PRC court awards maximum statutory damages of RMB 3 million in a trademark infringement case

In recent years, damages awarded in IP lawsuits, especially in trademark infringement cases, have increased significantly in China. The revised PRC Trademark Law, which took effect in May 2014, increased the cap of statutory damages awarded for trademark infringement from RMB 500,000 (EUR 67,000) to RMB 3 million (EUR 400,000).

The Beijing IP Court recently awarded the maximum statutory damages of RMB 3 million (EUR 400,000) for the first time, to a foreign manufacturer of winter coats, MONCLER S.P.A. (“MONCLER”), in a trademark infringement dispute against a Chinese garment producer (“ChinaCo”).

Background

In December 2014, MONCLER filed a lawsuit against ChinaCo with the Beijing IP Court on the grounds of trademark infringement and unfair competition. MONCLER argued that ChinaCo illegally used a logo on its products and website which is confusingly similar to MONCLER’s registered trademark without MONCLER’s prior consent. MONCLER therefore claimed damages of RMB 3 million (EUR 400,000), including reasonable fees for ceasing infringement of around RMB 130,000 (EUR 17,000). The Beijing IP Court ruled that ChinaCo had committed a trademark infringement and awarded RMB 3 million (EUR 400,000) to MONCLER.

Conclusions

1. Criteria for awarding statutory damages According to the PRC Trademark Law, the amount of actual damages for trademark infringement can be determined according to the benefits gained by the infringer (“Illegal Benefits”) or the losses suffered by the trademark owner (“Actual Losses”) during the period of infringement. If both the Illegal Benefits and the Actual Losses are difficult to calculate, the court may, at its discretion, award statutory damages. In practice, it is often difficult for trademark owners to prove Illegal Benefits or Actual Losses, and so trademark owners typically rely on statutory damages. However, PRC law does not set any criteria for the determination of these statutory damages, but instead confers a wide discretion upon the Chinese courts. In the MONCLER case, the Beijing IP Court awarded statutory damages based on the following grounds:
   • MONCLER’s registered trademark has a good reputation in the Chinese market.
   • The products offered on ChinaCo’s website carry a logo which is identical to the registered trademark of MONCLER.
   • The infringing products distributed by ChinaCo were high value.
   • ChinaCo intentionally did not label the name of the producer on the infringing products, which demonstrates intention of ChinaCo to infringe.
   The factors mentioned above can serve as reference points for other courts in the process of awarding statutory damages.
2. Burden of proof According to the revised PRC Trademark Law, if the trademark owner has made reasonable efforts to quantify the amount of the actual damages, the burden of proof will shift to the infringer. If the infringer refuses to provide the court with relevant financial documents or provides false materials, the court may determine the amount of damages by basing its assessment on the damages claimed by the trademark owner. This was the case with MONCLER, where the Beijing IP Court awarded the statutory damages by reference to MONCLER’s claimed damages. This approach favors trademark owners by lessening the burden of proof placed on them.
3. Reasonable fees for ceasing the infringement Usually, only half of the reasonable fees spent towards ceasing the infringement can be awarded by the court. However, in the case at hand, the Beijing IP Court granted all “reasonable fees” claimed by MONCLER.

In summary, this case indicates that the Beijing IP Court intends to lessen the burden of proof for trademark infringement for trademark owners and enable them to obtain more compensation for the infringement of their trademark rights. However, since China’s legal system is not based on case law, it remains to be seen whether the judgment will have any real effect on judicial practice in the future. In our opinion, codification of the criteria for the award of statutory damages for trademark infringement would be useful to ensure a greater degree of legal certainty for all parties involved in trademark infringement cases.