Moncler carries the day and takes home a whopping Rmb3 million in statutory damages

China

Moncler, a Franco-Italian fashion company famous for its shiny, fluffy winter coats, has recently achieved a significant victory before the Beijing IP Court. Moncler is in fact the first claimant to obtain the increased maximum amount of statutory damages of Rmb3 million (approximately $470,000) since the new Trademark Law came into force in May 2014 (the former maximum amount was Rmb500,000). This win can be seen as ground-breaking in China, where damages for trademark infringement are generally perceived to be relatively low.

Moncler entered the Chinese market in 2008, and quickly became a successful brand through intensive marketing campaigns. However, as happens every so often to successful brands in China, Moncler’s success soon drew the attention of counterfeiters. One of them was Royalcat, a Chinese company which started producing down-filled coats bearing either Moncler’s own trademark or similar trademarks.

Moncler’s trademarks:                                             

MONCLER 

Royalcat’s trademark/domain name:    

'mockner.com'    

                                                          

In order to gather evidence of the infringement, Moncler made notarised purchases at Royalcat’s premises. Those samples only bore the Mockner sign, as depicted above, and did not show any information concerning the manufacturer, Royalcat. Moncler therefore brought an infringement lawsuit against Royalcat, requesting a permanent injunction and Rmb3 million in compensatory damages.

One of the classic hurdles in infringement proceedings in China is establishing the concrete damages suffered due to the infringement. In order to assist claimants in proving damages, the trademark law contains a cascade system for the determination of damages:

  • In principle, damages must be set at the level of the actual losses incurred by the rights holder as a result of the infringement.
  • Where this is difficult to determine, the damages may be set at the level of the benefits derived from the infringement by the infringer.
  • Where this also proves too difficult to determine, the damages may be set at a multiple of the royalty fee paid for the use of the trademark.
  • If all of the above methods fail, then the courts may award discretionary damages (up to Rmb3 million under the new Trademark Law), depending on the circumstances of each case (ie, statutory damages).

However, the Chinese courts generally set the evidential bar very high: direct evidence of the above elements is almost always required, the forced production of evidence is rarely granted and lacks teeth, and foreign evidence is subject to several time-consuming formalities (ie, legalisation and notarisation). Therefore, as in the case at hand, many claimants are effectively forced to rely on statutory damages.

In the Moncler case, the IP Court applied the new Trademark Law, which became effective on May 1 2014, since Royalcat’s infringement continued until after May 2014. This meant that Moncler could rely not only on the increased statutory damages, but also on the new provision stipulating that, when a trademark owner produces prima facie evidence showing that financial statements and documents related to infringement are kept by the infringer, the court can order the infringer to produce them. If the infringer fails to do so, the court can determine the damages by referring to the trademark owner’s claim and evidence of damages.

The Beijing IP Court based its decision to grant the maximum amount of statutory damages on the following elements:

  • The MONCLER trademark enjoyed a high reputation on the Chinese market.
  • Royalcat failed to provide its financial statements and documents related to the infringement.
  • Royalcat had wilfully infringed the MONCLER mark as it displayed products bearing an identical MONCLER mark on its website at 'www.mockner.com' and did not display the name of the manufacturer on its products on purpose.
  • Royalcat sold the infringing products at high prices.
  • Royalcat was a longstanding, large-scale infringer, and was even in the process of setting up a commercial network, including franchising stores and distributors.

This case clearly shows that the Beijing IP Court no longer recoils from using the new, stricter sanctions provided by the Trademark Law, even in cases involving foreign claimants - who traditionally faced obstacles when seeking substantial damages. The case is particularly useful in demonstrating the elements that will justify the award of the maximum amount of statutory damages.

Eugene Low, Deanna Wong and Zhen Feng, Hogan Lovells, Hong Kong and Shanghai

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