New Balance ordered to pay $15.8 million in damages to Chinese businessman
The Guangzhou Intermediate People’s Court has ordered Xin Bai Lun Trade (China) Ltd, a subsidiary of New Balance, to pay Rmb98 million (approximately $15.8 million) to a Chinese businessman who owned the registered trademarks BAI LUN and XIN BAI LUN in China.
Xin Bai Lun China argued that ‘Xin Bai Lun’ is the Chinese translation of ‘New Balance’, and that its use pre-dated the plaintiff’s registration of XIN BAI LUN as a trademark. However, the court found that Xin Bai Lun China’s use of ‘Xin Bai Lun’ constituted trademark infringement, and that ‘New Balance’ should be translated as ‘Xin Ping Heng’ in Chinese.
The applicable law in this case was the old 2001 Trademark Law. As the plaintiff chose to have the damages calculated based on the profit resulting from Xin Bai Lun China’s infringing activities, the court found that Xin Bai Lun China’s net income during the relevant period (from 2011 to 2013) was approximately Rmb195.8 million and determined that the amount of damages should be half of Xin Bai Lun China’s net income during that period - that is, Rmb98 million.
The way in which the court calculated the damages is astonishing, as it essentially awarded 50% of the net profit of New Balance China to the plaintiff. Although New Balance likely made a mistake by not registering its Chinese name in the first place, it may not have deserved this punishment: although it is unclear from the judgment whether there was any bad faith in the plaintiff’s registration, the name ‘Xin Bai Lun’ has been widely associated with New Balance for years. It seems that the court simply followed the text of the old Trademark Law, without considering issues such as causation and other factors relevant to damages. This case is clearly a lesson for firms that are expanding quickly in China.
He Jing, senior consultant, and Cao Hui, associate at AnJie Law Firm