In a recent landmark decision, the newly established Beijing Intellectual Property Court awarded the first ever maximum statutory damage under China’s new trademark law in favor of French-Italian luxury outwear maker Moncler, in its dispute against a domestic apparel company for trademark infringement and unfair competition. The facts of the case are unremarkable. In 2013, Moncler, known for its iconic down jackets, discovered that Beijing Nuoyakate Garment Co., Ltd was manufacturing and selling down jackets with counterfeit Moncler logos. In addition, Moncler discovered that Nuoyakate also tried to register several fake trademarks and domain names in China and other countries. In December 2014, Moncler brought an action against Nuoyakate for trademark infringement and unfair competition.
The Court ruled in favour of Moncler and awarded the maximum statutory damage of RMB 3 million ($480,000) under China’s new trademark law, a significant increase from the previous maximum statutory damages of RMB 500,000 ($80,000). In addition, Nouyakate was ordered to stop using the domain name www.mockner.com and stop selling clothes that would infringe Moncler’s trademarks.
Significance of the case
Foreign companies bringing infringement cases in China have always had the burden of proving the actual damage suffered as a result of infringement. Historically, providing such proof has been difficult due to the absence of automatic disclosure or discovery of documents in legal proceedings, meaning that it was difficult for brand owners to show the damages which had been caused. While brand owners could, in such situations, rely upon statutory damages (which can be awarded without proof of damage), awards have historically been low.
However, under the 2014 trademark law, if the brand owner has presented as much proof of its claims as is practically possible, the Court can order the infringing party to submit its accounts books or any financial statements which reveal the amount of profit the infringer has earned as a result of its infringing actions. Failing that, the court can exercise its discretion to award the maximum statutory damage with regard to the circumstances of each case.
In this case, Nuoyakate failed to provide its earnings or relevant financial statements. Therefore, the Court awarded the maximum statutory damage by considering the following factors: (1) Moncler had maintained a good reputation in its trademark since its entry into the Chinese market in 2008; (2) Nuoyakate displayed goods on its website www.mockner.com with the same Moncler trademark and deliberately did not state the name of the manufacturer; (3) Nuoyakate sold the infringing goods at high prices; and (4) Nuoyakate had committed similar infringing activities for a long time and on a large scale and was in the process of setting up franchising stores and distributors.
This decision comes at a time when China is trying to shake off its reputation as a haven for widespread pirated and counterfeit goods. It demonstrates that China is taking a much firmer approach towards enforcing stricter sanctions under the new trademark law, even when the party being sanctioned is a domestic business.
Edward Chatterton is a Partner and the Co-Head of IPT, Asia at DLA Piper.