Determining the producer in trademark infringement cases

Wei Shiping,[Patent]

 

Abstract: In practical trials, it is one of the important controversial issues to determine whether the infringer is the producer and then bears the heavier civil liability than the general seller. The purpose of this article aims to analyze and summarize how to identify whether the infringer is the producer through some cases in practice, with a view to benefit the trial of similar cases.
 
 
In some trademark infringement cases arising from the sale of goods with counterfeit registered trademarks, the right holder often requested the infringer to stop the production and sale of infringing products, destroy the remaining stocks and production tools and claim for relatively high economic damages, which in essence required the infringer to bear the responsibility of both the seller and the producer. The infringing party often defends that it only sells and is not the producer of the counterfeit goods. At the same time, in some multi-defendant cases, some of the accused infringers claimed that their enterprise names and information were used on the infringing products by others without authorization, and they did not produce the products in question. Therefore, in trial practice, it is one of the important controversial issues to determine whether the infringer is the producer and then bear the heavier civil liability than the general seller. The purpose of this article aims to analyze and summarize how to identify whether the infringer is the producer through some cases in practice, with a view to benefit the trial of similar cases.
 
 
Introduction of Typical Cases
 
Case I
 
The plaintiff, Shanghai Chaokeai Culture Communication Co., Ltd., is the right holder of the registered trademark "MOKYO", and the defendant, Shantou Huayou Toy Shop, sold toy fans with the same logo as the registered trademark "MOKYO" through its store on "1688.com" (A Wholesale Service For Bulk Buy in China) without authorization. The plaintiff claimed that the defendant had implemented both producing and selling behaviors, and requested that the defendant be ordered to compensate the plaintiff for economic loss and reasonable costs of RMB 30,000. The existing evidence confirms that the defendant has implemented the selling behavior, but whether it constitutes the producing behavior, shall be determined in conjunction with the corresponding facts. The corresponding evidence confirms that the "1688.com" website itself is a wholesale purchasing website. The defendant has a minimum batch limit and corresponding wholesale price when selling to the public, and marked the information of "99656 (products in question) available for sale". Secondly, the express logistics information of the products in question showed that they were shipped from a warehouse in Shantou, Guangdong. The address is also the registered business premise of the defendant, which in line with the producer’s practice of producing and directly shipping. Moreover, the defendant's business information uploaded on "1688.com" includes the business model, factory area, number of employees, and business for wholesalers and retailers. In summary, it can be judged that the defendant's business model is different from that of a general seller and is more in line with the behavior of a producer. Accordingly, the court found that the defendant's behavior constituted both producing and selling, and sentenced it to bear a higher amount of damages than the general seller. [1]
 
Case II
The plaintiff Guangzhou Liby Group Co., Ltd., the owner of the trademark "SUPERB", found that the defendant Wen sold mosquito coils with similar logos to the plaintiff's trademark through the e-commerce platform "Pingduoduo", and labeled the product packaging with the words "authorized by Menglei Company". Therefore, the plaintiff brought the above two defendants to the court, claiming that the defendant Wen implemented the selling behavior, the defendant Menglei Company implemented the producing behavior. During the trial, the defendant Menglei Company argued that the product in question was not manufactured by it, and provided the packaging of its own mosquito coil product to prove that Menglei Company is not the producer, and the packaging is apparently different from that of the product in question. The defendant Wen admitted that the products in question are misuse of the defendant Menglei Company's business name, and the relevant production approval number are printed on the products in question after randomly found on the internet. After investigation, the pesticide production approval number on the product in question, pointing to an outsider, “Xuediao” mosquito coil produced by Xuediao Household Goods Company located at County R. And the pesticide registration number and other reference number on the packaging of the product in question are also consistent with the above “Xuediao” mosquito coil, which corroborated with defendant Wen's confession. In addition, the company's address labeled on the packaging of the products in question is "Shanghai Pudong New Area Park", which is a fake address. This fact proved that the defendant Wen actually does not know the basic situation of the defendant Menglei Company, and further confirmed Wen’s misuse of Menglei company’s enterprise name and information. In the case that the plaintiff failed to further prove the fact or possibility of co-production of the two defendants, the court did not support the plaintiff's claim for the defendant Menglei Company to bear the responsibility of infringement. [2]
 
