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Appeal by Quanzhou New *lun Technology Co., Ltd., Quanzhou New *he Footwear Co., Ltd., Chen *lai, Quanzhou Sheng * Footwear Co., Ltd., and Chen *zhou v. New Balance Trading (China) Co., Ltd. as appellee and Liangxi District Jia * Footwear & Apparel Store as original-instance defendant regarding a dispute over unauthorized use of another’s commodity get-up with certain influence
The adjudicative reasoning in this case unfolds along the following lines. The court first examined whether the get-up asserted by the plaintiff falls within the scope of “commodity get-up with certain influence,” with the criteria including the place of use of such get-up, the form of the font, the duration of continuous use, the scale of publicity, and market recognition; effective judgments may be used for reference. At the stage of comparing similarity of get-up, the standard is the overall visual effect; although the accused sign contains small embedded English words, the overall presentation still prominently displays capital bold letters and is used at the same position on the goods. On this basis, the court found that similarity is constituted and is sufficient to cause confusion. As to the defendant’s defense that the accused sign is a registered trademark, the court held that the right holder is entitled to choose commodity get-up as the basis of its rights, and where such get-up is used earlier and has certain influence, the status of registration of the trademark does not affect the determination of unfair competition. With respect to the amount of damages, after the right holder completed the burden of proof by means such as notarized evidence collection and applying to the court to obtain transaction data, the court extrapolated single-store sales volume using sales data from some stores as samples, and calculated the infringer’s profits by reference to the profit margin of similar products of listed companies in the same industry; where the infringer possesses evidence of actual sales but refuses to provide it, it shall bear the adverse consequences of failure to discharge the burden of proof. In addition, where multiple entities have close division of labor and cooperation in respect of domicile, packaging, domain name filing, publicity, etc., they constitute joint infringement and shall bear joint and several liability.
Brief Introduction of the Case
Through long-term and extensive publicity and sales, “New Balance” sports shoes have achieved extremely high market recognition and influence among the relevant public for the capital, bold “N” letter get-up used at the prominent positions on both sides of the shoes. This “N” letter get-up has been recognized in multiple effective judgments, including those of the Supreme People’s Court, as commodity get-up with certain influence. The plaintiff discovered that the defendants, including New * Company, New * Company, Sheng * Company and other entities, had, on a large scale nationwide, produced and sold sports shoes bearing the involved sign “
” via online e-commerce platforms and offline physical stores (self-claimed to exceed 1,000 stores). The plaintiff alleged that the defendants, by unauthorized use of signs similar to its well-known commodity get-up, acted with obvious subjective malice and on a massive scale, thereby constituting unfair competition, and thus filed suit with the court, requesting that all defendants be ordered to cease the infringement, eliminate the adverse impact, and compensate for economic losses and reasonable expenses totaling RMB 15 million.
The court, upon trial, held that the accused infringing sign “N” presents, in its overall visual effect, the capital, bold “
” letter, and the small English words embedded therein do not affect the overall identification. This sign is basically indistinguishable from the plaintiff’s “N” letter get-up in overall visual effect, and thus constitutes similarity sufficient to cause confusion among the relevant public. In determining the amount of damages, the court, by investigating the turnover records of some infringing stores, selecting the detailed transaction data of one infringing store as a sample to extrapolate the profit margin, and referring to the public financial reports of listed companies in the same industry, comprehensively determined the infringer’s profits. On this basis, the court rendered judgment ordering all defendants to cease the infringement, destroy inventory, publish a statement in China Intellectual Property News to eliminate the adverse impact, and compensate the plaintiff for economic losses and reasonable expenses in the amount of RMB 15 million. Dissatisfied with the first-instance judgment, the defendants appealed. The second-instance judgment dismissed the appeal and upheld the original judgment.
Gist of the Judgment
1. Overcoming the defense based on registered trademarks and achieving substantive protection of get-up through the Anti-Unfair Competition Law
The difficulty in this case lies in the fact that the accused infringing sign “
” is, in its form of use, largely consistent with the defendants’ registered trademark, and if the plaintiff were to assert only trademark infringement, it would be easy for the defendants to raise the defense of “legitimate use of a registered trademark.” The court accepted that the “N” letter get-up asserted by the right holder has strong distinctiveness on specific footwear products and may constitute commodity get-up with certain influence; meanwhile, in the course of trial, starting from the overall visual effect and the manner of use by the defendants, the court found that the defendants, by prominently using the similar accused infringing sign “
” to engage in free-riding, caused confusion and misidentification among the relevant public, thereby constituting unfair competition. This adjudicative approach provides a replicable enforcement strategy for addressing “parasitic imitation cloaked in trademark registration.”
2. Penetrating recognition of a multi-entity division-of-labor chain and ordering joint infringers to bear joint and several liability
In light of the characteristics of an integrated infringement chain formed through division of labor and collaboration among multiple affiliated companies and key individuals, the right holder fully adduced evidence of the substantive participation of each defendant in production, manufacturing, and business activities, including direct involvement of major shareholders in the infringing acts. The court ultimately found that all defendants constituted joint infringement and, in accordance with the law, shall bear joint and several liability. This determination effectively blocked the infringers’ attempt to evade legal liability through the use of companies and significantly enhanced the enforceability of the judgment.
3. Refined calculation of infringer’s profits resulting in a high damages award of RMB 15 million
Given the large scale of the defendants’ infringement and the concealed nature of their profits, the right holder, through multiple notarized purchases and sorting of payment and transaction data, established a formula for calculating the defendants’ infringing profits, and applied to the court to investigate the turnover records of some infringing stores. The court further selected the detailed transaction data of one infringing store as a sample to extrapolate the profit margin, and referred to the public financial reports of listed companies in the same industry, thereby providing sufficient and reasonable calculation grounds for the high damages award of RMB 15 million.
