China: First Preliminary Injunction Granted By China IP Court To Christian Louboutin

Last Updated: 8 December 2016
Article by Dr. Weili Ma

On June 22, 2016, Guangzhou IP Court granted a preliminary injunction to French designer brand Christian Louboutin per its request, ordering Guangzhou Verteam Trade Co., Ltd. (hereafter Verteam) to stop manufacturing, selling and offering for sale nine infringing lipsticks, and ordering Guangzhou Benefit Cosmetics Co., Ltd. (hereafter Benefit) to stop manufacturing the infringing goods. This is the first preliminary injunction issued by Guangzhou IP court and also the first preliminary injunction issued in regards to to patent infringement since the establishments of specialized IP courts in China since late 2014.

In issuing the injunction, Guangzhou IP Court took the following six factors into consideration: 1. Whether the patents at issue were valid and stable; 2. Whether the ongoing activities of the respondents were infringing the patents; 3. Whether the right holder's interests would be irreparably damaged if no injunction were issued; 4. Whether the loss incurred to the respondents by the issuance of the injunction was smaller than or equivalent to the loss caused to the right holder if no injunction were issued; 5. Whether the injunction would harm public interests; and 6. Whether the right holder afforded an effective and proper bond.

While we all know that Chinese courts had always been cautious in issuing preliminary injunctions before litigations are instituted, it is believed that this injunction from Guangzhou IP Court will herald stronger protection for IP rights in China. More details of the case will be shared below.

In 2015, Christian Louboutin was granted three Chinese design patents ZL201430483611.7 (Cosmetic Lid), ZL201430484500.8 (Cosmetic Container), ZL201430484638.8 (Cosmetic Container). The three designs relate to a same lipstick and are respectively designs of the lid, the tube and the whole lipstick. Christian Louboutin planned to enter the Chinese market in 2016. Unfortunately, earlier this year, before releasing its products in China, Christian Louboutin found that Verteam and Benefit (hereafter the respondents) were manufacturing, selling and offering for sale nine types of lipstick with identical designs to the above patents. Christian Louboutin believed that Verteam and Benefit were manufacturing products infringing its patent rights in large quantity and were planning to distribute these products in China. Christian Louboutin would suffer irreparable damage if such activities were not stopped. As a result, Christian Louboutin requested Guangzhou IP Court to order the respondents to stop the above infringing activities immediately, before Christian Louboutin took legal actions against the infringement.

Guangzhou IP Court issued the injunction per Christian Louboutin's request, taking into consideration the following six aspects when deciding whether to issue the injunction or not.

1. Whether the patents at issue are valid and stable

A prerequisite for obtaining an injunction is that the patent at issue is valid and stable. Article 4 of the Supreme Court's Judicial Injunction on Preliminary Injunction (2001) provides that a patentee seeking a preliminary injunction should supply evidence proving its patent's validity, such as a patent certificate, claims and description of the patent, or receipts of annuity payment and so on. As for a design (or utility model) patent, as it is not examined substantively, the patentee should also provide an evaluation report on patentability of the design patent issued by the Patent Reexamination Board (PRB) of SIPO, or a decision affirming the validity of the design patent issued by PRB or a court, so as to prove that the design patent is valid, stable and therefore enforceable.

In this case, Christian Louboutin submitted notifications of allowance, copies of Patent Register, and evaluation reports on the three design patents at issue. It was therefore proven that Christian Louboutin was the right holder of the patents and eligible to request the injunction. Moreover, the validity of the patents was not challenged since their issuance, showing that the patents are valid and stable.

2. Whether the ongoing activities of the respondents were infringing the patent at issue

A court handling a request for injunction will order a respondent to stop its infringing activities only when it considers that there is the possibility that such activities will be infringing. On the other hand, in evaluating the ongoing or soon to be performed activities of the infringer, as long as the court considers that infringement possibly exists, it can decide to issue an injunction.

In this case, both the alleged infringing products and the patents at issue belong to the same product class and have the same or similar designs. Based on existing evidence, it is decided that it is likely that the respondents are infringing the patents at issue.

3. Whether the right holder's lawful rights interests will be irreparably damaged if no injunction were issued

Preliminary injunctions are considered a severely proactive remedy. Considering the nature of this, Chinese Courts believe that there is no need to issue an injunction in the case that the reputation of a right holder is not harmed, or that damages may be calculated precisely and a respondent has the ability to pay them, meaning that the losses incurred by the right holders may be compensated after an effective decision is reached when the case is closed.

However, during patent enforcement, the right holder's interests will be irreparably damaged if no injunction is issued under the following circumstances: 1. The reputation of the right holder is being harmed; 2. The infringer is financially unable to pay the damages; 3. The damages cannot be determined. It is considered impossible to determine the damages if any of the following scenarios exist: 1. Losses caused by decrease in price and market share are difficult to calculate; 2. Damages to be borne by each infringer are difficult to calculate when there are several infringers; 3. A right holder faces much difficulty in increasing a reduced price to an original level due to malicious competition from an infringer.

Generally, after winning a case, a right holder should have its losses compensated. However, the right holder might not get enough compensation if the infringer does not have enough compensating capability or not compensated at all if the infringer does not have a definite domicile. In these cases, if the infringer's activities are not stopped, originally avoidable losses suffered by the right holder will become irrecoverable. In this case, the respondents did not provide evidence to show its financial status and profitability as to make it possible to fully estimate the losses to the right holder.