Case III
 
The plaintiff COFCO Group is the right holder of the "GREATWALL" series of trademarks, and the Great Wall Wine it produce and sell has a high market awareness. The plaintiff found that the defendants Yulong Group, Eveip Winery Co., Ltd. and Yinxiang Company produced wines with similar logo to the plaintiff's trademark without authorization and sold them all over China. Therefore, the plaintiff requested the above defendants to jointly bear the civil liability of stopping the infringement and compensating the damages. The defendant Yulong Group argued that it did not produce and sell the wine in question, and the reason why it was involved in the lawsuit was that the defendant Eveip Winery Co., Ltd. and Yinxiang Company printed their enterprise information on the products in question without authorization, and the defendant Eveip Winery Co., Ltd. sent an apology letter to the defendant Yulong Group for this reason, so it should not bear any responsibility. After investigation, it was found that the back labels of the wine bottles in question were marked with the enterprise names and production addresses of the above three defendants. The barcode printed on the back label of the wine in question was scanned and showed information such as "94 Collector editions le vin rouge (in barrels), Yinxiang Company, Specification 750ml*6 barrels, Brand KINGWALL, above information from The Article Numbering Center of China". In addition, the upper part of the bottle cap of the wine in question was marked with the word "Eveip", and the sealed packaging of the bottle mouth was printed with the corresponding origin code of the Yinxiang Company. Accordingly, the court found that Eveip Winery Co., Ltd. and Yinxiang Company were the producers of the wines in question, and that they produced and sold the infringing products in question and should bear the corresponding infringement liability. As for the defendant Yulong Group, the only thing that supported the plaintiff's claim that Yulong Group was the producer of the wine in question was Yulong Group's enterprise name and address printed on the bottle label, but these were public information and easily available. While no other evidence can prove that Yulong Group is the producer of the wine in question, such as the production code on the seal of the wine in question, which refers to the defendant Yinxiang Company; the production license and maker code of Yulong Group are not the same as those indicated on the wine in question. Also, combined with the fact that Eveip Winery Co., Ltd. issued a letter of apology to Yulong Group, the court finally found that Yulong Group was not the producer of the wine in question and was not liable for the civil liability according the proof standard of the high degree of probability of civil evidence. [3]
 
Factual and Legal Analysis to Determine Producer
 
Combining the above cases, the author believes that the following three aspects can be examined to determine whether the accused infringer is the producer.
 
The identification of business scope can be used as a basis for preliminary judgment
 
Article 13 of Administrative Regulations of The People's Republic of China Governing the Registration of Legal Corporations clearly stipulates that a corporation shall operate within its approved and registered scope of business. Article 30 of the Regulations stipulates that: “The registration authority may, in light of the circumstances, penalize an enterprise as legal person by warning, fine, confiscation of illegal earnings, suspension of business for consideration, or withholding or revoking the Business License for Enterprise as a Legal Person.” The circumstances include "altering major items in the registration without permission or engaging in business operations beyond the scope of business as approved in registration”. Similarly, Partnership Enterprise Law of the PRC, Sole Proprietorship Enterprise Law of the PRC, Regulation on Individual Industrial and Commercial Households and other laws and regulations also require other unincorporated organizations to engage in business activities within their approved and registered scope of business, and stipulate the corresponding administrative penalties for unauthorized engagement in business activities outside the scope. Therefore, by examining the business license or industrial and commercial registration information of the accused infringer in the matter of business scope, it is often possible to learn whether it has the qualification of processing and production, or just the qualification of sales in circulation. Under normal circumstances, ordinary operators will not risk being punished by the administrative organs, unauthorized to engage in behavior that does not match the scope of business. Enterprise registration information has a certain degree of objectivity. Therefore, by examining the scope of business of the accused infringer, it can be initially determined whether it has the prerequisites for being a producer.
 
Guiding the defendant to adequately defend against each other helps to clarify the facts
 
Article 88 of the Some Provisions of the Supreme People's Court on Evidence in Civil Procedures provides that "the judges shall make a comprehensive examination and judgment of all evidences from the degree of connection of each evidence with the fact of the case and the relations between the evidences." This requires the judgment and determination of the facts and the evidence of the case to be established on the basis of active evidence-producing and cross-examination of the two parties. Then the judges shall comprehensively review and judgment. In trial practice, the court tends to be more concerned about the confrontation between the plaintiff and the defendant. In similar cases, the defendant who is accused of bearing the responsibility of the producer to refute the plaintiff's claim will usually raises a defense, especially when disputing the legal effects claimed by the other party, new factual claims are often put forward, and such facts are difficult for the plaintiff to know. Therefore, in similar cases, the judge should not only pay attention to the confrontation between the plaintiff and the defendant, but also guide the defendants actively producing evidence and cross-examining on the relationship between production and sales, which helps to better clarify the facts.
 
To be specific, in order to avoid being held accountable, the defendant whose name is misused will generally proactively provide contrary facts, and attention should be paid to the response of other defendants, such as admitting the fact of misuse or adopting negative implied non-denial. If the defendants in the case do have production and sales relationship with each other, the defendant as a sales party is generally unwilling to take sole responsibility. At this time, the judge should explain to the defendant, according to the provisions of Article 64 of the Trademark Law, where a party unknowingly sells goods that infringe upon another party’s exclusive right to use a registered trademark, but can prove that it has obtained the goods lawfully and is able to identify the supplier, it shall not be held liable for damages. Even if the legal source cannot be established because of the lack of evidence, the relevant purchase documents, transaction records and payment statement, which are usually provided by the seller, can prove the purchase channel of the products in question and play an important role in further determining the producer.
 
Civil evidence should be comprehensively judged by "high degree of probability".
 
