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Weekly China Trademark News Updates – February 6, 2024


Weekly China Trademark News Updates

February 6, 2024

1. RMB 22.14 million damages was ordered against the defendant taking advantage of “Belle in Chinese” and “BELLE” without authorization

Recently, the Zhejiang High Court concluded a trademark infringement and anti-unfair competition lawsuit against the appellant Baoyang Liu for his involvement with the appellees New Belle Shoes (Shenzhen) Co., Ltd. (“New Belle”), Lirong Shoes (Shenzhen) Co., Ltd. (“Lirong”), the defendant in the first instance, Wenzhou Guangyuan E-Commerce Co., Ltd. (“Guangyuan”).  The court held that Liu is liable for trademark infringement and should stop the infringement and compensation to Lirong for economic losses and reasonable rights protection expenses of RMB22.14 million (USD3.11 million).

The court found that the Cited Marks have accumulated high goodwill nationwide through its continuous use and publicity by the trademark owner and its authorized parties. The “Belle in Chinese” and “BELLE” marks were once recognized as well-known marks and have been widely used in footwear products. They enjoy a high level of fame and popularity. Liu used the Disputed Mark in his Chinese TikTok store name, account, product links, product labels, hangtags, video promotions, and product introductions, which could be used to identify the source of the goods and constituted trademark use. The Disputed Marks “Australia Belle in Chinese” and “Australia Belle in Chinese + AOZHOUBELLE” completely include the Cited Marks. Although “Australia in Chinese” and the pinyin “AOZHOU” are included, they are only used to refer to the location in the minds of the general public. The identifying part of the Disputed Mark is still “Belle in Chinese” and “BELLE.” The Disputed Mark and the Cited Marks are used in the same class of goods, which is enough to confuse the relevant public as to the source of the goods. The two marks constituted similar marks. Liu used trademarks similar to the Cited marks on similar goods, which could easily cause confusion and misunderstanding among the relevant public and constituted trademark infringement.

To apply punitive damages, the test is “intentional infringement” and “serious circumstances.” First, the Cited Marks should have high distinctiveness and fame through continuous use and publicity. Lirong has opened a number of “Belle in Chinese/BELLE” brand TikTok accounts and stores. As a footwear business operator, Liu should have known that and make reasonable avoidance. Liu, however, actively sought to acquire the “” trademark that was similar to the Cited Marks in order to use it illegally. His use highlighted “Australia Belle in Chinese,” and replaced “AOZHOUBAILI” with “AOZHOUBELLE,” which fully included the Cited Marks in seeking of confusion. Liu actively used the Disputed Marks in TikTok stores, accounts, product tags, product links, video promotions to confuse consumers. Its intention to take advantage of the Cited Marks was obvious. Liu registered and established “Wenzhou Lucheng District Huibu Shoes Store” and opened a TikTok store “Australia Belle Shoes in Chinese” store that corresponds with his TikTok account “Australia Belle Official Flagship Store in Chinese.” Subsequently, Liu registered four individual companies and opened four TikTok stores respectively. Liu began to use the Disputed Marks on infringing goods and selling them on a large scale. The series of infringements carried out by Liu showed his strong intention, planning and organization, which met the first test of “intentional infringements.”

Second, Liu mainly sold infringing products through TikTok live broadcasts and TikTok stores that was not limited by time and place and can quickly accumulate a large number of customer groups in a short period of time, thereby achieving sales conversion. According to the facts found, its TikTok store “Australia Belle Shoes in Chinese” was opened on February 25, 2021, and by May 7, 2022 the number of fans has reached 936,000, and 519,000+ products have been sold. As of June 10, 2022, the number of fans has increased to 1.02 million, and 550,000+ products have been sold. The number of followers of his other TikTok accounts and online stores “Abao Selected Women’s Shoes in Chinese” and “Oucai Women’s Shoes Store in Chinese” also reached 315,000 and 69,000 respectively. Judging from the sales volume, the total transaction volume of only the five TikTok stores involved in the case has reached RMB 44.08 million. It was also found on Pinduoduo and Taobao that Liu was selling shoes using the Disputed Mark during the same period. It can be seen that compared with the traditional sales model, infringement in this case was carried out through online live broadcasting and other methods. The scope of infringement was wider and the profits from infringement were higher. At the same time, it also caused greater losses of trademark goodwill and losses to New Belle and Lirong. Economic losses are considered “serious infringement.” Therefore, Liu’s infringement met the statutory requirements for punitive damages, and the first instance court did not err in applying punitive damages.

