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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