According to Article 108 of the Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China, if the people's court, after examining the evidence provided by the party with the burden of proof, is convinced that the existence of the facts to be proved with high degree of probability, it shall find that the facts exist.[4] The standard of high degree of probability pursues the legal facts, which is the presumption of the facts to be proved, but the presumption process should include a logical process, that is "to prove with every evidence - with established underlying facts - a logical and necessary connection between the underlying fact and the fact to be proved - no counter-evidence to rebut the presumed facts". [5]
 
In practice, the plaintiff usually claims that the infringer is the producer, based on the producer’s information marked on the packaging of infringing products. Since enterprise information is often public, it is easy to be misused by others. Therefore, the producer information on the infringing products is only preliminary evidence. The plaintiff should provide evidence on the defendant’s business scale, business model, specific production information, etc., and these evidences can corroborate each other to make its evidence about the producer's claim reach a higher probative force.
 
In case I, the plaintiff claimed that the defendant was the producer and submitted a notary public certificate of infringement and a notarized object. In the absence of any counter-evidence submitted by the defendant, the court considered that the evidence provided by the plaintiff had reached a high degree of probability from the facts of the defendant's business model, enterprise information and infringing products delivery address, and thus found that the defendant involved in the case was the producer of the infringing products.
 
On the other hand, when the parties present contrary evidence to the same fact respectively, but none of them has formed a preponderance sufficient to negate the evidence of the other party, the court shall take into account the circumstances of the case and, through a comprehensive judgment of whether the probative force of the evidence provided by one party is significantly stronger than that of the other party. The facts claimed by the party that can make the existence of the facts to be proved to a significant degree of preponderance shall be determined.[6] As shown in Case II, the pesticide production approval document number and pesticide registration number of the infringing product in question all point to products produced by an outsider, and the enterprise information marked on the infringing product, that is, the business address of the defendant who was required by the plaintiff to bear the responsibility of the producer, is obviously fake. Moreover, the other defendant already confessed to the implementation of the unauthorized use of the outsider’s enterprise name. Similar situations also appeared in case III, where the plaintiff, based only on the producer's information marked on the infringing goods, claimed that the relevant defendant was the producer. While other evidence, such as the infringing goods production code, production license, maker code are not consistent with the information of the defendant. Other defendants also admitted to the misuse of others enterprise names and information. Therefore, the plaintiffs in the two cases failed to further prove the establishment of joint production, according to the civil evidence of the high degree of probability, the court excluded some of the defendants for being the producers of infringing products, and did not support the plaintiff's corresponding claims.
 
To sum up, in the civil dispute case of trademark infringement, when one party claims that the other party bears the responsibility of the producer, it shall prove that the party has carried out, or at least has the possibility of the corresponding production behavior. If the other party denies, adequate proof shall be presented around excluding or reducing the possibility of its implementation of the behavior. When the evidence of both parties does not reach absolute advantage, the admissibility of evidence in civil trials should be distinguished from the absolute standard of "beyond all reasonable doubt" in criminal cases. As a judge, on the basis of the full weighing of the evidence of both sides, according to the "high degree of probability", judge's corresponding mental impression is then formed whether affirming or negating the defendants has the possibility of production behavior, and can make the the corresponding decision.
 
Conclusion
 
Article 57 of China's Trademark Law stipulates that the behavior using a trademark that is identical with or similar to a registered trademark in connection with the same or similar goods, without the authorization of the owner of the registered trademark, that is production behavior, and selling goods that violate the exclusive right to use a registered trademark constitutes infringement of the registered trademark, and should bear civil liability including stopping the infringement and compensating for losses. From the perspective of the entire trademark infringement part, the producing behavior is the upstream and source of the selling behavior, and subjectively the former is more malicious than the latter, and the harmful consequences the former caused are also more serious. Therefore, judging whether the infringer constitutes the producing behavior in the trademark infringement case has profound significance to effectively combat the source of trademark infringement, protect the goodwill of the right holder and maintain the market order.
 
 
 
Reference
* Xie Xiaojun, the second author of this article, Judge of Shanghai Pudong New Area People's Court;
 Ruan Wenchu, the third author, Judge Assistant of Shanghai Pudong New Area People's Court.
 
1 See Civil Judgment of Shanghai Pudong New Area People's Court (2020) Hu 0115 Min Chu No. 59746.
 
2 See Civil Judgment of Shanghai Pudong New Area People's Court (2020) Hu 0115 Min Chu No. 11835.
 
3 See Civil Judgment of Shanghai Pudong New Area People's Court (2020) Hu 0115 Min Chu No. 11839.
 
4 Shen Deyong. 2015. The Supreme People's Court's Judicial Interpretation of Civil Litigation Understanding and Application, People's Court Press, p. 360.
 
5 Luo Meilin, [Case Study] The Application of the Rule of Evidence High Degree of Probability in this Case", Supreme People's Court Judicial Case Research Institute WeChat Public Account, available at https://mp.weixin.qq.com/s/K0VnWGP8MfFm_AnaOsOd-A. [Accessed 2 January, 2021].
 
6 Yan Wei. 2016. A Re-examination of China's Civil Litigation Proof Standard. No. 31.

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