New Balance’s “zero tolerance” policy towards counterfeits and perseverance in the Chinese civil courts paid off when it won a record breaking award in damages for a foreign company in an intellectual property dispute. The Suzhou Intermediate People’s Court ordered infringers to pay the US sportswear company damages and legal costs of RMB 10 million (about US$1.5 million) for using its signature slanting “N” logo.
This would have been a much welcomed win for the US company, especially after the controversial loss of the use of its Chinese name “Xinbailun” to a Guangdong businessman last year who registered the mark first in China. New Balance was ordered to pay him RMB 5 million (about US$750 k), reduced on appeal from the whopping original sum of RMB 98 million (about US$16 million).
The amendment to the Chinese trade mark law in 2014 increased awards of statutory damages from RMB 500k to RMB 3 million and allows for the possibility of triple damages for serious or bad faith infringement. Since the law came into force, awards of damages in trade mark cases have been on the rise. In both New Balance cases, the Courts have been prepared to make awards in excess of the maximum sums. It will be interesting to see whether this award is reduced on appeal.
This is a timely judgment – a blow to counterfeiters and a strong message to foreign brand owners in the fashion industry that China takes this seriously. The impact of counterfeiting is not restricted to private losses on IP owners, consumer safety and the detrimental effects on economic growth. The scale of the problem is enormous. In a recent report on ‘The Economic Impacts of Counterfeiting and Piracy’* the estimate of the foregone economic growth in the 35 OECD countries as a result of counterfeiting and piracy is between US$ 30 -54 billion. There are also proven links between terrorist funding and counterfeit trade. The Charlie Hebdo attack in Paris was funded by the sale of €8,000 of counterfeit Nike shoes procured from China via Western Union and sold in France online. This decision in China has far reaching implications in making the world a safer place.
*Report by BASCAP (Business Action to Stop Counterfeiting and Piracy) and INTA (International Trade Mark Association) 2016