Regarding the calculation of punitive damages, New Belle and Lirong agreed to calculate Liu’s infringement profits based on the total transaction volume of RMB 44.08 million of the five TikTok stores involved in the case obtained by the first instance court. Lirong issued the “Special Audit Report on Belle Brand Sales and Operations” stating that the net profit margin of Belle brand sales was 30.73%, of which the net profit margin of offline physical stores was 28.97% and the net profit margin of online e-commerce stores was 35.42%. This court found that the first instance court referred to the profit rate data provided by Lirong, combined with the time when Liu’s online stores stopped infringing, the damage caused, the possible existence of some non-infringing product sales links, the commission of live broadcast sales on TikTok, and Taobao, Pinduoduo and other platforms that infringing shoes were being sold. It was reasonable to determine that the profit margin of the online store involved in selling infringing goods was 25%. Based on this, this court determined that Liu’s infringement profits were RMB 11.02 million and applied one-time punitive damages based on this calculation base. It also determined that the reasonable expenses of New Belle and Lirong were RMB 100,000. The final amount of compensation is RMB 22. 14 million.

2. The decoration of “Crocs” has lost its distinctive features and cannot protected under the Anti-Unfair Competition Law

The Fujian High Court concluded a trademark infringement lawsuit between the appellant Crocs Trading (Shanghai) Co., Ltd. (“Crocs Company”) and the appellants Pan Zhiming, Quanzhou Fengze District Zhongkuo Trading Co., Ltd. (“Zhongkuo”), Quanzhou Fengze Chaoyi E-Commerce Co., Ltd. (“Chaoyi”), Quanzhou Jixuan Trading Co., Ltd. (“Jixuan”), and an individual Huang. The defendants were ordered to immediately stop the trademark infringement and compensate Crocs Company for economic losses and reasonable expenses of RMB 1 million (USD140,480).

Here, Crocs Company is the owner of the “CROCS” mark (“Cited Mark”). Through Crocs Company and its affiliated companies’ continuous use and publicity, the Cited Mark has obtained relatively high fame in its approved class. The Disputed Mark is “CROSS,” which was used on the same class of goods as the Cited Mark. The Disputed Mark was used on the shoe product itself, product packaging boxes, and the sales page of the e-commerce platform. Such uses were clearly trademark uses. Using the general attention of the relevant public as the standard, when comparing the Disputed Mark and the Cited Mark in isolation, the distinctive part of the two marks constituted similar. Under the circumstances that the Cited Mark is relatively famous, the Disputed Mark is likely to cause confusion. The first instance court did not err in finding that the Disputed Mark constituted an infringement of the Cited Mark.

In this case, Crocs Company claimed that the product decoration of its CROCS brand “Classic Crocs in Chinese,” “Crocband Kaluoban in Chinese,” and “Bayaband Clog Beiyakaluobankelulu in Chinese” series of shoes falls within the scope of the Anti-Unfair Competition Law because of its decoration has a certain influence. Judging from the evidence provided by Crocs Company, although the “CROCS” brand series of shoes have gained a certain degree of popularity through continued use and publicity, there is no sufficient evidence to prove that the relevant public has regarded the construction upholstery of this series of shoes to be associated with Crocs Company. Although there was a previous judgment that protected the decoration claimed by Crocs Company, that judgment was in 2015, which was a long time before the litigation in this case occurred. The uniqueness of a mark’s decoration should be combined with the public perception at the time of the dispute. Knowledge and whether the decorative mark also have distinctive features that distinguish the source of the goods shall be used as the criterion for judgment. Whether the decorative log has been protected is only one of the factors to be considered. Judging from the supplementary evidence submitted by the defendants, “crocs design shoes” products are relatively common in the market and have different functions. Third parties outside of this case have successfully registered for design patents based on improvements to such features. Even if the decoration claimed by Crocs Company had certain uniqueness in the early stage, there is no evidence to prove that Crocs Company actively defended its rights when a large number of footwear products with the same or similar features appeared on the market, which made such decoration more general and losing its inherent distinctiveness. Based on the above analysis, the decoration claimed by Crocs Company does not meet the requirements for decoration with certain influence stipulated in the Anti-Unfair Competition Law and should not be protected.

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