[Handling Attorney]

Wang Xiyu

[Keywords]

Civil/Subject Matter/Trademark Infringement/Second Fair Purchase/Foreign-Related/Intellectual Property

【Key Points of the Ruling】

MCM Company, through its authorized agent, purchased the goods in question twice from Shop No. XX on the east side of a certain shopping mall. The markings printed on the goods in question are identical to the plaintiff’s registered trademark. Moreover, all the allegedly infringing goods fall within Class 18—the category for which MCM Company’s registered trademark is approved for use. The operator was unable to provide a legitimate source for the goods in question. Therefore, its sales activities have infringed upon the plaintiff’s exclusive right to its registered trademark and it should bear legal responsibility by ceasing the infringement and compensating for the losses incurred.

According to the Trademark Law, intentionally providing facilitating conditions for acts that infringe upon another party’s exclusive right to a registered trademark also constitutes an infringement of such exclusive right. The seller of the infringing goods involved in this case, Wang, is a merchant at a certain shopping mall. As the organizer and manager of the market in question, the trading company has a legal duty to maintain market order, protect consumers’ legitimate rights and interests, and ensure product quality. It also has statutory obligations to inspect and monitor the operators entering the market, as well as the goods they sell and the services they provide. After MCM Company sent a written letter clearly informing the trading company of the fact that the stall and other merchants operating in its market were selling infringing goods, the trading company failed to take effective measures to stop the infringing sales activities occurring within its market. As a result, during its second notarized purchase, MCM Company still obtained the infringing goods from the stall operated by Wang. Therefore, the trading company subjectively knew or should have known that Wang’s stall was engaged in infringing activities, and objectively provided him with the business premises and market operational facilitation. Thus, the trading company’s conduct was at fault and constituted an infringement of MCM Company’s exclusive right to its registered trademark. Consequently, the trading company bears joint and several liability for the losses caused by Wang’s infringing acts.

[Basic Facts of the Case]

The MCM brand was founded in 1976 in Munich, Germany, and is a designer and manufacturer of high-end leather goods, accessories, and other products. MCM is a company that... The owner of the series of trademarks, Thanks to extensive promotion and widespread use, the trademark enjoys extremely high brand recognition worldwide, including in mainland China. To ensure that consumers receive products of guaranteed quality, MCM sells its products exclusively through its direct-sales network, which includes the plaintiff’s official website as well as the specialty stores listed on that website. As of now, MCM has established more than 90 specialty stores in major cities across mainland China, all located in well-known, high-end shopping malls. These stores are strategically positioned in first- and second-tier cities throughout mainland China, creating a robust physical platform for product promotion and sales.

On February 25, 2016, MCM Company’s authorized agent purchased a wallet bearing the plaintiff’s registered trademark—counterfeit—in shop No. XX, East Wing, of a certain shopping mall, at a transaction price of RMB 400.

On April 18, 2016, MCM Company sent a warning letter to a certain trading company, clearly informing it of the fact that counterfeit goods were being sold at Shop No. XX in a certain shopping mall. The letter demanded that the trading company take concrete and effective measures to stop merchants from selling counterfeit products, conduct a comprehensive inspection within the market, and thoroughly investigate and crack down on the sale of goods bearing MCM’s registered trademarks. The trading company was also required to ensure that no further acts infringing upon MCM’s exclusive rights to its registered trademarks would occur within the market.

On June 27, 2016, MCM Company, through its authorized agent, once again purchased a counterfeit wallet bearing MCM’s registered trademark from Shop No. XX, East Wing, at a certain shopping mall, at a transaction price of RMB 400. The defendant, Shop No. XX, East Wing, at the said shopping mall, sold goods that infringed upon the plaintiff’s exclusive right to its registered trademark. Meanwhile, the trading company failed to fulfill its management obligations and thus provided convenience and assistance for the infringing acts committed by Shop No. XX, East Wing, at the shopping mall. To protect MCM Company’s legitimate rights and interests, the company has filed a lawsuit with the court.

【Judgment Result】

1. Defendant Wang and a certain trading company shall immediately cease infringing upon the exclusive rights to the registered trademarks No. G623685 and No. 1927130 owned by the plaintiff, MCM Holding Company (MCMHOLDINGAG), effective from the date this judgment becomes legally enforceable.

2. Defendant Wang shall, within 10 days from the date this judgment becomes effective, compensate Plaintiff MCM Holding Company (MCMHOLDINGAG) a total of RMB 50,000 for economic losses and reasonable expenses incurred in stopping the infringing acts.

3. The defendant, a certain trading company, shall bear joint and several liability for compensation with respect to the second item of the above-mentioned judgment.

