Current Chinese trademark law provides that the compensation shall be assessed based on the losses the right holder has suffered, the profits the infringer has earned or the trademark license fees. If the infringement is in bad faith and severe, the court could impose on the infringers the punitive compensation which could be not more than five times of the amount determined in the aforesaid method. The statutory compensation is also covered in this law, and it was raised from RMB 3 million to RMB 5 million in the latest amendment which came into effect last year.

In practice, trademark proprietors may run into difficulties while collecting direct evidence proving the losses they suffered, the profit infringers gained or the trademark license fees, but trademark proprietors could still expect statutory compensation granted by court. Claiming for statutory compensation does not mean without burden to collect evidence, on the contrary, it is quite necessary to submit evidences to influence the judges in a decision of compensation. Based on interpretation of the Supreme Court, while determining statutory compensation the court would take into consideration of the nature, duration and consequences of the infringing act, the reputation of the trademark, the amount of trademark license fee, the type, time and scope of the trademark license, as well as the reasonable expenses for stopping the infringing acts, etc. In view of this guidance and in order to obtain comparatively high compensation, it is suggested that the trademark proprietor submit evidence relating to the long duration of the infringement, the different types of infringing products, the large production scale, etc. to prove the infringement is severe.

For more compensation, the following prongs on evidence collections should be noticed:

Evidence proving the infringers' profits

The more profits gained by the infringers, the more compensation they shall pay. Though the trademark proprietors might not be able to obtain direct evidence proving the infringers' profits, they could submit to court an estimated amount of profits gained by the infringers through manufacturing and selling the infringing products. The estimated profits could be calculated based on the sales volume of the infringing products, the unit price and the profit rate. The data collected from reliable sources could have influence on the judges determining the amount of the statutory compensation.

If the infringing products are distributed and sold through online platforms, the trademark proprietors could adopt the sales volume and comments numbers as shown on the website as the basis to calculate the infringers' profits. If the infringers deny the sales volume shown online, they shall submit counterevidence proving the numbers are not true. In one judgement, though the defendant submitted evidence proving that the sales volume on the online platform was not real, the court ruled that the sales volume included "false trading" that should not be counted into infringer's profits, but the plaintiff's "indirect losses", including the lost sales and possible credit decline due to the "false trading", should be counted and included in the compensation.

To submit to the court a reasonable calculation of the infringers' profits, the trademark proprietors could try to collect useful data from the information released by the infringers on its official website and recognized online stores or through some government websites. The annual production amount, products types and sales volume found in these websites could be regarded as reliable sources for evaluation of the infringers' profits. If the trademark proprietor and the infringer had trademark invalidation dispute or other administrative litigations, the trademark use evidence submitted in those cases by the infringer and that relating to the sales status of the infringing products could be used by the trademark proprietor to evaluate the infringer's profit.

It might be difficult to find the profit rate for calculating infringers' profits. Trademark proprietors may refer to the profit rate of the industry released by the Industry Association or credible third parties. The profit rate indicated in an Annual Report released by listed companies in the same industry could also be used as reference while deciding the infringers' profit rate.

Evidence proving the infringers' bad faith

Infringers' infringement act would be regarded as in bad faith if it is repeated infringement or conducted with full awareness of the trademark proprietor and the involved trademark. To prove the bad faith, the trademark proprietors could collect evidence proving the infringement is conducted under the following backgrounds: a) the trademark proprietors ever delivered Cease and Desist letter to the infringers for trademark infringement or initiated administrative complaint, civil and administrative litigation against the infringers; b) the trademark proprietors and the infringers have business relationships; c) the infringers filed application for registration of trademarks similar to or identical with the trademark proprietors' registered trademarks; d) the infringers used more than one of trademark proprietors' trademarks; e) the trademark proprietors have other IP disputes (patent or copyright) with the infringers; etc.

Evidence proving trademark proprietors' use and the reputation of the trademark

According to trademark law, if the trademark proprietors could not prove the actual use of the registered trademarks in the past three years counting from the date of filing the litigation and fail to prove the losses caused by the infringement, the accused infringers would not bear the liabilities for compensation. Therefore, it is suggested that while filing the trademark infringement litigation, the trademark proprietors collect and submit evidence proving the trademark use and trademark reputation. The evidence could be used not only against the non-use defense, but also to prove the bad faith of the infringers, as infringement is intentionally conducted by the infringers who know the good reputation of the trademarks. The evidence that could prove the reputation of a trademark include: the continuous use of the trademark, the reputation of the trademark in the market, the market share, sales area of the goods bearing the trademark, the promotional activities for this trademark, etc.

(First published in World IP Review ( WIRP ) issue 1)

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.