In a recent appeal, China’s Supreme People’s Court (“SPC“) found in favour of Michelin against Sen Tai Da and related parties (“Sen Tai Da“) for trademark infringement. The SPC’s decision is significant in that it authoritatively confirms the emerging trend to take the reputation of a mark into account when determining the level of the – somewhat discretionary – statutory damages in Chinese trademark cases. In the case at hand, the SPC explicitly recognized the robust reputation of Michelin’s marks, and raised the statutory damages awarded from RMB 60,000 to 500,000 (around US$ 75,000).

Background

Michelin, the France-based tire manufacturer owns a number of trademarks in China including:

(a) the “MICHELIN” word mark; (b) the “米其林” word mark (Mi Qi Lin in Chinese characters); and

(c) the “click here to view the image” logo.

Michelin previously engaged Sen Tai Da as its distributor from 2006 to 2009. In 2010, Michelin discovered that Sen Tai Da and Qingdao Sen Qi Lin Tire Co., Ltd. (“Sen Qi Lin“), an associated company, have been using the following marks on identical goods: (a) “CENCHELYN”; (b) “森麒麟” (Sen Qi Lin in Chinese characters), (c) Click here to view the image and (d) solely the kirin logo (together the “Infringing Marks”). Sen Tai Da also registered the domain name “cenchelyn.com”. Further, Li Dao Wei, a dealer of Sen Tai Da has been using the mark “米其林” at its store in Chongqing.

As a result, in 2011, Michelin took action against Sen Tai Da, Sen Qi Lin and Li Dao Wei before the Chongqing Fifth People’s Court for trademark infringement and unfair competition.

In the first instance, the Chongqing Fifth People’s Court found that (i) Li Dao Wei’s use of the mark “米其林” was infringing and he should pay Michelin RMB 50,000 damages and (ii) Sen Tai Da and Sen Qi Lin’s use of click here to view the image (but not “CENCHELYN”, “森麒麟” or the Kirin logo in itself) is similar to Michelin’s mark “click here to view the image” and they should pay Michelin RMB 10,000 damages. However, the Court found that none of the Infringing Marks were visually, phonetically and conceptually similar to “MICHELIN” or “米其林”.

Michelin appealed, and on second instance, the Chongqing Higher People’s Court upheld the finding. Michelin consequently further appealed to the SPC.

Relevance of reputation

In its judgment, the SPC emphasized the below three principles when considering whether a mark is identical or similar:

  1. The level of attention of the relevant public;
  2. Not just a global assessment of the similarity of the trademarks but also a comparison of the major parts of the trademarks involved, where the objects are compared in isolation;
  3. The fame and reputation of the registered trademark when determining whether an allegedly infringing sign is similar.

In this case, the SPC emphasized the strong reputation of Michelin’s marks in China, reiterating that “the more reputable the trademark, the broader and stronger protection it should receive”.

Placing particular importance on (i) the fame of the “MICHELIN” mark in China, even before Sen Tai Da and Sen Qi Lin were established – “MICHELIN” was included in the List of Major Trademarks for Nationwide Protection in China in 2006, and (ii) the previous relationship between Michelin and Sen Tai Da, the SPC ruled that the mark “CENCHELYN” was similar to “MICHELIN” and its use on identical goods constituted trademark infringement.

Turning to damages, the SPC held that Michelin’s evidence did not satisfy the high threshold for direct evidence of compensatory damages. The SPC therefore concluded that Michelin should be awarded statutory damages, which the courts can generally set at their discretion within certain limits. Stressing the strong reputation of the Michelin marks in China and the clear case of infringement, the SPC repealed the decision of the lower courts and set the damages at RMB 500,000 in total, i.e. the maximum amount of statutory damages under the 2001 Trademark Law (applicable to this case).

Conclusion

Following last year’s Moncler case, where Moncler was also granted the maximum statutory damages (RMB 3 million- under the new Trademark Law, see our article: Moncler carries the day and takes home a whopping 3 million RMB in statutory damages), this Michelin case is a further confirmation that the Chinese courts are widening their discretion to award higher statutory damages in trademark infringement cases.