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Repeated trademark infringer fined for RMB 4.9 million

Repeated trademark infringer fined for RMB 4.9 million

Background

Vans, Inc. (“Vans”) sued Wenzhou Shuangxiang Co., Ltd., (“Shuangxiang”) for infringing its trademark right when Shuangxiang manufactured and sold shoes using Vans’ Cited Marks and requested the court to order quintuple punitive damages based on Shuangxiang’s unjustified gains. Vans claimed that not only did Shuangxiang infringed its trademark right by manufacturing and selling shoes using its Cited Mark, but Shuangxiang also knowingly continued its infringing activities after multiple local Administration for Market Regulation (“AMR”) raids and penalties issues. Vans found that Shuangxiang sold its infringing products through an associated company Chengdu Maijia Co., Ltd. (“Maijia”) and requested to have both companies to be held jointly liable. The court held against Shuangxiang and Maijia for infringing Vans’ trademark right and ordered RMB 4.89 million (USD 767,500) in economic loss and RMB 10,072 (USD 1,580) in reasonable legal costs.

Cited Marks 

Reg. No.: 21171127A
Reg. Date: Nov. 7, 2017
Infant full suits; swimwear; costumes for masquerade balls; shoes (things worn on the feet); dress belts (clothes); wedding dresses; eye masks for sleep; shower caps; dress ribbons;

Reg. No.: 4724337
Reg. Date: Aug. 28, 2014
Children’s clothing; trousers; underwear; bathrobes; outerwear; T-shirts; pajamas; garments; underpants; infant full suits; costumes for masquerade parties; soccer shoes; running shoes with metal spikes; shoes; metal accessories for shoes and boots; soles; Shoe heels; Insoles; Boots and Shoe Skids; Boots; Garment Ribbons; Shower Caps; Wedding Dresses.

Reg. No.: 8606383
Reg. Date: Sep. 14, 2011
Ski boots; snowboard boots; sports shoes; shoes; boots.

Issues

  1. Trademark infringements
  • Trademark use

The defendants argued that the following marks were used only as decorations on the side of the shoes but not as trademarks. For shoes related products, however, labeling logos on both sides of a shoe can effectively convey the source of the products to consumers. Even if these logos were decorative use, such decorative use will not diminish its distinctive functionality. Therefore, the disputed logos constitutes as trademark use.

Disputed Logos

  • Similarity between the Cited Marks and the Disputed Logos

The Disputed Logos were consistent with the Cited Marks, and the subtle differences in graphics and texts were unlikely to catch consumer’s attention. Considering Vans has been publicizing and promoting its Cited Marks on its highly popular and distinctive skateboard shoes, when general consumers paying general attention to the Disputed Logos, they were likely to be confused regarding the source of the goods or mistaken that the source of goods was associated with Vans. Therefore, the Disputed Logos constituted as similar marks to the Cited Marks.

  • Joint liability

Although the alleged infringing acts were carried out by Shuangxiang and Maijia, both companies were actually owned by a mother-son duo Xiang Jin and Xiulu Li. Together, they manage all manufacture, sales, contacts, payments, delivery, and everything else related to running a business. In particular, Xiang Jin, the mother, carried out every infringing activity and directly received unjustified benefits from the infringements. Therefore, all defendants were jointly liable.

  1. Punitive damages
  • Applicability of punitive damages

Shuangxiang infringed Vans’ trademark right multiple times and received administrative punishments, however, Shuangxiang carried on its infringing acts. Additionally, Maijia, a company controlled by Shaungxiang’s owner Xiang Jing also infringed Vans’ trademark right. The relationship and acts between the two companies should be seen as intentionally infringing Van’s trademark right and punitive damages should be applied.

  • Determining the defendants’ sales amount

Vans requested the court to retrieve sales amount of Shuangxiang and Maijia from 1688 and Tmall platforms. The parties agreed that those alleged infringing products marked with “successful transaction” on the platforms totaled RMB2.39 million (USD 375,325). The defendants, however, argued that the number may not be the most accurate number and should be reduced because there was a possibility of faked transactions.

The court reasoned that sales amount was an important factor for consumer’s selection of products on e-commerce platforms. Creating fake sales, however, would present an image to consumers that the defendants’ shops were popular and trusted, which would likely to lure and mislead consumer to purchase at the defendants’ shops. Creating fake sales violated the principal of good faith and the court would not support the defendants’ claim to reduce the sales amount collected from the platforms.

  • Calculating actual damages

The defendants had operated its infringement business between 2017 and 2021 and failed to provide its own profit when the court requested. Thus, the court calculated the defendants’ profit based on 50% of the gross profit margin of Vans’ Chinese licensee. Such reference can be rectified by publicly available industry numbers and the sales numbers provided by the defendants. Not to mention that the defendants operated infringement business, which should have obtained higher profit margin than companies in the same industry.

  • Determining actual damages

Considering the defendants’ continuous and large scale of infringements on Vans’ trademark right and Vans’ high fame, the defendants’ acted with bad faith and the infringement circumstances were serious, the court ordered treble damages based on the defendants’ acts and the evidence provided.

Takeaways

  1. Logos placed on two sides of the shoes are eye-catching and can effectively convey to consumers the source of goods. The decorative purpose of logos will not decrease its function to distinguish the source of goods. ‌
  2. Continuous infringements by an infringer and its accomplice after receiving multiple administrative punishments should be considered as intentional infringement. When the circumstances are serious, punitive damages should be applied. ‌
  3. When calculating damages, profits calculated based on defendant’s sales price and industrial average profit can be consider in order to determine the final base for damages calculation. ‌
  4. Although generating fake purchase records can effectively reduce infringer’s actual profit, such records still negative impact rights owner’s marketing strategy, product’s goodwill, and market share.

 

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