Supreme People's Court press conference highlights latest trends in trademark cases

China

On October 22 2013 the Supreme People's Court held a press conference in Beijing to present eight leading IP court decisions in civil and criminal cases. Trademark owners might find that these cases help resolve some long-lasting concerns, including a lack of deterrence against infringement, the insufficient amounts of damages awarded, and the difficulties in obtaining interim injunctive relief. 

Trademark holders have long recognised how difficult it is to obtain preliminary injunctions in China. However, among the cases released last month, the Supreme People's Court listed one case where Eli Lilly China successfully obtained an interim injunction in a trade secret case. This emphasis placed by the Supreme People's Court on the importance of injunctive relief may encourage judges to be more aggressive when granting interim injunctions for all types of cases, including trademark and unfair competition cases. 

A major focus in the Supreme People's Court press conference was an increase in the amount of damages awarded in IP lawsuits. The court highlighted three trends that have led to this increase:

  1. The courts have started to allow the use of economic analysis, valuations, financial accounting and other professional analytical methods when calculating damages in IP cases.  
  2. The courts have become more willing to exercise their discretion to award fair and reasonable damages, and have even awarded higher amounts of compensation when infringers refused to provide evidence in their possession.  
  3. The Supreme People's Court suggested that the courts would actively support rights holders' requests for compensation of reasonable expenses spent on IP enforcement, and that such enforcement expenses would be taken into account separately from the damages.

In Haitian v Gaoming, a trademark infringement and unfair competition case, there was insufficient evidence to directly prove the amount of the rights holder's actual loss, but the court used the audit report and other relevant evidence to determine the amount of damages and allow the rights holder to obtain the maximum amount of compensation. Haitian, the rights holder, had also spent more than Rmb4 million on advertising to recover from the damage done to its goodwill as a result of defendant Gaoming's actions. The court determined that the amount incurred to eliminate the negative effects on its goodwill counted as reasonable expenses and ordered Gaoming to pay such amount to Haitian. The combination of these measures significantly increased the amount of damages awarded.

The Supreme People's Court also addressed the issue of the enforcement of court decisions. In certain cases, the courts ordered the defendant to change its company name where the use of such name constituted trademark infringement or unfair competition, to reduce the risks of repeated or continued infringement (see Haitian v Gaoming). 

What is also interesting is that the Chinese courts have started to use civil sanctions to obtain compliance with court orders. The Supreme People's Court pointed to a trademark case, BMW v Guangzhou Century Baochi Clothing Ltd, in which the local court imposed harsher civil sanctions against the infringer, who had committed wilful and repeated infringements. The court, taking into account various factors, held that Gaungzhou Century Baochi Clothing had committed a serious and malicious infringement and had gained huge profits. Accordingly, it was ordered to pay Rmb2 million to compensate the plaintiff's economic losses and an additional Rmb100,000 in civil sanctions.

The Supreme People's Court also highlighted that record criminal fines have been imposed in trademark counterfeiting cases. In the Zong Liangui case, which involved 28 defendants accused of counterfeiting registered trademarks, an incredible Rmb27 million in fines was awarded.

The Supreme People's Court's determination to enhance the protection of IP rights and deter further infringements through the imposition of higher damages and fines should be welcomed by trademark owners. However, it remains to be seen how soon the local courts will start to follow these trends.  

He Jing, AnJie Law Firm, Beijing

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