Weekly China Brand Protection News

November 13, 2024

1. The “Calculation Method for Illegal Business Profits in Trademark Infringement Cases” Issued and Implemented

Recently, the China National Intellectual Property Administration (CNIPA) and the State Administration for Market Regulation (SAMR) jointly formulated and issued the “Calculation Method for Illegal Business Profits in Trademark Infringement Cases,” with some points as following:

Illegal business profits refer to the total value of infringing goods or the revenue generated from infringing activities.

The value of infringing goods that have already been sold is calculated based on the actual sale price. For unsold infringing goods, the value is calculated based on the average actual sale price of infringing goods identified. If the average actual sale price cannot be determined, the marked price of the infringing goods is used. If the actual sale price cannot be determined and there is no marked price, the market median price of the infringed goods during the infringement period is used.

For goods already manufactured but not yet affixed with infringing registered trademarks, if there is solid and sufficient evidence to prove that these goods would infringe on others’ exclusive trademark rights, their value shall be included in the illegal business profits.

Infringing goods given away for free that infringe on others’ exclusive trademark rights shall calculated based on the actual purchase price or production cost of the giveaway goods. If the actual purchase price or production cost of the giveaway goods cannot be determined, or if the giveaway goods are non-standard items, the illegal business profits is calculated based on the marked price or the market median price of the infringed goods.

If the party provides sufficient evidence proving that the sales volume of infringing goods has been inflated by fake sales methods, such as fake orders, these inflated sales figures are not included in the illegal business profits.

2. LIQUI MOLY Awarded RMB 1 million in Economic Damages and RMB 200,000 in Legal Expenses in the Appeal Judgment

The Zhejiang High Court recently issued a final ruling in the German LIQUI MOLY against Zhejiang Youguan Limo Auto Parts Co., Ltd., et al. (“Youguan Limo”) for trademark infringement and unfair competition case. 

On Whether the Accused Acts by Youguan Limo Constitute Trademark Infringement, the Court Held:

In this case, based on multiple notarized certificates and administrative penalty decisions submitted by LIQUI MOLY, it is sufficient to determine that Youguan Limo used the accused marks “,” “,” “,” “力魔,” “优冠力魔,” etc., on product names, physical goods, packaging, company and store signs, online store decor, product descriptions, and promotional materials, among other locations. These marks served to identify the product source, constituting trademark usage under the trademark law. Although LIQUI MOLY’s registered trademarks “力魔,” “德国力魔,” “LIQUI MOLY,” “” were designated on different classes of goods according to the CNIPA Goods & Services Classification, the designated goods of lubricants and motor oil under LIQUI MOLY marks and the oil filters used by Youguan Limo are complementary in automotive maintenance and are closely related in sales channels and target consumers, thus making them similar goods. Additionally, the accused mark “,” “力魔,” “优冠力魔” and cited marks “,” “力魔,” and “优冠力魔” were essentially identical, constituting identical trademarks. The foreign-language portions of the accused mark “,” along with its layout, sound, and appearance, were similar enough to the “LIQUI MOLY” trademark, despite minor differences in design, that it was likely to cause confusion about the source of the goods or a connection between the two parties, constituting similar trademarks. In summary, Youguan Limo used marks identical or similar to LIQUI MOLY’s registered trademarks on similar goods without authorization, which constitutes trademark infringement.

On Whether Lin and He Are Jointly Liable for Infringement, the Court Held:

Based on the findings, Lin and He, who are close relatives to the legal representative and major shareholder of Youguan Limo, are directly involved. Lin registered the “MOLY” and “” marks and authorized their use by Youguan Limo, and Youguan Limo used it improperly. Later, the trademarks were transferred to He. Additionally, He had been operating an individual business under the name “力魔” since 2014, selling filter products, registering copyright for “” as an art piece, and directly participating in the sale of infringing goods. Lin, He, and Youguan Limo repeatedly applied for “优冠力魔,” “LIQUI,” “MOLY,” ”LIQUI MOLY,” “,” “优冠力魔,”marks similar to LIQUI MOLY’s in Class 7 goods, which shows a clear intent to associate with the well-known LIQUI MOLY brand and cause consumer confusion. Each party’s actions led to the same harm against LIQUI MOLY, thus constituting joint liability.

