Jiang Nan Qin Huimin August 15 2022 Court awards 10 million yuan damages in single civil case involving trademark infringement and unfair competition Wanhuida Intellectual Property | Intellectual Property - China Jiang Nan, Qin Huimin Intellectual Property IntroductionFactsDecisionCommentIntroductionOn 24 April 2022, the Guangdong High Court rendered a decision in Guangdong Yongquan Valve Technology Co, Ltd v Dongguan Yongquan Valve Ltd et al, reversing the first-instance decision of the Dongguan Intermediate Court. On top of awarding damages of 10 million yuan, the Guangdong High Court ordered:the cessation of trademark infringement and unfair competition;the recall and destruction of the infringing products from the market; andthe release of a statement to eliminate adverse effects.FactsThe case itself was quite straightforward. In 1998, the plaintiff registered the YONGQUAN trademark in class 7. In August 2011, the plaintiff changed its trade name to align with its sizable trademark portfolio, centring on the YONGQUAN trademark.In December 2011, the predecessor of one of the defendants started using the same trade name and later registered a confusingly similar domain name to piggyback on the plaintiff's goodwill. Since 2013, the defendants had been blatantly engaged in manufacturing, distributing and offering for sale infringing valves bearing trademarks that were either identical or similar to the plaintiff's prior registered trademarks in respect of the same or similar goods.The trial court found trademark infringement and unfair competition and granted the plaintiff damages of 700,000 yuan. Both parties appealed.DecisionThe Guangdong High Court confirmed the finding of trademark infringement and unfair competition. The tricky part was the calculation of damages.The plaintiff adduced prima facie evidence, including:the online sales prices of the infringing products;the profit margin of the valve industry; andother evidence outlining the rough size of the defendants' nationwide business operations.Since the defendants' account books were under their control, the Court ordered them to submit those account books that were associated with the infringement. Unsurprisingly, the account books adduced were found to be incomplete and did not tally with the defendants' genuine business transaction records.The Court held the defendants liable for obstructive practice and concluded that the furnished evidence did not suffice to attest the losses the plaintiff had suffered or the profits the defendants had yielded from the infringement. In light of the above and in the absence of trademark royalties, which could have served as a framework of reference in the calculation of damages, the Court held that statutory damages would apply.The Court opined it would be reasonable to penalise the act of aggravated IP infringement with a view to punishing and preventing infringement and maintaining the order of market competition. Where an infringer exhibits obvious bad faith, and the circumstance of infringement is serious, yet the rights holder has not explicitly advocated for the application of the punitive damage regime or it is practically impossible to apply it, the courts may factor in the wilfulness of the infringer and the severity of the act of infringement and award significant damages up to the maximum limit.First, the Court acknowledged the plaintiff's status as an industry leader and the high brand awareness of its trademarks in the valve industry. It enumerated the defendants' rampant infringement acts, victimising 10 of the plaintiff's registered trademarks, in tandem with:their multifaceted and calculated acts of unfair competition;the massive scale of their business operations; andthe fact that the infringement had gone on for a decade, leading to confusion and misidentification among the relevant public and substantial erosion of the market share of the plaintiff.The Court therefore found that the defendants had acted in glaringly obvious bad faith and that the severity of the infringement merited hefty damages. The Court awarded a total of 10 million yuan in damages, equally split between the defendants' acts of trademark infringement and unfair competition.CommentConsidering that acts of trademark infringement and unfair competition are often closely intertwined, allegations are usually raised and affirmed simultaneously in one single civil proceeding and the judiciary tends to assess the tort liability of both acts in their entirety. This is not, however, mandatory. The courts may opt to assess the acts severally and award separate monetary damages on their own merits, as long as the acts are relatively independent. China's Trademark Law and the Anti-Unfair Competition Law each sets the maximum statutory damages at 5 million yuan, which means the courts may award statutory damages of up to 10 million yuan in a single civil proceeding involving both torts.For further information on this topic please contact Nan Jiang or Huimin Qin at Wanhuida Intellectual Property by telephone (+86 10 6892 1000) or email ([email protected] or [email protected]). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.