By Xu Jing King & Wood Mallesons’ IP group.
The specific measures established in this case provide a guiding standard to determine essential factors of irreparable damage to a patented design. This case serves as guidance and reference for handling other similar cases.
The patented product
French fashion designer Christian Louboutin is famed for his iconic red-soled shoes, which are spotted on the feet of numerous domestic and overseas stars at red carpet events. This world-class designer is also known for his unique bullet-shaped lipsticks which are counterfeited in China. The imitated lipsticks were sold online at an extremely low price even before distribution of official products began in China.
The uniquely shaped Christian Louboutin lipstick was granted design patents in China so there was no doubt as to the ruling of the Court regarding the copying of the design. The question was whether justice upheld by the favorable result after the long-lasting proceedings (6 to 12 months) would be too late. In the Chinese market where the new patented lipstick had not yet debuted, yet the market was inundated with counterfeits, time would decide the value of the design.
Applying a ‘time-matters-most’ strategy
In this case, we abandoned the traditional approach, and applied for the preliminary injunction before the Guangzhou Intellectual Property Court (the “Court”), i.e. the court of the place of domicile of the alleged infringer.
To obtain the preliminary injunction before trial, it is necessary to answer questions most likely to be considered and asked by the judges. In this case, both the alleged nine types of product infringement and the patents at issue had the same or highly similar designs, and the evidence of alleged infringement acts was notarised; therefore, the possibility of infringement is not a focus. Rather, we anticipated the following questions that the judges may consider most:
- As the design patents are not substantively examined, are the patents at issue valid and stable?; and
- Have the rights holder’s interests been irreparably damaged?
It is indeed these issues that the judges inquired most about during the hearing procedures.
Before applying for a preliminary injunction we submitted an evaluation report on the patentability of the design, which confirms the validity of the patents. But being a prerequisite for the rights holder in any design patent case to prove that their patent rights are stable and valid, the report alone is not enough to persuade the judges. To prove the uniqueness of the patents at issue, more reliable legal documents are required. Unlike in China, design patents are substantively examined and searched in some other countries. So we considered using the patent grant documents issued by other countries in relation to the same design to prove the validity. We collected the records of searches carried out in several countries and submitted the patent grant documents issued by these countries to the Court. This was recognized by the Court in its document of issuing of the preliminary injunction, where the Court first analysed the validity of the patents at issue, and considered and supported other countries’ patent grant documents submitted by the right holder as an important factor in proving patent validity, indicating that the conditions of validity for issuing the preliminary injunction were satisfied.
Irreparable damage to Christian Louboutin’s interests
Another difficulty lies in proving “irreparable damage”. Preliminary injunctions are not applicable to any damage where a monetary remedy is available, a ground on which many applications have been rejected. At the heart of the issue is non-monetary harm and immediateness of the threat. We emphasized, amongst other things, the following aspects in hearing:
- A design patent carries reputation both of the designer and his/her design, which means, in this case, reputational damage had occurred which cannot be remedied in monetary terms;
- Since the patented products were counterfeited before the official products were distributed in the Chinese market, it is impossible to determine the monetary losses arising as a result of difficulties in distributing patented products in China;
- The huge price gap between the patented products (RMB600 per piece in overseas markets) and the counterfeits impedes the implementation of the right holder’s proposed sales plan for the Chinese market.
All of these arguments are supported by the Court and serve as basis for the implementation of “specific methods to determine whether the right holder’s interests have been irreparably damaged” (note: This case is included in commentaries on 2016 Top 10 IP Cases by the Guangdong High People’s Court). Specific factors for determination include:
- whether the right holder’s reputation is damaged;
- whether the alleged infringer has the ability to provide compensation;
- whether the damages caused by decrease in both price and market share may be calculated precisely; the right holder faces much difficulty in increasing a reduced price to an original level due to malicious competition from an infringer.
Thanks to the efforts of the KWM teams in Beijing and Guangzhou, the Court granted the preliminary injunction for the first time. This case is selected as a 2016 Top 50 IP Cases Decided by Chinese Courts published by the Supreme People’s Court, and a 2016 Top 10 IP Cases in Guangdong published by the Guangdong High People’s Court.