Pan Jianxing
China-qualified lawyer · Partner, 北京市长安律师事务所
Beijing & Shenzhen
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