In the latest update from members of the MARQUES China Team, Ms Haiyu Li and Mr Tingxi Huo summarise recent developments regarding damages, and the latest decision in the New Balance case.

SPC interprets IPR punitive damages

The Supreme People’s Court (SPC) of China released the Interpretation Concerning Application of Punitive Damages in Civil Cases of Intellectual Property Right Infringement, effective 3 March 2021, which includes seven rules.

The Interpretation addresses issues such as wilfulness, bad faith, wilful infringement factors, severe scenarios and means of calculation.

In recent years, China amended its laws relating to trade marks, copyright, patents, seeds, unfair competition and the civil code and updated the relevant judicial interpretations. Accordingly, significantly heavier fines and higher damages have been provided, which is expected to greatly improve the IPR enforcement environment and deter infringers.

However, the amended laws and interpretations are slightly inconsistent in terms of punitive damages. The Interpretation is made to better help coordinate the different laws and standardise the application of punitive damages.

According to the SPC’s plan, it will release more typical cases to further illustrate the rules and guide the local courts in the future.

Read a translation of the Interpretation on the Team’s page on the MARQUES website (log-in required).

Shell granted maximum statutory damages

The Beijing IP Court recently granted Shell a maximum statutory damage of CNY5 million (€0.64 million) in its first-instance ruling under the newly amended Chinese Trademark Law.

In this case, because Shell was unable to prove its loss or the defendants’ profit from the trade mark infringement, the Court used its discretion to comprehensively consider such factors as the defendants’ subjective bad faith, self-announced profit and the contribution of trade mark and granted the damages.

Under the old Trademark Law, the maximum statutory damages award was CNY3 million (€0.39 million). As the five defendants’ trade mark infringement lasted until after the new Law took effect on 1 November 2019, the new Law was applied and greater damages were thus granted.

Record award for trade secrets

According to news from Chinaso.com, on 19 February 2021, the Supreme People’s Court (SPC) granted damages of CNY159 million (€20.5 million) for infringing trade secrets in the second and final instance, a record high in all trade secret cases.

The two plaintiffs Zhonghua Chemical and Shanghai Xinchen jointly developed a vanillin producing technique and protected it as a trade secret. Zhonghua Chemical won some awards for the technique and has become the biggest vanillin producer in the world, occupying 60% of the world’s vanillin market.

In 2010, Mr Fu, a workshop Deputy Director of Zhonghua Chemical, received CNY400,000 from Wanglong Tech, one of the five defendants, informed Wanglong Tech of the trade secret and joined the company. Wanglong Tech and the other two company defendants actually used the trade secret to produce vanillin from 2011 through 2017, producing at least 2,000 tons of vanillin every year.

After the first-instance suit, both sides appealed to the SPC, which finally ordered the defendants to stop infringement and granted total damages of CNY159 million, with the reasonable expenses for enforcement included. At the same time, the SPC transferred the criminal evidence to the police for criminal prosecution.

New Balance fails to invalidate XINBAILUN

On 9 February 2021, the Beijing Higher People’s Court finally upheld the Beijing IP Court’s ruling and the China National IP Administration’s (CNIPA) decision to refuse New Balance’s petition for invalidation of Zhou Lelun and his company’s Chinese trade mark XINBAILUN (新百伦) on the basis of its English trade mark NEW BALANCE.

Zhou Lelun and his company applied for and registered the Chinese trade mark. Although New Balance used the same mark earlier, under China’s first-to-file principle as opposed to the first-to-use principle, the Supreme People’s Court (SPC) found New Balance’s use to be infringement in another civil lawsuit.

The Beijing Higher People’s Court ruled that there was no one-to-one correspondence between the Chinese and English marks and that New Balance’s earlier use of the same Chinese trade mark is insufficient to prove its influential or famous status before the challenged trade mark’s filing date.

As the ruling on the invalidation is final, New Balance will have to design and select a different Chinese mark equivalent to its original English version. This case once again reflects the importance of filing trade marks earlier and conducting searches before use in China.

Haiyu Li and Tingxi Huo are members of Chofn IP. Find out more on the MARQUES China Team page