4. The other claims of the plaintiff, MCM Holding Company (MCMHOLDINGAG), are dismissed.

【Reasons for the Ruling】

The court held that MCM Company is registered in Switzerland, while the alleged infringement occurred in Shenyang City, Liaoning Province, People’s Republic of China. Since MCM Company chose to bring the lawsuit before a Chinese court, in accordance with Articles 48 and 50 of the Law of the People’s Republic of China on the Application of Laws to Foreign-related Civil Relations, the ownership, content, and liability for infringement of intellectual property rights shall be governed by the law of the place where protection is sought. With regard to liability for infringement, the parties may also, after the infringement has occurred, agree to apply the law of the court’s jurisdiction. Therefore, in this case, the laws of the People’s Republic of China shall apply.

Regarding the question of whether the defendant Wang’s actions constitute infringement: MCM Company has legally obtained exclusive rights to registered trademarks No. G623685 and No. 1927130 through registration, and its legitimate rights are protected by law. Using a trademark identical to a registered trademark on the same type of goods without the permission of the trademark registrant constitutes an act of infringement upon the exclusive rights of the registered trademark. MCM Company, through its authorized agent, purchased the goods in question twice from Shop No. XX in the East Area of a certain shopping mall. The markings printed on these goods are identical to those of the plaintiff’s registered trademarks No. G623685 and No. 1927130. Moreover, all the allegedly infringing goods fall within Class 18—the class of goods for which MCM Company’s registered trademarks have been approved. The operator of Shop No. XX, Wang, was unable to provide a lawful source for the goods in question. Therefore, his sales activities have infringed upon the plaintiff’s exclusive rights to the registered trademarks, and he should bear legal responsibility for ceasing the infringement and compensating for the losses incurred.

Regarding the question of whether a certain trading company should bear liability: According to China’s Trademark Law, intentionally providing convenience—such as warehousing, transportation, mailing, or concealment—for acts that infringe upon another party’s exclusive right to a registered trademark also constitutes an infringement of such right. The seller of the infringing goods in this case, Wang, is a merchant at the Liaozhan Clothing Market. As the organizer and manager of the market in question, the trading company has a legal duty to maintain market order, protect consumers’ legitimate rights and interests, and ensure product quality. It also has statutory obligations to inspect and monitor the operators entering the market, as well as the goods they sell and the services they provide. After MCM Company explicitly informed the trading company in writing about the fact that the stall and other merchants operating in its market were selling infringing goods, the trading company failed to take effective measures to stop the infringing sales activities occurring within its market. As a result, during its second notarized purchase, MCM Company still obtained the infringing goods from the stall operated by Wang. Therefore, the trading company subjectively knew or should have known that Wang’s stall was engaged in infringing activities, and objectively provided him with the business premises and market operational conveniences. Thus, the trading company’s conduct was at fault and constituted an infringement of MCM Company’s exclusive right to its registered trademark. Consequently, the trading company should, in accordance with the law, bear joint and several liability for the losses suffered by MCM Company due to Wang’s infringing acts. The defense raised by the trading company—that it had already fulfilled its relevant market management and supervision obligations—is unsupported by factual or legal grounds, and the court does not uphold this argument.

Regarding the amount of compensation, MCM Company failed to provide evidence demonstrating the losses it suffered due to the infringement. Therefore, it requested the court to determine the amount of compensation for the shop No. XX in the East Wing of a certain shopping mall and for a certain trading company using the statutory damages method. Since the quantity of infringing goods sold by the shop No. XX in the East Wing of the shopping mall and the profits derived from such infringement cannot be ascertained, this case should, in accordance with Article 63, Paragraph 3 of the Trademark Law, adopt the statutory damages method to determine the amount of compensation. Given that MCM Company’s registered trademark enjoys a high level of recognition, and considering factors such as the repeated nature of the infringing acts committed by the shop No. XX in the East Wing of the shopping mall, its subjective malice, and the degree of fault involved, the amount of compensation is determined at an appropriate level. MCM Company’s claim for expenses incurred in stopping the infringement was excessive; only the reasonable portion of these expenses is supported.

[Relevant Statutes]

Tort Liability Law of the People's Republic of China

Article 2 For infringement upon civil rights and interests, liability for tort shall be borne in accordance with this Law.

The civil rights and interests referred to in this Law include rights such as the right to life, the right to health, the right to name, the right to reputation, the right to honor, the right to portrait, the right to privacy, the right to marital autonomy, the right of guardianship, the right of ownership, the right of usufruct, the right of security interest, copyright, patent rights, exclusive rights to trademarks, the right of discovery, equity interests, inheritance rights, and other personal and property rights and interests.

