[Case No.: Civil Mediation Settlement No. (2018) Lu-04-Civil-Pre-432]

The case released as the Civil Mediation Settlement No. (2018) Lu-04-Civil-Pre-432 made by the Zaozhuang Intermediate Court, which is the nation's first case in which a trademark owner has ever been awarded with a punitive damage. It was specially selected as one of the " 3.15 Classical Cases", with a certificate issued by the "Institute of Consumer Rights and Interests Protection Law of the China Law Society", to mark its status as the first Chinese case which involves a punitive damage for trademark right infringement. Thereafter, an annual symposium 2018 was also convened in Zaozhuang, Shandong province, to discuss the punitive damage system for trademark infringement and to promote anti-counterfeiting actions against corporates.

  1. In May 2016, some consumer bought 5 boxes of biscuits produced by a Shandong food company which counterfeit the trademark "六個核桃" owned by Hebei Yangyuan Zhihui Beverage Co., Ltd.with the Consumer reported this counterfeit to the Shandong Zaozhuang Administration for Industry and Commerce;
  2. In July 2018, Hebei Yangyuan Zhihui Beverage Co., Ltd. filed a complaint to the Zaozhuang Intermediate Court, alleging that said Shandong food company used, without consent, the trademark "六個核桃" owned by Hebei Yangyuan Zhihui Beverage Co., Ltd. on the packages of biscuits manufactured by it, which constitutes a trademark infringement in bad faith, and thus claim for punitive damage;
  3. After repeated analyses and explanation of related laws and regulations to both parties made by the staff in the Court who handled the case, said Shandong Food company admitted the fact of infringement and agreed to compensate a punitive damage;
  4. In August 2018, the Zaozhuang Intermediate Court made a Civil Mediation Settlement to confirm that the Shandong Food company shall pay RMB16,000 to Hebei Yangyuan Zhihui Beverage Co., Ltd.

→This case became the first one in the whole China in which a trademark owner has ever been awarded with a punitive damage.

Trademark infringement occurred frequently in China. Low infringment cost for the infringer, high maintenance cost for the right owner and often low compensation barely to cover the litigation costs are common in judicial practice of cases involving trademark rights. As a result, a punitive compensation system has been introduced in the Trademark Law of China. It is set forth in Article 63 of the Trademark Law that "Where the infringement of the exclusive right to use a registered trademark is committed in bad faith and the circumstance is serious, the amount of damage shall be more than one time but less than three times of the amount assessed by referring to the actual losses suffered by the right holder because of the infringement, the profits the infringer has earned because of the infringement, or the license fee for using the registered trademark". However, since this revision to the Trademark Law, no such case with a punitive damage as referred to in Article 63 of the Trademark Law has ever appeared until the adjudication of this case which in fact initiated the use of said provision.

"The judicial principle of increasing the severity of punishment against intellectual infringement has been embodied together with the judicial creativity and proactivity in this case wherein a punitive damage coverered by the party concerned was affirmed through a Mediation Settlement, which can be referred to as the 'Zaozhuang Experience'", commented a professor of Renmin University of China and Vice-Chairman of Institute of Consumer Rights and Interests Protection Law of the China Law Society.