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Restoring the ‘Balance’ for Foreign Brands in China?

By Natalie Dyer on Monday 25th September 2017

In August 2017, the Suzhou Intermediate People’s Court, near Shanghai, awarded damages of 10,000,000 RMB (about £1.2/$1.5 million) against three Chinese defendants who made shoes under the brand “New Boom”.

The 10 million RMB award, though not large by global standards, is a significant increase on previous damages awards, and is thought to be the highest ever awarded to a foreign company in a Chinese trade mark infringement case. Unusually for this type of case, the infringers were also ordered to pay “reasonable expenses” to New Balance in the sum of 800,000 RMB.

The ruling comes as China ramps up its continuing efforts to clamp down on intellectual property infringement, and follows a recent speech by President Xi Jinping in which he vowed to punish infringers.

The dispute concerned New Balance’s famous slanting “N” logo and the manufacture of shoes under the brand “New Boom” by the three Chinese defendants.

In its judgement, the Court held that the defendants, in operating in the shoe market under the brand “New Boom”, relied on the “malice of free-riding” and “seized market share from New Balance”. The defendants’ actions created “confusion by a large number of consumers” which in turn “drastically damaged the business reputation of New Balance”.

Interestingly, the Court decided not to award damages on the commonly used statutory scale (which are capped at RMB 3 million), opting instead to calculate the amount of damages based on the loss suffered by New Balance and the profits gained by the infringers.

The judgment hails victory not only for New Balance but for numerous foreign businesses that have long complained that China has done little to protect their trade marks and brands from theft by Chinese individuals and companies.

Trade mark registrations in China therefore can and do hold up, and this case clearly shows that significant damages, and sometimes expenses, can be awarded against an infringer.

If you are trading in China, or having products made or sourced in China, it is always recommended to obtain trade mark registration in China as early as possible, particularly bearing in mind that China (unlike the UK and EU for example) rarely recognises unregistered trade mark rights and usually applies a strict “first to file” trade mark system. There is unfortunately a tendency for Chinese parties to register western trade marks and brands, and trade mark registration should therefore be obtained in China as early as possible to avoid a Chinese party pre-empting you by registering your mark in China themselves. Once your trade mark is registered in China, it should then be difficult for a third party to register the same or a similar mark for the same or similar goods and/or services as you, and easier for you to take action against infringers.

Without a registration in China for your trade mark, it is very difficult to prevent infringing use of your trade mark by third parties, and potentially also third parties seeking to register your trade mark. This could lead to you being unable to use your own trade mark in China.

Other potential IP rights in China should also be considered where relevant, such as patent, utility model and design protection, which can provide significant advantages to businesses operating in China.

Swindell & Pearson is a UK based intellectual property firm that has been helping businesses and individuals obtain patent, trade mark, and design right protection for their ideas, innovations and brands for over 130 years. We are experts in dealing with IP matters in China having worked with Chinese IP firms, and European clients seeking protection in China for many years. To find out how Swindell & Pearson can help you and your business with any patent, trade mark or design right matters in China or elsewhere please get in touch via info@patents.co.uk or by telephone on 01332 367 051.

 

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