New Balance has won a record pay-out in a Chinese trade mark case after three Chinese shoemakers were found to have infringed the brand’s trademarked slanting “N” logo.

In this rare trade mark victory, the Chinese court awarded more than 10 million yuan (£1.2m or $1.5m) to New Balance. The case is believed to be one of the largest awards ever given to a foreign company in a trade mark dispute in China.

Although small by international standards, the significant increase on previous penalties reinforces current attempts by China to crack down on the widespread problem of trade mark abuse; this is particularly in light of international pressure on Beijing to take more action on suspected intellectual property theft by Chinese companies.

Previous Clashes

One of the biggest problems is trade mark ‘squatters’ who anticipate a mark or brand’s popularity and register a trade mark before the rightful owner is able to. The issue is prolific in China due to its first-to-file trade mark system. The first party to file a trade mark has the earlier rights, even if the mark has been used earlier by a third party but not filed.

In previous rulings, companies from Apple to Heineken have lost trade mark battles in China due to this issue. For example, in 2012, Apple was forced to pay $60m to a local company that had registered iPad before Apple because a court rejected Apple’s unregistered right to the trade mark.

Last year former basketball player Michael Jordan was targeted but successfully managed to stop a Chinese sportswear company from using a translation of his surname on their products; this was seen as a landmark verdict because it went against the first-to-file precedent in China.

More recently, in August, Under Armour won a trade mark case in China marking another victory in the battle between Western brands and Chinese companies seeking to exploit their better-known counterparts.

Trade Mark Reform

In 2001, China started strengthening its trade mark laws when it joined the World Trade Organisation. China took a major step to improve its IP system when the amended Trademark Law of the People’s Republic of China was introduced in 2014. The new law aimed to streamline trade mark registration procedures and toughen the legal protection of trade marks in China to align with international standards. However, while defences for foreign companies exist, trade mark violations remain common.

To dispel its reputation for being a haven for counterfeit goods, China has introduced specialised IP courts and re-drafted its trade mark laws to be more favourable to brand owners. For example, previously, damages in infringement cases often fell below the maximum statutory amount of $75,000 but new legislation increased the threshold to $450,000. The amount awarded in the New Balance ruling is significantly more than this upper limit demonstrating that Chinese courts are starting to clamp down on misuse of trade marks.

Conclusions

More recent legislative reforms and the positive rulings highlighted above demonstrate the increasingly firm approach being taken by Chinese courts to boost brand protection and the ability of foreign companies to enforce their trade mark rights in China. A trend is emerging whereby if there is sufficient evidence, Chinese courts are increasingly willing to punish infringers and compensate trade mark owners properly.

The ruling offers hope to other foreign companies operating in China, not just to New Balance. Although some foreign companies will continue to face problems in China, it is hoped that this victory for New Balance will result in more positive outcomes for foreign companies seeking to protect their intellectual property in the future.