New Balance has won in a trade mark infringement dispute in a first instance decision from the Suzhou Intermediate People’s Court. The court ordered the defendants to pay damages and legal costs of RMB10 million ($1.47 million) in a case involving the use of the shoemaker’s slanting logo.
The defendants Zheng Chaozhong, Xin Ping Heng Sporting Goods Limited Company and Bo Si Da Ke Trading Limited sold shoes with a slanted N design.
This case is unusal as it is rare for Chinese courts to issue an award that is in excess of the maximum statutory amount that could be claimed which is RMB 3 million. The decision may encourage foreign brand owners to initiate high damages lawsuits against aggressive infringers.
“Nowadays, foreign brand owners like us are facing increasingly aggressive lookalike infringements in China on a scale we don’t see in other major markets,” says Angel Shi, brand protection manager at New Balance. “The winning of this case has given us confidence to continue our proactive brand protection strategy in China.”
Carol Wang, head of Shanghai litigation team at Lusheng Law Firm (which represented New Balance) explains the reasoning behind the judgement. “Generally speaking, it’s the defendant’s infringement scale and their bad faith,” she says. The reasoning has three main points:
- The court concluded that according to the evidence, the defendant’s damages had no doubt exceeded RMB 10 million, whether it was in terms of the plaintiff’s loss or the defendant’s illegal profit. The defendant’s business operation duration, the defendant’s advertisement through different media, the Administration for Industry and Commerce’s penalty decisions, the notarised defendant’s warehouse and their personal statement about the sales, and the industry profit rate all contributed to the evidence.
2. The defendant’s bad faith and the seriousness of their infringement nature was another factor as they did not stop the infringement even after receiving the court’s interim injunction.
3. The court also fully supported the legal cost of RMB 800,000, saying for such a complicated case involving two challenges of jurisdiction and two court hearings of interim injunctions, the plaintiff’s attorneys have paid a great amount of effort to push the case forward, and have well facilitated the progress of their hearing and should be fully supported.
Wang observes that in China’s judicial practice, sometimes even when the evidence is solid, the judges still need to have reasonable courage and wisdom to award damages in excess of the statutory damages because most courts take conservative approaches.
“IP enforcement in second and third tier cities in China have been progressing, but compared with tier one cities, where the judges tend to take more open minded approach, the judges there still take a relatively conservative approach,” Wang says. “You can rarely find any judgements with high amounts of damages in tier two or three cities. Of course the cities close to Shanghai, like Suzhou and Hangzhou, which we call tier 1.5 cities, are as sophisticated as tier one cities.”
While local protectionism still takes place in China, IP enforcement is gradually improving. High damage awards may help to deter infringers and give a confidence boost to brand owners, especially foreign ones, in their efforts for brand protection.
The defendants were represented by Fujian Chengyi Law Firm and Shanghai Sanshi Law Firm. Neither firm has yet responded to request for comment.