Some online infringers sell counterfeits mixed with genuine ones as a cover, which is not only an annoying problem but even becomes a real trouble to the brand owners. This creates a possibility for the infringers to harass the right owners by making use of the genuine products they sell. WHD - PEKSUNG recently successfully dealt with several harassing litigations by such kind of infringers, and would like to share some experience and tactic based on one typical case.

Case Brief

In the beginning of 2014, a few brand owners met with the Alibaba to address the issue of online sellers engaged in the business of counterfeits on Tmall. Tmall organized an anti-counterfeiting campaign by conducting purchase from random Tmall stores and sending the samples to the right owners for authentication. The products of four stores were confirmed as counterfeits by the brand owner, based on which Tmall shut down the online stores and kept their guarantee deposit.

In June, 2014, three online sellers filed civil litigations against one brand owner on the ground of unfair competition, claiming that the brand owner, by its false statement, had unfairly jeopardized their business and seeking damage. To prove that the statement was wrong, they supplied the source evidence of some genuine products of the same kind. They challenged the lack of notarization in the purchase process by Tmall and, furthermore, accused the brand owner to have switched the samples sent by Tmall. The brand owner described the full picture to the court and suggested a stay of the procedure while independent infringement actions would be launched against each of the complaining online sellers. Two of the online sellers, for fear of being sued, withdrew their cases. The third one, Shunfa, insisted. Its case was dismissed in November 2014, by a simple ruling made after a hearing during which it was demonstrated that Shunfa did not even qualify as a plaintiff under the Anti-Unfair Competition Law, since it was not in a competition relationship with the brand owner.

But Shunfa did not give up. In August 2015, Shunfa filed a non-infringement lawsuit against the brand owner based on the same evidence. The same claim about "switching the samples" was made. This time, there was no possible argument as to the qualification of Shunfa as a plaintiff.  

The brand owner filed an infringement counter-claim requesting the court to order the full disclosure of the sales records of Shunfa store on Tmall. By comparing the total amount of sales of the products in question and the very small amount for which Shunfa was able to supply evidence of legitimate source, the brand owner identified a substantial gap between the two amounts which fully justified the trademark infringement.

In the end of 2016, under the pressure of paying huge damages, Shunfa finally surrendered and reached a settlement with the brand owner by withdrawing the noninfringement case and paying a substantial damage.

WHD - PEKSUNG Group represented this brand owner in both civil proceedings.

Comments:

The specific tips against the harrasment of such kind of infringers are to challenge the plaintiff's qualification in case the claim is based on unfair competition and to consider a counterclaim strategy based on the inconsistency between the total amount of the sales record and the amount the can be supported by the legitimate source evidence.

And in a more general way, it is not wise to just accept the direction set by the infringers and entangle ourselves into a defense on their ground. Only by jumping out of that scope, and positively proving the existence of infringement, either by suing directly or requesting the disclosure of the sales record, can one solve the problem.