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 been increasing 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 (approximately EUR 67,000) to RMB 3 million (approximately EUR 400,000). The Beijing IP Court recently awarded the maximum statutory damages of RMB 3 million (approximately EUR 400,000) to a foreign manufacturer of winter coats, i.e. MONCLER S.P.A. (“MONCLER”), in a trademark infringement dispute between MONCLER and a Chinese garment producer (“ChinaCo”). This is the first case in which a PRC court awarded the increased maximum statutory damages to a trademark owner.

ChinaCo has appealed this case to the Beijing High Court. Although the Beijing High Court has not rendered a final judgment yet, this case has attracted considerable public attention due to the high amount of the statutory damages awarded.

Case 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 (approximately EUR 400,000), including reasonable fees for ceasing infringement of around RMB 130,000 (approximately EUR 17,000). The Beijing IP Court acknowledged MONCLER’s claims and ruled that ChinaCo committed a trademark infringement. ChinaCo was, therefore, ordered to pay damages of RMB 3 million (approximately EUR 400,000) to MONCLER.

ChinaCo appealed against this ruling to the Beijing High Court, where the second-instance proceedings are currently pending.

Main Conclusions of the Case 

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.

Usually, in judicial practice, it is difficult for trademark owners to prove Illegal Benefits or Actual Losses. In order to obtain compensation, trademark owners therefore typically have to rely on statutory damages. However, PRC law does not set any criteria for determination of these statutory damages, and, following from that, confers a very wide discretion upon the Chinese courts. In the case at hand, the Beijing IP Court awarded the above-mentioned amount of statutory damages on the following grounds: 

• The registered trademark of MONCLER enjoys a high reputation on the Chinese market.
• The products offered on ChinaCo’s website carry a logo which is identical with the registered trademark of MONCLER. Furthermore, the infringing products distributed by ChinaCo have a high value. ChinaCo’s trademark infringement must, therefore, be considered as serious.
• ChinaCo intentionally did not label the name of the producer on the infringing products, which reflects the ill intention of ChinaCo.

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 prove the amount of the actual damages, the burden of proof will be shifted to the infringer, who possesses the account books and other relevant financial materials. If the infringer refuses to provide the court with these documents or provides false account books or false financial materials, the court may determine the amount of damages by basing its assessment on the damages claimed by the trademark owner.  

The case at hand used the above-mentioned stipulation as a legal basis for awarding damages to the trademark owner. The Beijing IP Court ruled that since MONCLER presented preliminary evidence proving that the account books and other relevant financial materials relating to the infringement were kept by ChinaCo, ChinaCo is obliged to provide such documents. However, since ChinaCo did not present the above-mentioned documents to the Beijing IP Court, the Beijing IP Court awarded the statutory damages by referring to MONCLER’s claimed damages. This eases the burden of proof placed on trademark owners and will be in favor of trademark owners who want to enforce their trademark rights in the near future.  

3. Reasonable fees for ceasing the infringement 

Usually, in judicial practice, only half of the reasonable fees which have been spent towards ceasing the infringement, such as lawyers’ fees, notarization fee for evidence collection, etc. can be awarded to the trademark owner by the court. However, in the case at hand, the Beijing IP Court granted all “reasonable fees” claimed by MONCLER.

In short, this case indicates that the Beijing IP Court intends to ease the burden of proof for trademark infringement and acts towards enabling trademark owners 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 the judicial practice in the future. In our opinion, codification of the criteria for the award of statutory damages for trademark infringement would be a useful way in which to ensure a greater degree of legal certainty for all parties involved in trademark infringement cases.