Insights & News

New Measures for Calculating Illegal Business Revenue in Trademark Infringement Cases

2025-01-10

 

Safeguarding the exclusive rights of trademarks has always been a top priority for trademark registrants. Upon uncovering infringements, trademark registrants can either request administrative authorities to address the issue or initiate legal proceedings with the court. Administrative enforcement is oftentimes preferred by trademark registrants for its efficiency and cost-effectiveness.

 

When administrative authorities investigate trademark infringement cases, prompt actions such as halting the infringing activities, confiscating and destroying infringing goods and relevant tools for manufacturing infringing goods and forging registered trademark symbols, and imposing fines, are taken upon confirming infringement. Penalties can reach up to five times the illegal business revenue where the illegal business revenue exceeds RMB 50,000; fines up to RMB 25,000 may apply where there is no illegal revenue or the illegal revenue is less than RMB 50,000. Persistent offenders engaging in trademark infringement more than twice within five years or those with other severe circumstances face escalated penalties.

It is evident that the accurate determination of infringers’ illegal business revenue plays a pivotal role in administrative enforcement. Pursuant to relevant provisions of the Implementing Regulations of the Trademark Law, such calculation may consider various factors including the sales price of infringing goods, the marketed price of unsold infringing goods, the actual average sales price of the infringing goods that has been ascertained, the mid-market price of the infringed goods, the infringer’s business revenue gained from infringement, and other relevant factors for the reasonable calculation of the value of the infringing goods.

To standardize enforcement protocols, the China National Intellectual Property Administration (CNIPA) and the State Administration for Market Regulation (SAMR) recently jointly issued Measures for Calculating Illegal Business Revenue in Trademark Infringement Cases to regulate the calculation methods, and the key aspects of the Measures include the following contents:

 

 

Illegal Business Revenue

Illegal business revenue refers to the total value of infringing goods involved in trademark infringement committed by a party or the business revenue generated from such infringement.

 

Value of Infringing Goods

The value of sold infringing goods is calculated based on the actual sales price.

The value of unsold infringing goods is calculated using the actual average sales price of the sold infringing goods that has been ascertained; where the actual average sales price cannot be ascertained, the value of unsold infringing goods shall be calculated based on the marketed price.

Where the actual sales price cannot be ascertained or the marketed price is unavailable, the calculation shall be based on the mid-market price of the infringed goods during the infringement period.

The value of manufactured goods without an infringing registered trademark should be included in the illegal business revenue, provided that there is substantial and sufficient evidence proving that the goods will infringe another party’s exclusive right to use a registered trademark .

 

Mid-Market Price

The mid-market price of the infringed goods shall be determined based on the reference retail price for the same goods published by the infringed party; in the absence of such a retail price, the following measures shall be adopted:

 (1) If multiple businesses sell the same type of infringed goods in the market, the mid-market price is determined by averaging the sampled retail prices of some of these businesses; if only one business sells the goods, the mid-market price is determined based on that business's retail price.

 (2) If there are no infringed goods of the same type being sold in the market, the mid-market price is determined based on the middle price of previously sold infringed goods of the same type in the market, or the mid-market price of infringed goods of the same category being offered for sale in the market which are identical or similar to the infringing goods in functionality, purpose, main materials, design, configuration, or any other aspect.

Where it is difficult to determine the mid-market price according to the provisions of the preceding paragraph, it may be determined by a price determination agency.

The mid-market price of the infringed goods stated by the parties concerned and provided by the trademark owner may serve as a reference after they are verified based on the examination of other relevant evidence.

If the parties concerned have any objection against the calculated mid-market price of the infringed goods, they must provide evidence to support their claims.

 

Subcontracting

In subcontracting operation involving labor and materials, where the subcontractor uses goods that infringe the exclusive right to use a registered trademark, the illegal business revenue shall be calculated based on the actual sales price of the infringing goods; where the infringing goods are not independently priced, the calculation shall be based on the goods' value in proportion of such subcontracting operation; where the value proportion cannot be determined, the calculation shall be based on the mid-market price of the infringed goods.

 

Complimentary Goods

For complimentary goods that infringe on another party's exclusive right to use a registered trademark, the illegal business revenue shall be calculated based on the actual purchase price or manufacturing cost of the goods; if the actual purchase price or manufacturing cost cannot be determined or if the goods are non-standard goods, the calculation shall be based on the marketed price or the mid-market price of the infringed goods.

 

Refurbished Goods

If refurbished goods infringe on another party's exclusive right to use a registered trademark, the illegal business revenue shall be calculated based on the overall value of the infringing goods.

If the refurbished goods themselves do not infringe on another party's exclusive right to use a registered trademark but their components or accessories do, the illegal business revenue shall be calculated based on the value of the infringing components or accessories.

 

Counterfeit Marks

 

For infringement involving counterfeiting or unauthorized production of another person’s registered trademark symbol or selling counterfeited or unauthorized manufactured trademark symbol, the calculation of illegal business revenue is based on the actual sales price of the infringing mark.

 

Contributory Infringement

For contributory infringement involving someone deliberately providing assistance for the infringement of another party's exclusive right to use a registered trademark, the illegal business revenue shall be calculated based on the revenue from such assistance in the infringement; where there is no such revenue, the matter shall be handled as if there were no illegal business revenue.

 

Rental Goods

For rental goods infringing on another party's exclusive right to use a registered trademark, the illegal business revenue shall be calculated based on the rental income.

 

Advertising Campaigns

Where infringement of another party's exclusive right to use a registered trademark occurs in advertising campaigns and the infringing goods cannot be verified, the matter shall be handled as if there were no illegal business revenue.

 

Joint Infringement by Licensor and Licensee

 

Where a licensor and a licensee jointly infringe on another party's exclusive right to use a registered trademark, the illegal business revenue shall be calculated according to aforementioned provisions on “value of infringing goods” and “mid-market price”.

Where the licensor assists the licensee in infringing on another party's exclusive right to use a registered trademark, the illegal business revenue shall be calculated based on royalties; if the trademark is licensed gratuitously, the matter shall be handled as if there were no illegal business revenue.

 

Illegal Business Revenue Cannot be Verified

Where the actual illegal business revenue cannot be verified according to the above provisions, the matter shall be handled as if there were no illegal business revenue.

 

Partial Illegal Business Revenue Can be Verified

For cases where only partial illegal business revenue can be verified, the matter shall be handled according to the verified illegal business revenue.

 

False Sales

Where the party involved provides adequate evidence to prove that the sales figures of infringing goods were increased by false sales measures such as false purchases, the sales figures shall not be included in the illegal business revenue.

 

Transfer from Criminal Organs to Administrative Organs

In a case involving reverse connection between criminal justice organs and administrative law enforcement organs, where illegal business revenues determined by the organs are discrepant, the illegal business revenue may be determined based on the investigation conducted by the administrative organs, in accordance with the provisions of these Measures.

 

 

We believe that the newly introduced “Measures for Calculating Illegal Business Revenue in Trademark Infringement Cases” by the CNIPA and the SAMR will have a profound positive impact on trademark administrative enforcement practices.

 

If you have any question about the protection of intellectual property rights, please feel free to send us emails. For patent-related matters, please send to info@afdip.com. For trademark/litigation/legal matters, please send to info@bhtdlaw.com.

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