On Whether Youguan Limo’s Actions Constitute Unfair Competition, the Court Held:

First, Youguan Limo’s use of “力魔” as its trade name could mislead consumers about the source of goods and disrupt market order, constituting unfair competition. Additionally, advertising statements in Youguan Limo’s 1688 online store, such as “the company obtained EU certifications of CE and IS016949 ” and “our products (LIQUI and MOLY) mainly supply Dongfeng Honda and Dongfeng Nissan,” were found to lack factual basis, constituting false advertising and unfair competition. Even if these claims were made by certain employee, they are considered acts of the company, which must bear liability.

On Compensation Amount:

Youguan Limo claimed that LIQUI MOLY had not actually used the “力魔,” “德国力魔,” or “LIQUI MOLY” trademarks, thus there was no actual loss. This Court held that evidence, such as promotional materials submitted by Youguan Limo, shows varying degrees of use of these trademarks. Additionally, there is no dispute among the parties regarding the actual use of the “” trademark, so the alleged trademark infringement has indeed caused actual loss to LIQUI MOLY, and Youguan Limo should bear compensation liability.

Regarding the compensation amount, since LIQUI MOLY has not provided evidence of actual loss due to the infringement or the profits gained by the infringer, nor is there a reasonable trademark licensing fee as a reference, statutory damages should be applied in this case. The court considered the following factors:

1. The cited marks have high distinctiveness and reputation, and the accused marks and company name significantly contribute to the products and corporate profits.

2. Lin, He, and Youguan Limo jointly committed trademark infringement, and Youguan Limo engaged in unfair competition.

3. Lin, He, and Youguan Limo knowingly cooperated in trademark infringement despite the reputation of the cited marks, with evident bad faith in leveraging LIQUI MOLY’s goodwill.

4. The infringement has persisted for a long period. Youguan Limo claimed it began production in March 2014, while Lin and He applied to register trademarks similar to LIQUI MOLY’s in as early as 2010 and 2011. The infringing products were widely sold, including online, offline, and for export, with high sales figures.

5. The infringing goods relate to vehicle and consumer safety.

6. The local Market Supervision Bureau has imposed fines on Youguan Limo totaling RMB 1,300,800 for trademark infringement and unfair competition against LIQUI MOLY.

7. In this case, LIQUI MOLY incurred high legal costs to prevent infringement, including attorney fees and multiple notarized evidence collections.

In conclusion, the court believes the original compensation amount should be increased and fully supports LIQUI MOLY’s claim of RMB 1,000,000 (USD 137,000) in economic losses and RMB 200,000 (USD 27,400) in reasonable expenses.

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Weekly China Brand Protection News

November 6, 2024

1. Huawei Successfully Protects its Phone Charger Based on “Influential Product Names and Packaging”

The Beijing IP Court made a second-instance ruling in the case of Dongguan Zhihong Electronics Technology Co., Ltd. (the appellant) against Huawei Terminal Co., Ltd. (the appellee) and the original defendant, Beijing JD 360 Degree E-commerce Co., Ltd., over unfair competition. The court ruled that Zhihong Electronics must immediately stop using product names and packaging that are identical or similar to Huawei’s “SuperCharge” and “超级快充 (SuperCharge in Chinese)” chargers. Zhihong Electronics is also ordered to halt the sale of the infringing products and destroy existing stock, as well as compensate Huawei for economic losses and reasonable expenses amounting to CNY 110,000 (USD 15,000).

The second-instance court found that Huawei began promoting its super fast charging mobile chargers in 2016. Through Huawei’s extensive and long-term marketing, the name “SuperCharge / SuperCharge in Chinese” and the distinct design elements—such as the specific size, white color, rounded corners, and an oval depression on one-third of the charger body—have gained significant recognition and influence. While the depressed design is not exclusive to Huawei, when combined with other elements, it still creates a distinctive feature that sets it apart from other chargers. Therefore, the court ruled that the “SuperCharge / SuperCharge in Chinese” name and its unique design qualify as product names and packaging with significant influence under Article 6 of the Anti-Unfair Competition Law.

