By Xu Jing, Ye Wanli, Liu Xinyu, Intellectual Property group, King & Wood Mallesons
On April 22, 2021, Xiamen IP Tribunal issued a judgment for Emerson Electric Co. (“Emerson”), ordering the defendants – Company A, Company H, and their person in charge, Mr. W – to stop its trademark piracy that had been lasted for 10 years, compensate attorney fees, and make a public statement to eliminate negative effects. The trademark agency for the three defendants were also ordered to stop its contributory infringement and compensate Emerson.
This is the first time that Chinese courts grant an injunctive order and an award of damages against a trademark pirate without malicious assertion (e.g. filing malicious notice-and-take-down requests or civil lawsuits). Xiamen IP Tribunal moves a big step further from the existing cases, which the court found the defendant for violation of Article 2 of the Anti-Unfair Competition Law for its trademark piracy and malicious assertion of the pirate marks. The judgment demonstrates the Chinese court’s strong efforts to defeat trademark piracy, and set up a precedent for genuine brand owners. It is also encouraging to see that the court also found the trademark agent liable for its knowingly assistance in the trademark piracy, which delivers a very strong message to those service providers which are actively assisting with serial trademark piracy.
Company A was established by Mr. W in 2008, and started to file trademark applications for In-Sink-Erator trademarks (including In-Sink Erator in Latin characters, Chinese characters, and the logo, collectively as the “In-Sink-Erator trademarks”) in 2010. Emerson timely filed to oppose each of the applications filed by Company A, but failed in all of them before the Trademark Office, the Trademark Review and Adjudication Board (the “TRAB”), and Beijing No.1 Intermediate People’s Court. On December 25, 2015, Beijing Higher People’s Court issued final judgments in four of the cases, reversing the first-instance judgments, and ruling that Company A violated Article 41.1 of the Trademark Law (2001) for its seeking registrations through improper means. During these period of time and even after the final judgment, Company A continued its piracy and Company H was established to continue the piracy on the In-Sink-Erator trademarks.
As of March 2020, Company A and Company H had filed to register 48 trademarks that were identical with Emerson’s trademarks or based on the same logos similar with Emerson’s marks in 14 classes. Mr. W also filed to register many trademarks that were identical or similar with famous brands, like iPhone, Daimler, etc. Company X assisted Company and Company H in registering 47 of the 48 pirate marks related to In-Sink-Erator, and also actively assisted the three defendants in pirating other famous brands. Emerson timely filed to oppose or invalidate each of the pirate marks, and spent more than RMB 1,000,000 in these prosecution proceedings.
In March 2020, Emerson filed a civil complaint with Xiamen IP Tribunal against the defendants, seeking 1) an injunctive order refraining the defendants from registering trademarks that are identical or similar with the In-Sink-Erator trademarks in all classes; 2) an award of damages in amount of RMB 5,000,000, including enforcement costs for this case; and 3) an order for eliminating negative effects by issuing a statement on national-wide and local medias. On September 22, 2020, Xiamen IP Tribunal held a hearing for the case. A few days before the trial, Company A and Company H withdrew or deregistered its existing trademark applications or registered trademarks.
On April 22, 2021, Xiamen IP Tribunal held an online session to declare its first-instance judgment on this case. In the opinions, the court set up the following rules:
- A civil claim for injunctive orders and recovery of attorney fees against trademark piracy is actionable under the unfair competition law. The trial of such type of dispute will not interfere with the CNIPA’s authority over prosecution of trademarks.
- Serial trademark piracy with knowledge of the illegality of registering these marks violates Article 2 of the Anti-Unfair Competition Law, which brings injunctive reliefs and damages awards for the plaintiff. Malicious assertion of the marks against the plaintiff is not a required element.
- An injunctive order can still be justified even if the defendant withdraws its pending applications or deregistered its registrations, as the defendant’s costs associated with the piracy is too low but the plaintiff’s costs is high, and it will also incur waste of public resources.
- Attorney fees associated with any oppositions, invalidations, administrative court appeals can be recovered as economic compensation; attorney fees associated with the instant case can be recovered as enforcement costs.
- The individual in charge of the companies committing the piracy can be jointly and severally liable if the elements of joint infringement can be established.
- The trademark agency can be jointly liable as well under the contributory theory, if the agency knowingly assists in the trademark piracy.
- Serial trademark piracy against one brand should be considered as one single act, rather than independent acts of applications, and the date of the last pirate filing starts calculation of the statute of limitation – 3 years.
The reliefs granted in the judgment include:
- Defendants A, H and W are refrained from filing to register any trademarks that are identical or similar with the In-Sink-Erator trademarks;
- Company X is refrained from assisting defendants A, H and W in filing to register any trademarks that are identical or similar with the In-Sink-Erator trademarks;
- Defendants A and W are jointly and severally liable for Emerson’s losses and enforcement costs in amount of RMB 1,200,000, and Company X is liable for 40% of the granted amount;
- Defendants H and W are jointly and severally liable for Emerson’s losses and enforcement costs in amount of RMB 400,000, and Company X is liable for 40% of the granted amount; and
- All four defendants are ordered to issue a statement on a national-wide media to eliminate negative effects arising out of the trademark piracy within 90 days after receipt of the judgment.
The defendants have appealed to Fujian Higher People’s Court within the statutory period.
It is very encouraging to see that Chinese courts for the first time granted injunction and damages awards for a genuine brand owner against defendants committing serial trademark piracy. This is a major breakthrough under the backgrounds of the national-level efforts in fighting against trademark piracy across different government functions. It can be expected that many more genuine brand owners will initiate similar actions to resolve the long-time trademark piracy problems and to recover its costs. From a strategic perspective, this judgment provides a roadmap that a genuine brand owner to replicate under the unfair competition theory. Although the defendants are still entitled to file an appeal with Fujian Higher People’s Court, this judgment is still a milestone and a good reference to brand owners to launch “counter-attacks” against those long-time trademark pirates for now.