Useless to say that when we talk about China (under any aspect), numbers are always huge. The case we analyze below is no exception: Indeed 100 million RMB (around 14 million US$) plus legal expenses were finally recognized to the plaintiff of this case by the Supreme People's Court.
Let's dig a bit more in the details of this fascinating case.
The plaintiff is a very popular security door manufacturer called PANPAN and the trademark of this company was recognized well-known trademark as early as 1999. The business has been flourishing since then and no big legal matters occurred until 2016. In this year the counterparty, a Chinese citizen named Mr. Zhou, was able to purchase a registered trademark which is somehow similar (very similar!) to PANPAN. The trademark that was purchased is called XINPANPAN, where the first character XIN shares a very similar pronunciation to the character which means "new".
Happy with his registered "new" trademark, Mr. Zhou decided to use it and put it on business officially. He entered the business of security doors as well promoting himself as the New PanPan company. Few years later, the original company noticed the growing business launched by Mr. Zhou and decided to file a lawsuit before the Jiangsu High People's Court, seeking an order against Xin PanPan (the company), Mr. Zhou (the physical person) and two other co-defendants to cease all infringements and unfair competition actions, and to bear ¥95 million in damages for trademark infringement and ¥5 million for unfair competition, as well as reasonable expenses.
The claim was fully supported by the Jiangsu Court and so far seems everything "ordinary". What is interesting though about this case is how this amount was calculated. Indeed, we are familiar with decisions that most likely recognize an award for the plaintiff somehow similar or slightly greater than the profit generated by the illegal actions carried out by the infringers.
In this case we can see that the illicit profit calculated by the Court amounted to 27 million RMB: in the first instance it was the defendant himself who stated that their accounting and finance department was chaotic, hence the 27 million RMB were calculated mostly based on the evidence provided by the plaintiff PANPAN).
In terms of punitive damages, the SPC considered multiple factors, including:
- industry competition
- the malicious trademark acquisition
- the repeated infringements
- intentional factors
- the broad scope of the infringement; and
- Xin PanPan's high profits
- Zhou had business dealings with PanPan Company as early as 2007, and thus was well aware of the fame and influence of the PANPAN trademarks. Nevertheless, it still established Xin PanPan in September 2016 and actively sought to acquire the XINPANPAN trademark for infringing activities.
- Phonetically, 'Xin PanPan' resembles 'New PanPan', thus showing an intent to leverage the renown of PanPan Company and its related trademarks.
- Zhou directed Xin PanPan to continue using the XINPANPAN trademark even after it was declared invalid.
- After a temporary name change, Xin PanPan's official WeChat account was changed back to 'Sichuan Xin PanPan Company Limited', clearly demonstrating an intent to infringe on the series of trademarks of PanPan Company.
I must say that the work done by the legal department of the PANPAN company was extraordinary. It is indeed very important to collect as much evidence of the infringement as possible, which will form the basis for the calculation of the amount to be confirmed by the Court.
Another important aspect here is the fact that the actual controllers of the company, as well as the individual trademark owners, were all cited as co-defendants and successfully pursued for joint infringement, thus putting a lot of pressure on the business leaders and not only on the company.
Last but not least, is the recognition of the legal expenses. We do not often see this claim recognized and when it happens, it usually covers only basic expenses. In this case the Jiangsu High People's Court explicitly acknowledged that PanPan Company had invested significant efforts into investigating and collecting evidence for the litigation. As a result, the court determined that ¥650,000 (more than 90,000 US$) was a fair and reasonable amount to cover expenses.
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.