Weekly China Brand Protection News

August 2, 2024

A couple who held shares in multiple operating entities maliciously attached themselves to the goodwill of the “Skechers in Chinese” mark, and the court applied punitive damages amounting to CNY 7 million

The Wenzhou Intermediate Court made a first-instance trademark infringement and unfair competition judgment between the plaintiff, Skechers U.S.A., Inc. II (“Skechers”), against the defendants Zhenjiang Sikaiqi (Sketchers in Chinese) Shoes & Apparel Co., Ltd. (“Zhenjiang Sikaiqi”), Hengfeng Zhuxuan Shoe Business of Wenling City (“Hengfeng”), Yitu Trading Co., Ltd. of Wenling City (“Yitu”), Jiang Zhuquan, Wenzhou Walaishen Shoes & Apparel Co., Ltd. (“Walaishen”), Jin Xuehong, and five other defendants. The court ordered the seven defendants to immediately cease trademark infringement and unfair competition activities and to jointly compensate Skechers for economic losses and reasonable expenses related to rights protection, totaling CNY 7 million (USD 970,887).

The infringing products, packaging boxes, tags, certificates, after-sales service commitment cards, promotional screens in stores, WeChat, and TikTok used the allegedly infringing marks “SHKFCELVS,” “SKECHERS,” “斯凯奇,” “”, “”, “”, “D’LITES”, “”, “” and several logos similar to Skecher’s registered trademarks.

The infringing products’ shoeboxes and certificates were labeled with the names and addresses of Zhenjiang Skechers and Walaishen, indicating their roles as manufacturers. Therefore, Walaishen was identified as the manufacturer of the infringing products. Hengfeng, operated by Jiang Zhuquan, sold the infringing products in its offline and online TikTok stores. Yitu operated Hengfeng as an offline store whose business scope includes shoe sales, with Jiang Zhuquan as the sole shareholder. Thus, Yitu jointly committed the infringement.

Jiang Zhuquan, as the controlling shareholder of Zhenjiang Sikaiqi, Walaishen, and Yitu, and the operator of Hengfeng, had a common intent to infringe and objectively collaborated in the production and sale of infringing products. Jiang Zhuquan and Jin Xuehong, being spouses, established various business entities such as Zhenjiang Sikaiqi and Hong Kong Sikaiqi Fashion (International) Co., Ltd., while Jin Xuehong established Sikaiqi Shoes & Apparel Group Co., Ltd. and participated in production activities, jointly infringing Skechers’ goodwill. They also received large payments through personal accounts, participating in infringement activities with the other companies.

The six defendants used “Sikaiqi Shoes & Apparel Group Co., Ltd.” and “Zhenjiang Sikaiqi Shoes & Apparel Co., Ltd.” without permission on infringing products, packaging boxes, tags, certificates, and promotional screens in stores, leading to public confusion and constituting unfair competition. The decoration of Skechers’ “D’LITES” series shoes had gained a certain level of influence through extensive promotion. The six defendants used similar decorations without authorization, causing public confusion and unfair competition.

Regarding the compensation amount, based on data obtained by the court, Skechers cited illegal business earnings of CNY 23 million as the basis for calculating compensation, with a profit margin of 10%. The six defendants’ profits from infringement were CNY 2.3 million (23 million × 10%), used as the basis for calculating punitive damages. Considering the defendants’ subjective intent, the circumstances of the infringement, and the significant losses caused to Skechers Company through extensive online and offline sales, the punitive damages were set at twice the profit amount. Thus, the six defendants were ordered to jointly compensate Skechers a total of CNY 7 million (USD 970,887) (CNY 2.3 million + CNY 2.3 million × 2 + CNY 100,000).

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