2019 Top10 IP Typical Cases Released by the Supreme People’s Court of the P.R.C. – Trademark cases

On 21 April 2020, The Supreme People’s Court of the P.R.C. released Top 10 IP cases and 50 typical IP cases. We summarized the 5 trademark cases out of the top 10 cases below which respectively involve OEM,  invalidation based on adverse effect, punitive compensation,  protection of well-known trademarks, and application of “three-in-one” intellectual property adjudication system.

1.Honda Motor Co., Ltd. vs. Chongqing Hensim Xintai Trade Co., Ltd., Chongqing Hensim Group Co., Ltd. (Supreme People’s Court/(2019) Zui Gao Fa Min Zai No. 138) 

This case is the latest judgement of the Supreme People’s Court (SPC) on the trademark infringement dispute involving OEM (Original Equipment Manufacture). In this case, SPC holds that the OEM manufacturer, Chongqing Hensim Xintai Trade Co., Ltd., constitutes trademark infringement, which is a remarkable change from the previous judicial opinions especially that in the Pretual case in 2015.

SPC clarifies in the judgement that the use of trademark is an objective act and genrenally composed of multiple segments. When determining whether it constitutes trademark use, an overall and consistent interpretation must be made in accordance with the Trademark Law, instead of looking at single and separate process.  There can be trademark use in the sense of the trademark law also in case of an OEM arrangement during the processes of manufacturing and attaching trademark in the factory in China. In terms of the relevant public standard to determine “confusion” in the trademark use analysis, the SPC opines that it shall also include operators of businesses related to the products. Products involved in an OEM arrangement can still be accessed by the relevant public of the PRC either online or when traveling abroad. The judgment also mentioned that Chinese OEM upon commission of foreign clients, which bear a trademark that has already been registered in China by another person or entity, is not a justified defense for non-infringement. As it shows that OEM activities will still face potential trademark infringement risks in China, this judgement will have significant reference to the future similar cases.

2.Shanghai Junke Trade Co., Ltd. vs. (former) Trademark Review and Adjudication Board of SAIC,  Yao Hongjun. (Beijing High People’s Court /(2018) Jing Xing Zhong No. 137) 

This case is a classic case of “other adverse effect” in Article 10.1.(8) of the Trademark Law.

The “other adverse effect” clause is one of the absolute reasons for prohibiting the use and registration of trademarks. To some extent, the disputed mark “MLGB”, widely seen as a pinyin abbreviation of a vulgar curse in China, reflects the current status of the use of negative terms appearing in the network environment entering the field of trademark registration. The second- instance court fully considered the legislative purpose, objective and historical evolution of the clause, and proposed that the determination of “other adverse effect” in the clause should consider the elements of “judgment subject, time node, judgment standard, and burden of proof”. It was finally determined that the disputed trademark itself had a negative meaning and low style, which had an adverse effect. The second-instance court considers Article 10.1（8）is suitable to evaluate the registrability of network language so as to establish a healthy social environment and  maintain social spiritual civilization and morality.

3.Balanced Body Inc vs. Yongkang Elina Sports Equipment Co. Ltd (Shanghai Pudong New Area People’s Court/(2018) Hu 0115 Min Chu No. 53351) 

This is a typical case of applying punitive compensation standards for intellectual property infringement .The defendant in this case YONGKANG ELINA SPORTS EQUIPMENT signed a settlement agreement with the plaintiff infringement of intellectual property rights. However several years later the defendant used the same trademark on the same goods as the plaintiff’s “MOTR“ trademark again without the latter’s consent. Meanwhile, the total sales amount of the defendant is quite high, and the infringement act also has a large influence. What’s worse, the low quality pof the defendant’s products would cause  negative impact on the plaintiff’s goodwill. Considering the above-mentioned factors, the court ordered the defendant to stop the infringement and supported the plaintiff’s claim to apply the standard of triple punitive compensations.

In this case, the court has applied punitive compensation standards to severely crack down on malicious and repeated IP infringements and breaches of good faith. The punishment reflects China’s determination to create a good and honest business environment.

4.Hangzhou Moris Technology Co., Ltd. and Aupu Home Style Corporation Limited vs. Zhejiang Fengshang Building Materials Co., Ltd., Zhejiang Modern New Energy Co., Ltd., Yunnan Jinmei Environmental Protection Technology Co., Ltd. and Sheng Linjun (Zhejiang High people’s Court/ (2019) Zhe Min Zhong No. 22) 

This is a typical case of protecting well-known brands and striking bad faith registration. During the first instance, the mark “ ” of the defendants was still valid. The plaintiff‘s registration ’“ ”(AO PU), had been recognized as a well-known trademark in judicial and administrative proceedings for several times before the infringement act being sued, and its value has been maintained and promoted through continuous and extensive publicity and use during the period of infringement.

The court of first instance recognized the plaintiffs’ trademark as a well-known trademark, reiterated the intention of the applicant of the mark “ ” to free-ride (found in the previous judgment) and pointed out that the defendants’ use of marks such as ” was also obviously malicious, and finally decided that the defendants violated the plaintiffs’ exclusive right to use the registered trademark and prohibited the use of the relevant logo and defendants’ trademark which was a registered mark at the time of ordering. In terms of the compensation amount, the court finally ordered the defendants to compensate for RMB 8 million, considering the defendants’ extremely high profits from infringement, the huge brand value of the plaintiffs’ mark and the adverse impact of a series of actions of the defendants. And the court of second instance upheld the first instance judgement.This case severely cracked down on the “free rider” behavior and protected the value of well-known brands through high compensation, which is beneficial to regulating the order of market competition.This case also made full use of the principle of good faith. The first instance court decided in a civil litigation that a registered trademark should be prohibited to be used given it was a malicious registration and the use was infringing the plaintiff’s prior rights, which is a postive ruling for trademark administrator to resolve the trademark disputes in susequent procedures.

5.The crime of counterfeiting registered trademark and the crime of selling commodities bearing counterfeit registered trademark: Xiamen Delemeng Science and Technology Co., Ltd., Xiamen Xinghengchang Trading Co., Ltd., Yang Mingfeng, Yang Maogan (Fujian Xiamen Intermediate People’s Court/ (2018) Min 02 Xing Zhong No. 632) 

This is a typical case of applying the “three-in-one” intellectual property adjudication system. The defendant units Xiamen Delemeng Science and Technology Co., Ltd. and Xiamen Xinghengchang Trading Co., Ltd., jointly operated and managed by appellants Yang Mingfeng and Yang Maogan (original defendants), have not only purchased and sold the bearings with the fake “SKF”、”FAG” and other registered trademarks, but also reprinted the aforesaid trademarks on the bearings of no brand or other domestic brands without the permission of the owner of the registered trademarks and made sales. Besides, the amount of the crime is quite huge. The court of first instance sentenced the defendant units to a fine and the defendants to fixed-term imprisonment and a fine for the crime of counterfeiting registered trademarks as well as the crime of selling commodities bearing counterfeit registered trademarks. In addition, the infringed has withdrawn the civil litigation brought against the defendants and the defendant units based on the same infringement during the second instance because the defendants have actively fulfilled their obligations to compensate. The court of second instance, taking into account the factors such as Yang Maogan’s voluntary surrender and meritorious service, understanding of the injured unit and low social harmfulness, sentenced him to a prison term with probation and mitigated his punishment according to law, and upheld other original judgments. When deciding sentence, the court of second instance took the fact into consideration that the trademark infringer obtained forgiveness of the victim unit through active compensation and the latter withdrew the relevant civil suit, which showed the innovative results of the “three-in-one” intellectual property adjudication system.