In recent years, Guangdong courts have fully leveraged the adjudicatory function of intellectual property trials, adhered to the concept of strict protection, and lawfully increased the amount of judicial damages awards to ensure that right holders obtain full and adequate compensation and that malicious infringers pay the price. On 17 July, the Guangdong High People’s Court released a set of typical cases on punitive damages in intellectual property. The trademark infringement dispute case brought by an international luxury brand against an individual, represented by Lusheng Law Firm, was honorably selected.
Lusheng’s Selected Case
Representation of an international luxury brand in a trademark infringement dispute against an individual
Brief Case Summary
The client is the right holder of an internationally renowned jewelry and watch brand. Its trademark has repeatedly been recognized as a well-known trademark by the former State Administration for Industry and Commerce and in effective court judgments, and enjoys a very high level of fame. Previously, the client had filed a lawsuit against Zhang for selling watches infringing its trademark rights, and the parties reached a settlement agreement. Zhang undertook to cease the infringement, destroy the infringing products in stock, pay compensation to the client, and expressly promised that, in the event of any further infringing acts, he would pay punitive damages. However, Zhang did not honor his commitments. Instead, he diverted traffic from the original infringing WeChat store to multiple WeChat accounts held by himself and associated persons, and set up new WeChat stores to continue selling infringing watches.
Lusheng Law Firm, acting for the client, filed a lawsuit with the court, requesting that Zhang be ordered to cease the infringement and that punitive damages be applied, requiring him to compensate the client for economic losses and reasonable expenses.
The effective judgment of the Yuexiu District People’s Court of Guangzhou held that: the trademark involved in the case enjoys a high degree of fame; after reaching a settlement in the previous litigation, Zhang did not cease his infringing acts but continued to seek illegal gains, thereby constituting repeated infringement; he also used WeChat accounts of associated persons to sell infringing watches in an attempt to evade liability for infringement. His subjective intent was manifestly malicious, and the circumstances of infringement were serious, so punitive damages should be applied. The court, in accordance with the law, obtained Zhang’s transaction details, calculated his sales amount during the period of infringement, and then, based on the average profit margin in the same industry, determined his profits from infringement as the base for punitive damages, applying double punitive damages. Zhang was ordered to compensate Company K for economic losses and reasonable rights protection expenses in an amount exceeding RMB 720,000.
Typical Significance
1. Successfully overcoming obstacles to the application of punitive damages and establishing a benchmark judgment for “concealed infringement after settlement”
In this case, our firm applied for the retrieval of transaction records for multiple accounts held by Zhang and submitted similar-case judgments as corroboration. On the basis of fully considering the well-known status of the trademark involved, we effectively proved his subjective malice in repeated infringement and the scale of the infringement. In response to Zhang’s defenses such as “fake transactions to boost sales” and “payments unrelated to infringement,” our firm conducted professional evidentiary analysis to demonstrate that the main source of the payments he received was the sale of infringing products.
The court ultimately applied the rule on obstruction of evidence, using the retrieved payment transaction records as the base and, with reference to the profit margin in the same industry, applied double punitive damages. This effectively resolved the practical difficulty in judicial practice of determining the base amount for punitive damages. This innovative practice not only provides a replicable rights protection path for similar cases, but also highlights the judiciary’s policy orientation of imposing strict sanctions on concealed repeated infringement.
2. Innovating electronic data evidence collection to address the challenge of concealed infringement
In response to the infringer’s use of multiple WeChat accounts of other persons and Alipay accounts for receipt of payments as new types of concealed infringement methods, this case, by applying to the court for retrieval of full-chain electronic transaction records, constructed a complete evidentiary chain of infringing profits, thereby providing a replicable rights protection solution for electronic data evidence collection and damages calculation in similar cases.
3. Improving full-chain judicial protection for well-known trademarks
As a successful rights protection case for an internationally renowned luxury brand, this case, from supervision over the performance of the settlement agreement to the crackdown on new infringing acts, has formed a closed-loop protection model of “discovery–settlement–repeated infringement–punishment,” significantly enhancing the rights holder’s enforcement effectiveness and providing a model for intellectual property protection of similar luxury brands in China.