Evidence in the case showed that Zhihong Electronics not only produced chargers with designs highly similar to Huawei’s, but also promised to sell products bearing the “Huawei,” “SuperCharge,” and “SuperCharge in Chinese” trademarks on its 1688 storefront. Such actions could easily confuse the public, constituting unfair competition as defined by Article 6, Section 1 of the Anti-Unfair Competition Law. Although Huawei’s purchase of infringing products from Zhihong Electronics’s supplier did not display the “SuperCharge” or “SuperCharge in Chinese” trademarks, the combined actions of promoting these products on 1688 led the court to conclude that Zhihong Electronics improperly used Huawei’s influential product names and packaging, which could mislead consumers.

Founded in 2020, Zhihong Electronics is primarily engaged in the development and sale of electronic products and accessories. As such, the company should have been aware of Huawei SuperCharge charger’s name and design. Despite this, Zhihong Electronics did not take steps to avoid infringing on Huawei’s trademarks and instead produced and sold highly similar chargers, engaging in unfair competition. While Zhihong Electronics argued that it was merely a processing agent and should not bear responsibility, the second-instance court ruled that the evidence presented in the appeal was insufficient to prove that the infringing products were commissioned from its supplier, and even if they were, Zhihong Electronics was still responsible for accepting the commission knowing that infringement was likely.

2. First Domestic Legally Binding Cross-Border E-Commerce Unfair Competition Case Based On “Fake Reviews and Manipulation”

The Shenzhen Intermediate Court has issued a second-instance judgment in a case involving Amazon.com Inc. and Amazon.com Services LLC (“Amazon”) against two defendants over unfair competition. The court ruled that the two defendants must issue a public statement for 15 consecutive days to remove the negative impact of their unfair competition on Amazon, and they are required to compensate Amazon for economic losses and reasonable expenses totaling CNY 800,000 (USD 110,000).

Amazon claimed that the unfair competition conducted by the two defendants included services such as “Add to Cart | Wish List,” “Ranking Optimization,” “Pull-down Promotions,” “Direct Reviews,” “Associated Videos,” “Like Tasks,” “Q&A Questions,” “Q&A Answers + Video,” “Q&A Polls,” “Merging International Reviews,” “Flash Sale Control,” and “Deleting Negative Reviews.” Amazon argued that these actions disrupted the market competition order in the cross-border e-commerce industry, harmed the fair competition ecosystem that Amazon had worked hard to build, and infringed upon consumers’ rights to be informed and make choices.

The second-instance court found that evidence showed that the contested actions were carried out using fake Amazon buyer accounts. The defendants acknowledged this, and as such, the court ruled that these actions, while conducted through Amazon buyer accounts, did not reflect the genuine intent of Amazon customers. Instead, they constituted false transactions or actions based on false representations related to the transaction. The results of these actions were designed to assist Amazon sellers in creating false or misleading commercial promotions. Therefore, the behaviors conducted on the defendants’ websites were deemed to be false advertising.

As for the “Merging International Reviews” practice, Amazon’s platform guidelines explicitly state that reviews may only be merged if the products are substantially identical and belong to the same category or variation. However, the notarized evidence in this case showed that the contested website provided examples of merging reviews from different products with similar appearances, and did not follow Amazon’s rules when providing this service. This action helped and encouraged Amazon sellers to fabricate related product reviews, and the merged reviews, which came from visually similar products, were likely to mislead consumers into misidentifying the reviewed product. As such, the court also determined that the “Merging International Reviews” practice constituted false advertising.

Follow us on LinkedIn! Email: trademark@beijingeastip.com Tel: +86 10 8518 9318 | Fax: +86 10 8518 9338 Address: Suite 1601, Tower E2, Oriental Plaza, 1 East Chang An Ave., Dongcheng Dist., Beijing, 100738, P.R. China