Article 6 A person who, through negligence, infringes upon the civil rights and interests of others shall bear tort liability.

Article 9 Anyone who instigates or assists others in committing an infringement shall bear joint and several liability with the perpetrator.

The fifteenth The main ways of assuming tort liability are:

(1) Cease the infringement;

(6) Compensate for losses;

The above-mentioned methods of assuming tort liability may be applied individually or in combination.

Trademark Law of the People's Republic of China (Revised in 2013)

Article 57 Any of the following acts constitutes infringement of the exclusive right to use a registered trademark:

(1) Using a trademark that is identical to a registered trademark on the same type of goods without the permission of the trademark registrant;

(3) Selling goods that infringe upon the exclusive rights of a registered trademark;

(6) Intentionally providing facilitating conditions for acts that infringe upon another party’s exclusive right to use a trademark, or assisting others in committing such infringing acts;

Article 63 If the actual damages suffered by the rights holder due to the infringement, the profits obtained by the infringer from the infringement, and the licensing fees for the registered trademark are difficult to determine, the people’s court shall, based on the circumstances of the infringing act, award compensation not exceeding three million yuan.

Law of the People's Republic of China on the Application of Law to Foreign-related Civil Relations

Article 48 The ownership and content of intellectual property rights shall be governed by the law of the jurisdiction where protection is sought.

Article 50 For liability for infringement of intellectual property rights, the law of the jurisdiction where protection is sought shall apply. The parties may also, after the infringement has occurred, agree to choose the law of the court’s jurisdiction.

Interpretation of the Supreme People's Court on Jurisdiction and Legal Application Issues in Trademark Cases Following the Implementation of the Amendment to the Trademark Law

Article 9 Unless otherwise provided in this Interpretation, for civil trademark cases accepted by the People’s Courts after the date of implementation of the amended Trademark Law, if the acts occurred before the date of implementation of the amended decision, the provisions of the Trademark Law as in effect prior to the amendment shall apply; if the acts occurred before the date of implementation of the amended decision but continued after that date, the provisions of the amended Trademark Law shall apply.

[Lawyer’s Perspective]

As the agent for a trading company in this case, after accepting the mandate, I reviewed the case files, verified the relevant facts with the client, and conducted an analysis. My conclusion was that the infringement itself was clearly established; the only remaining issues were whether our side had fulfilled its duty of care and whether the amount of damages claimed by the plaintiff was excessively high. Although, in the end, the People’s Court ruled that our side bears joint and several liability, thanks to thorough communication between the agent and the People’s Court, the compensation amount was reduced to a level that satisfied our side. This case offers some valuable insights into handling trademark infringement cases, which I’d like to share with everyone now.

(1) Acceptance of the case

First, it is essential to clearly identify the court with jurisdiction over the case—that is, which court will handle the filing and trial: whether it is the court at the place where the infringement occurred or the court at the defendant’s domicile. This determination is crucial for ensuring the smooth progression of subsequent litigation. According to Article 3 of the Supreme People’s Court’s Interpretation on Issues Concerning Jurisdiction and Application of Law in Trademark Cases Following the Implementation of the Amendment to the Trademark Law, first-instance civil trademark cases fall under the jurisdiction of intermediate-level people’s courts and above, as well as grassroots people’s courts designated by the Supreme People’s Court. For civil and administrative cases involving the protection of well-known trademarks, jurisdiction lies with the intermediate people’s courts located in cities where the provincial or autonomous region governments are based, in cities under separate planning, and in municipalities directly under the central government, as well as other intermediate people’s courts designated by the Supreme People’s Court. From this, it is evident that lawyers representing trademark owners must give full consideration to the court with jurisdiction over the case. They should first consider selecting a court that is convenient for the parties involved in the litigation, as this approach can help keep the costs of protecting rights within manageable limits.

(2) What are the parties’ demands?

　　According to the Tort Liability Law, trademark infringement cases typically involve claims such as cessation of infringement and compensation for damages. In specific cases, lawyers should carefully analyze the details and help their clients clearly define and refine their claims.

1. The issue of the scope of injunction against infringement. Trademark infringement disputes vary widely in terms of the forms and scope of infringement, potentially involving infringing goods, advertising and promotional materials, logos, company websites, directly operated stores, stores of sales agents, and franchised specialty stores. Therefore, in the statement of claim, it is essential to clearly specify both the specific content and the manner in which the infringement is to be stopped, so as to avoid omissions, prevent repeated lawsuits, or ensure that a single lawsuit can effectively address similar infringement issues.

