Determination of Trademark Infringement Damages in China

Foshan Intermediate People’s Court in Guangdong Province recently made a ruling to award the luxury brand Alfred Dunhill 10 million yuan (US$1.5 million) for damages in trademark infringement and unfair competition.

Similar rulings were observed in 2016 where Beijing IP Court imposed 10 million yuan damages in the case Meichao Group v. Beijing Xiujie, in 2017 where the Supreme Court ordered 10 million yuan indemnity to Huiyuan, in 2018 where Suzhou Intermediate People’s Court awarded New Balance 10 million in damage.

These cases reflected China’s continued effort on crackdown IP infringement and provide us an opportunity to explore the judicial standards for determining damages and to understand the evidential rules.

Article 63 of the Chinese Trademark Law stipulates the legal basis for infringement compensation and the basis of punitive damages.

A63: The amount of damage for infringement of the exclusive right to use a registered trademark shall be assessed on the basis of the actual losses suffered by the right holder because of the infringement; where it is difficult to determine the actual losses, the amount may be assessed on the basis of the profits the infringer has earned because of the infringement. Where it is difficult to determine the losses the right holder has suffered or the profits the infringer has earned, the amount may be assessed by reference to the appropriate multiple of the amount of using the registered trademark under a contractual license. 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 above calculation. The amount of the damage shall also include the reasonable expenses of the right holder incurred for stopping the infringing act.

… …

Where it is difficult to determine the losses suffered by the right holder, the profits the infringer has earned and the fees of licensing a registered trademark, the people's court shall grant a compensation not exceeding RMB 3,000,000 yuan, according to the circumstances of the act of infringement.

According to the above, the amount of compensation is usually determined in the following order:

1.  find actual loss suffered by the right holder as a result of the infringement;

2.  where the actual loss is difficult to ascertain, determine it in accordance with the profits obtained by the infringer from the infringement;

3.  where the above two are difficult to determine, reference to the appropriate multiple of the trademark license.

When determining the amount of compensation, the court(s) usually consider factors such as the nature and duration of the conduct, consequence, reputation of the trademark, the amount of royalty, the type, term, and scope of license, and the reasonable expenses on stopping the infringement.

In addition, in applying punitive compensation, the court(s) usually consider factors such as

1. renown of the trademark;

2. whether the infringer knew the trademark and/or the relevant rights; for example, whether the infringer is in the same industry, whether the infringer filed a trademark application which was rejected by the Trademark Office by citing the trademark of the plaintiff.

3. whether the amount of sold infringing goods was huge

4. how long did the infringement take place

In summary, in order to obtain higher compensation, it is necessary to provide evidence in related to losses, especially those with willfulness.