As Lululemon has hit the headlines in China this month, regarding its rising China sales revenue, in IP legal circles, it has also been making news. Recently, the Meizhou Intermediate Court from Guangdong issued a judgement ordering an infringer named Zhang, to immediately cease trademark infringement (counterfeiting in this case) and compensate Lululemon for economic losses of RMB 1 million (approx. USD140,000). It has been reported that in this case, the court “… comprehensively considered Zhang’s degree of subjective fault, infringement profits, nature of infringement, operation method, operation scale, duration, sales amount and other factors, combined with the fame of Lululemon’s registered trademarks, and the reasonable and necessary cost paid by Lululemon to stop the infringement” when calculating the damages amount to be paid by Zhang.
In a 2022 case out of Shanghai, the Shanghai IP Court affirmed a lower court’s decision in favour of Daimler in a trademark infringement case (counterfeiting) involving the Mercedes Benz trademarks, and ordered an infringer to pay RMB800,000 (USD113,000) in compensation to cover Daimler's economic losses. Key in this case, was the presentation of submissions and evidence discussing how the quality of the counterfeits could affect the safety of consumers (brake pads and other important auto parts were involved). Of particular interest in this case, is that the infringer attempted to use a common defence raised by counterfeiters to try to keep damages "manageable": “As for Tonghe’s contention that the amount of compensation should be based on the number of infringing products seized by the industrial and commercial administration and the amount of administrative penalty, the SIPC held that, according to Trademark Law of the People's Republic of China, the trademark registrant has the right to apply for administrative investigation as well as to file a civil lawsuit for trademark infringement against the infringement of the exclusive right to use a registered trademark. Tonghe was subject to administrative punishment because the trademark registrant filed an administrative complaint based on the three notarized purchases of infringing products. However, the amount of compensation awarded in civil actions is not necessarily based on the facts on which the administrative penalty is based and the amount of the administrative penalty.” - see an analysis by the court reporters here.
In December 2022, the Beijing IP Court issued a well publicised judgement in the case of Jägermeister vs Yego Hunter - this case hit the headlines given the size of the damages award being RMB10m (approximately USD1.4m) including punitive damages.
Jägermeister is a German digestif product manufacturer. Yego Hunter is a liqueur produced produced by Shengluo Company Qingdao Wine Co., Ltd. (简称圣罗拉公司), Hefei Puyuan Commerce & Trade Co., Ltd. (合肥葡园商贸有限公司), and an individual named Chang. The infringers used the logos "野格哈古雷斯" (Ye Ge Ha Gu Lei Si) and "YEGO HUNTER" as well as a deer head graphic on the labels of the bottles and on their website. The first two Chinese characters are the exact same of the trademark registered by Jägermeister and therefore were considered the Chinese translation of it. Jägermeister sued for trademark infringement and contravention of the PRC Law Against Unfair Competition. It was a classic infringement/passing off case involving bottles and labelling - see a discussion of the case here for images of the marks involved.
In this case, the court based its calculations of damages on the monthly sale invoices offered by the defendant. These documents showed that the defendant had received around RMB8m from sales within two months. purchasers in two months. It is thought that, all things considered, the damages award could have ended up being significantly higher than RMB10m in this case, however perhaps the degree of infringement involved played on the minds of the judicial officers when concluding what amount should be paid by the infringers.
Many may think that these large damages awards are a new thing for China’s courts. However, it is important to remember that damages awards have been rising consistently over the last ten years across the intellectual property infringement cases in general. Many will remember New Balance grabbing the headlines in IP legal circles in 2017, with its damages award of USD1.5m. Then in 2021, New Balance saw an award from a Shanghai court for USD3.9m. If we were to wind the clock back to 2005, many will recall how similar cases would often end in awards that barely covered legal and investigation costs.
Local Chinese companies are also benefitting from the court’s willingness to issue larger damages awards. For example, in the case of Huaihai (the local manufacturer of tricycles, motorcycles, scooters and e-bikes) v Hairun, a Chongqing court has just awarded RMB30m in damages for trademark infringement involving mechanical lubricants. This case has become well known for another reason, being whether damages should be ordered to be paid by the owner of an infringing trademark in relation to the period preceding the invalidation of the mark, when bad faith is in play – consistent with the draft amendments to the Trademark Law, awaiting promulgation, and prior court decisions, the court answered this question in the affirmative.