2. Issue of compensation for damages. According to the provisions of the Trademark Law of the People’s Republic of China, the amount of compensation for infringement upon exclusive trademark rights shall be determined based on the actual losses suffered by the right holder as a result of the infringement. If the actual losses are difficult to determine, the compensation may be set according to the profits gained by the infringer from the infringement. If both the right holder’s losses and the infringer’s gains are difficult to ascertain, the compensation amount may be reasonably determined by reference to a multiple of the licensing fee for the use of the trademark. In cases of malicious infringement of exclusive trademark rights involving serious circumstances, the compensation amount may be set at more than one but less than three times the amount determined according to the methods described above. If the actual losses suffered by the right holder, the profits gained by the infringer, or the licensing fee for the registered trademark are all difficult to determine, the people’s court shall, based on the specific circumstances of the infringing act, award compensation not exceeding three million yuan. Therefore, in claiming compensation for damages caused by trademark infringement, the plaintiff must provide appropriate evidence to substantiate the corresponding economic losses incurred. Of course, such losses are generally difficult to prove, which underscores the importance of thorough communication between the lawyer and the client and the adoption of effective methods to accurately determine the extent of the economic loss.

3. The issue of rights protection costs. As clearly stipulated in the Trademark Law, the amount of compensation should include the reasonable expenses incurred by the rights holder in taking measures to stop the infringing acts. These reasonable expenses generally include attorney’s fees, investigation and evidence-gathering costs, notarization fees, and case filing fees, among others.

　　(3) Collect and organize evidence, draft the complaint, prepare an exhibit list, and get ready to file the lawsuit.

　　During the evidence-gathering process, to ensure that the evidence can be admissible in court, it is recommended to contact a notary office in advance and collect evidence of infringement related to the infringing party. This evidence should be preserved through notarization and documented in the form of appropriate notarial certificates. At the same time, prepare the relevant proof of trademark ownership to demonstrate that the plaintiff is the lawful holder of the trademark rights—for example, trademark information from the National Trademark Office, the trademark certificate, or the certificate of trademark transfer. In this case, the plaintiff obtained the goods in question twice by making fair purchases from Shop No. XX on the east side of a certain shopping mall, thereby establishing solid evidence and ultimately achieving the goal of having the People’s Court uphold the plaintiff’s claims.

　　(4) Pre-trial preparations following case acceptance

　　After the court accepts the case and sets a trial date, the task for the attorney representing the plaintiff is to demonstrate in court how the defendant’s infringing act has been established. In the author’s view, this can be approached from the following aspects:

1. Whether the trademark used by the defendant—whether it consists of a graphic element, letters, or a combination of both—is identical to or similar enough to the plaintiff’s trademark to the extent that it could easily be mistaken for the genuine article, cause confusion among consumers, and impair their ability to make informed purchasing decisions; at the same time, the defendant’s trademark should also be compared with the plaintiff’s trademark in terms of pronunciation—whether the pronunciations are identical, or whether English letters have been substituted for Chinese pinyin in a way that creates confusion.

2. Whether the products bearing the defendant’s trademark are identical or similar to the goods approved for use under the plaintiff’s trademark. Similar goods refer to those that are identical or closely related in terms of function, purpose, production sector, distribution channels, and consumer target groups, or goods that the relevant public generally perceive as having a specific connection and are likely to cause confusion.

3. The defendant’s subjective intent behind the infringement of the plaintiff’s trademark rights. The fundamental reason for the defendant’s infringement of the plaintiff’s trademark rights lies in commercial interests—specifically, the defendant’s aim is to enhance buyers’ trust in it, free-ride on the plaintiff’s brand reputation, and indirectly sell its own products by leveraging the plaintiff’s well-known standing in the industry, thereby achieving profit. This has caused market confusion and undermined the legitimate rights and interests of the trademark owner.

(5) Post-Trial Legal Work by Lawyers

1. Submit written agent opinions and supplementary opinions. Some parties and their agents, after presenting evidence and undergoing cross-examination during the trial and delivering their oral agent statements in court, tend to believe that their task is already complete. However, this approach is undesirable. Promptly submitting written pleadings or opinion letters helps judges clearly understand the parties’ claims and the case’s line of reasoning when drafting the judgment, thereby facilitating the judge’s decision-making process and the preparation of the court documents.

2. Mediation efforts. After the court trial—including the defendant’s response, evidence examination, and adversarial arguments—both parties should have a clear understanding of the ultimate direction this case will take. Under the court’s mediation arrangement, the two sides may reach a settlement agreement. Therefore, when the situation is favorable to the client, the attorney representing the client should promptly explain the pros and cons to the client and actively facilitate mediation, thereby ensuring a smooth conclusion to the case and fully leveraging the significant role of the mediation mechanism.