Moreover, the right holder normally recovers expenses on research and development by selling products. In this regards, the right holder generally sells the patented product at a price higher than the infringing product, as the infringer affords no expenses on R&D. A higher price will cause market share loss to the right holder. In this particular case, the infringer sold the infringing products at RMB270 per piece, while the patented products were sold at about RMB600 per piece in overseas markets. The respondents selling the infringing products at such a low price would undermine the right holder's market share. If no injunction were issued at this point, once a stable market was formed, the right holder would face incredible difficulty in implementing its regular pricing strategy when entering the Chinese market, which means that its due market share will be permanently reduced. It will be difficult to determine losses incurred, due to the lower price and lost market share, by the right holder.

Moreover, the design patents relate to cosmetics, which enjoy much benefit from their novelty and popularity. Large quantity sales of the infringing products will for certain make people less apt for purchasing the same products, thereby shortening the life cycle of the products.

Considering the above facts, it is urgent to stop the infringing activities. It is noted that though Verteam indicated to the Court that it was willing to stop the infringing activities during the oral hearing, it did not elucidate how it would effectively do so. Such promise takes no part in impeding the issuing of the injunction. In a word, the right holder will suffer irreparable damage if no injunction is issued.

4. Would the loss incurred by the respondent by the issuance of the injunction be smaller than or equivalent to the loss caused to the right holder if no injunction is issued

As a preliminary injunction will affect the economic benefit, most of time significantly, of both parties, a court has to consider the effects upon the respondent as well on the right holder when handling a request for injunction, so as to balance the interests of both parties. A scenario of protecting minor interest of one party while causing much loss and waste of social resource should be prevented from happening, such that interests of the whole society can be maximized. While the interests of the right holder should be warranted, if the loss suffered by the right holder is negligible comparing to that of the respondent when an injunction is issued, it will be against the essence of law. In consideration of the above, a request for injunction shall be upheld in case losses to the respondent by the issuance of the injunction will be no smaller than losses caused to the right holder if no injunction is issued. On the other hand, an injunction shall not be issued if much loss will be incurred to the respondent if the injunction is issued. Still, the right holder shall enjoy protection if the losses to both parties will be equivalent when the injunction is issued.

In this case, if an injunction is issued, the respondent will lose money spent on molding, advertisement and manufacturing of the infringing product, as well as profit loss for not able to manufacturing or selling infringing products. On the other hand, the right holder will suffer much serious losses if no injunction is issued. Such losses will include R&D cost, advertisement cost, lower pricing, lost market share and competitive edge. Therefore, the loss to the right holder will be much higher if no injunction is issued.

5. Whether the injunction would harm public interests

Judicial authorities bear the responsibility of guarding public interests. Courts should in no case make a decision that will harm the public interests, the same goes with an injunction if a patent at issue has significant impact on health, security, environment or other major public interests, such interests should be considered in deciding whether to issue an injunction or not.

In this case, both the patented products and infringing products are cosmetics. The issuance of the injunction is related to the economic interests of the involved parties but not the public interests. At the same time, as the design patent is quite remarkable and distinctive, an injunction will help to prevent confusion in the market. Instead of harming public interest, it will actually safeguard the public interest by helping to maintain a healthy market environment.

6. Whether the right holder put forth an effective and proper bond

Article 66 of the Chinese Patent Law provides that a right holder shall put forth a bond when requesting a court to take measures to stop infringing activities. The request will be rejected if no bond is supplied.

A preliminary injunction serves the purpose of quickly stopping infringing activities. Therefore, the court shall make a decision in a very short time. However, it is possible that the decision to issue an injunction will be contrary to the final decision. In light of the above, the right holder is required to make a deposit when requesting an injunction. Such a requirement will in the first place make the right holder cautious in requesting an injunction, and in the second place help to compensate losses to the respondent in case an injunction is issued wrongly. The bond shall be in a reasonable amount as to be enough to compensate possible losses to the respondent. At the same time, under the general consideration of improving enforcement, the cost for enforcing patent rights shall not be too high. In this sense, the bond can be lowered to a certain extent.

In this case, the court asked both parties to negotiate on the bond amount during the oral hearing. The respondent indicated that the right holder needed not to put forward a bond. At the same time, the court considered that the right holder had a high winning possibility and it is quite unlikely that the injunction will be issued wrongly. Moreover the three design patents relate to the same products. As a result, the court decided that the right holder should pay a bond of RMB1million for injunctions for the three patents.

The right holder paid the required amount. In the case that any further evidence will prove that the respondent will suffer more losses when the injunctions are in force, the right holder shall increase the bond.

Guangzhou IP Court considered all the above factors and granted injunctions on June 22, 2016. The injunctions came into force right away and the respondents were ordered to stop infringing activities immediately.

Chinese courts are normally very cautious in granting injunctions. Actually, according to Judge Cao Liping from IP Tribunal, Beijing Haidian Court, only 2.5 percent of requests for injunctions were granted by courts, while 67.5% were rejected and 30% withdrawn. Together with damages, obtaining an effective injunction is considered an important remedy to right holders. While Chinese Courts are increasing awarded damages, hopefully they will be more willing to grant injunctions as well, such that stronger protection may be provided to the right holders.

(This article was originally published in the IPPro Patents, Conference Special,Page 18-20)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.