Jason Yao Yanfei Ren July 4 2022 Wenzhou court awards Siemens 1 million yuan in civil suit Wanhuida Intellectual Property | Intellectual Property - China Jason Yao, Yanfei Ren Intellectual Property FactsDecisionCommentOn 27 September 2021, the Wenzhou Intermediate Court awarded Siemens damages of 1 million yuan (inclusive of reasonable cost) in a trademark civil infringement proceeding. The defendants of the civil proceeding were Mr Wang and Ms Kong, counterfeiters of fake Siemens switches, sockets and accessories. Wang had been convicted in a previous criminal prosecution proceeding.FactsWang's counterfeiting business started in 2016. He was arrested by the public security bureau of Pizhou, Xuzhou, for counterfeiting Siemens switches and sockets in July 2017. Given that he was a first offender and the scale of the counterfeiting business was small, Wang was released on bail pending trial in August 2017. In September 2018, he was convicted of counterfeiting registered trademarks, sentenced to two years in prison and three years of probation (from 22 September 2018 to 21 September 2021), and fined 100,000 yuan by the Xuzhou Intermediate Court of Jiangsu province.Wang resumed his counterfeiting business almost immediately after his release. This time, he colluded with Kong and relocated to Wenzhou, Zhejiang province, to resume the manufacture and sales of counterfeit Siemens switches, sockets and accessories. By the time Wang's and Kong's dens were raided on 12 June 2019, the counterfeit products had generated over 700,000 yuan in sales.On 19 November 2020, the Ouhai District Court, Wenzhou, ascertained that Wang and Kong were guilty of counterfeiting registered trademarks and the circumstances were especially severe. In view of the fact that Wang had committed multiple crimes when he was still on probation, the Court revoked his probation and affirmed that the circumstance merited a combined punishment for several offences. The Court therefore sentenced Wang to three years in prison and imposed a fine of 400,000 yuan, which – combined with the original sentence rendered by the Xuzhou Intermediate Court – equalled a cumulative imprisonment of four years and six months and fines of 500,000 yuan. The Court sentenced Kong to one year and five months in prison and imposed a fine of 100,000 yuan.As Wang had continuously and repeatedly committed trademark infringement activity for a long time and had showed no sign of repentance after being subject to criminal penalties, Siemens opined that the fact that Wang had expanded the counterfeiting scale and resumed the organised trademark infringement action substantiated his blatant malice and the gravity of the circumstance. In early 2021, Siemens filed a civil infringement lawsuit before the Wenzhou Intermediate Court, contending that punitive damages should be applied and demanding damages of 1 million yuan for its financial losses and reasonable expenses incurred to stop the infringement.DecisionThe Wenzhou Intermediate Court referred to the Interpretation of the Supreme People's Court on the Application of Punitive Damages to the Trial of Civil Cases involving Infringement of Intellectual Property Rights (the Judicial Interpretation) in assessing punitive damages.Article 3.1 of the Judicial Interpretation enumerates the metrics the courts shall take into account in their determination of wilful infringement, including:the type and status of the infringed IP right;the popularity of the products involved; andthe relationship between the defendant and the plaintiff or interested parties.Article 3.2.(5) further provides that if the defendant commits acts of pirating or counterfeiting registered trademarks, the court may make a prima facie presumption of wilfulness.The Court affirmed that back in 2012, the SIEMENS trademark had been recognised by the Guangzhou Intermediate Court as a well-known trademark in class 9. The fact that the defendants had been engaged in counterfeiting a well-known trademark sufficed to prove that the defendants had committed wilful infringement.Article 4.1 of the Judicial Interpretation enumerates the metrics the courts shall take into account in their determination of the severity of the infringement circumstances, including:the infringement methods and frequency;the duration, geographical scope, scale and consequences of the infringement; andthe infringer's actions in the lawsuit.Article 4. 2.(1) further stipulates that the court may find the infringement circumstances serious if the defendant – after a court has imposed an administrative penalty on it or found it liable for infringement – commits the same or similar tort again.The fact that Wang had been convicted in two criminal proceedings for counterfeiting the SIEMENS trademark and that a substantial number of counterfeit goods had been seized on the spot sufficed to prove the gravity of the infringement. The Court thus concluded that Wang was subject to treble punitive damages.Considering that the sales amount of the counterfeit Siemens products totalled 820,000 yuan in the aforementioned two criminal proceedings and that the estimated profit margin was 30% of the industry, the Court ascertained that the actual loss the plaintiff suffered due to the infringement was 246,000 yuan. On top of that, Wang was obliged to indemnify Siemens punitive damages of 738,000 yuan. The damages plus the reasonable costs Siemens had incurred in stopping the infringement well exceeded 1 million yuan. The Court therefore fully supported the plaintiff's indemnity claim and ordered the defendant to pay 1 million yuan, of which 200,000 yuan was to be jointly and severally borne by Kong.The defendants did not appeal and the decision has come into effect.CommentIt is welcome that the Wenzhou Intermediate Court reiterated in the decision that the fact that a civil subject is held liable in an administrative or criminal proceeding for an act shall have no bearing on it being held liable for the same act in a civil proceeding. Also, if the property of the civil subject is inadequate to cover all the fines and damages during the execution of the court decisions, the property shall be prioritised to cover the civil damages. The application of punitive damages and the clarification on the priority in bearing indemnifying liabilities is conducive to financially crippling the counterfeiters and deterring them from relapse.For further information on this topic please contact Jason Yao or Yanfei Ren at Wanhuida Intellectual Property by telephone (+86 755 8279 1635) or email ([email protected] or [email protected]). The Wanhuida website can be accessed at www.wanhuida.com.This article was first published by IAM.