BALANCED BODY v. Yongkang Yilian Shanghai's first case of punitive damages for intellectual property infringement

China IP,[Trademark]

 

First-instance case number: (2018) Hu 0115 Min Chu No.53351
This case involves reviewing the applicable conditions of punitive damages and determining the compensation base. The defendant was warned for allegedly infringing other plaintiffs’ trademarks and then signed a settlement agreement promising not to engage in infringing activities. Still, the infringement was found again in this case. The defendant counterfeited the plaintiff's trademark and products as they were and sold them through online and offline channels, and the products still had quality problems. After examination, the court found that its behavior met the applicable requirements of punitive damages on "malice" and "serious circumstances".
 
Case introduction
Plaintiff: BALANCED BODY INC
Defendant: Yongkang Yilian Sports Equipment Co., Ltd. (hereinafter referred to as Yongkang Yilian Company)
 
Balanced Body Company is mainly engaged in the production and sales of sports equipment and the promotion of fitness courses, and owns many invention patents, and has registered trademarks involved in many categories of goods and services in China. In March 2018, Balanced Body Company discovered that Yongkang Yilian Company promoted the same fitness equipment with the trademark involved in an exhibition. At the same time, Yongkang Yilian Company sells through WeChat Mall, factory sales and other ways. Balanced Body Company believes that the trademark used by Balanced Body Company is exactly the same as the trademark involved, and the commodity category is the same as the commodity approved for use by the trademark involved, which constitutes trademark infringement. In fact, as early as 2011, Yongkang Yilian Company infringed the intellectual property rights of Balanced Body Company. After Balanced Body Company sent a warning letter, both parties signed a settlement agreement, and Yongkang Yilian Company promised not to engage in infringing activities. In view of its repeated infringement, Balanced Body Company claims to apply three times punitive damages, demanding compensation of three million yuan, and at the same time requesting to order Yongkang Yilian Company to stop infringing exclusive trademark rights.
 
After trial, Shanghai Pudong New Area People's Court held that the infringing logo used by the defendant is exactly the same as the trademark logo of the plaintiff's right, and they are used on the same product, and the style, color and logo position of the product are almost exactly the same. This comprehensive imitation of the plaintiff's trademark and product shows that the defendant's intention of infringing the plaintiff's trademark right and attaching to the plaintiff's goodwill is obvious.
 
As early as 2011, the defendant was warned by the plaintiff for the alleged infringement of products exported to Spain. After the plaintiff communicated many times, the defendant finally signed a settlement agreement and promised not to engage in any activities that might infringe or hinder the plaintiff’s intellectual property rights in the future. However, a few years later, the defendant was found to produce and sell products that infringed the plaintiff's exclusive right to use the registered trademark again. The defendant's malicious infringement is extremely serious.
 
In 2016, the defendant's total enterprise sales reached more than eight million yuan. In this case, the defendant promoted and sold infringing products through various online and offline channels, and the products were sold to Xiamen and other regions. It can be seen that the defendant’s scale of production and operation was large. There were many sales channels of the product, wide geographical scope and significant influence of infringement.
 
The defendant's infringement causes market confusion and has quality problems in its infringing products. It will make consumers mistakenly buy and think that the plaintiff's products have quality problems, and negatively evaluate the plaintiff's business reputation, resulting in serious infringement consequences.
 
To sum up, the court ordered the defendant to stop infringing the plaintiff's trademark exclusive right, applied three times punitive damages, and ordered the defendant to compensate the plaintiff for three million yuan. After the judgment of the case, neither party appealed, and the judgment has now taken effect.
 
Typical meaning
The Trademark Law (revised in 2013) stipulates that if the circumstances of malicious infringement of the exclusive right to use a trademark are severe, the amount of compensation can be determined based on more than one time and less than three times the base. In this case, the defendant had signed a settlement agreement for allegedly infringing on the plaintiff’s other trademarks. However, the infringement was found again in this case, and the defendant's products still had quality problems and were sold through multiple channels. After examination, the court found that its behavior met the applicable requirements of punitive damages on "malice" and "serious circumstances". In determining the compensation base, the court calculated the infringement profit according to the product of the sales volume of infringing goods and the unit profit of infringing goods, and based on the defendant's refusal to perform the obligation of disclosure of evidence, which constituted an obstacle to proof, it fully adopted the superior evidence standard to determine it. The court held that according to the defendant's WeChat propaganda content, it is enough to prove the sales volume of infringing goods. If the defendant cannot prove its propaganda content’s authenticity, it should support the plaintiff's claim; the unit profit of infringing goods can be determined according to the similar products outside the case and the defendant's admission. Based on this, the court calculated the base and finally determined three times the punitive damages in view of the defendant's malice and seriousness. This case is the first punitive damages case of intellectual property infringement in Shanghai court, which reflects the people's court’s effort to increase the application of punitive damages. After the verdict, the case was widely reported by the media and received widespread attention from all parties. In a letter to the court after the judgment came into effect, the successful American enterprise said that through the case, it was convinced that China had established an effective judicial system of intellectual property rights. Significantly, foreign and Chinese enterprises could get effective judicial protection of intellectual property rights equally in China. The judgment would strengthen the confidence of foreign enterprises in investing and doing business in China.

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