In this blog we look at the recent landmark decision in China in which New Balance was awarded damages of 10 million RMB for trade mark infringement. We consider why the award was so high and what this means for IP owners. (See the end of this blog for the Chinese translation.)
Background
On 15th August 2017 (Beijing time), US President Trump issued a Presidential Memorandum which directed US trade representative Robert Lighthizer to investigate China’s business practices for theft of US technology and violation of US intellectual property rights under Section 301 of the Trade Act 1974. Several days later, it was widely reported that New Balance, the US sports shoemaker, had won a “landmark” trade mark case with damages in an amount of 10 million RMB. Interestingly, the court decision was dated and issued on the 15th August 2017, the same date as the Presidential Memorandum. However, this blog will not discuss why the dates so coincide, but why the level of damages awarded was so high and what this actually means for IP rights owners.
Why was the award of damages so high?
According to China’s trade mark law, there are several ways to calculate an award of damages:
(1) the loss to the trade mark owner;
(2) the profits gained by the infringer;
(3) an amount reasonably determined with reference to the royalties; or
(4) statutory damages (if an amount is difficult to determine by methods 1-3).
Overall, though, in practice, due to the difficulty of collecting evidence in China, the most commonly used way is statutory damage. The trade mark law revised in 2013 increased the maximum amount of statutory damages from RMB 500,000 to RMB 3 million. We have seen an increasing amount of damages rendered by Chinese courts in trade mark infringement cases in recent years, probably partially because of this reason.
However, the amount of damages in the New Balance trade mark case was not determined using the more common statutory damages scheme. Instead, the court considered the loss suffered by the trade mark owner, in addition to the profits made by the infringers.
The loss suffered by the trade mark owner was calculated using the following formula: the number of infringing products sold by the infringer, multiplied by the profit per unit of the products of the registered trade mark (which is the price of the New Balance shoes multiplied by the profit rate in this case). According to the evidence accepted by the court, the number of shoes sold which violated the trade mark was “at least” 1 million pairs. The “lowest” price for a pair of shoes on New Balance’s official website was 269 RMB and the net profit rate for New Balance was 14.47%. According to the above formula, the “lowest” possible loss suffered by New Balance was 1,000,000 x 269 x 14.47% which is equal to 38,924,300 RMB; an amount far higher than 10 million RMB.
The profits of the infringers were calculated using another formula: the number of infringing products sold by the infringer, multiplied by the profit per unit of the infringing products. Besides the profit earned from the selling of shoes, the infringers also charged their franchisees franchising fees which when totaled came to over 4,100,000 RMB. According to the statement made by one infringer, the profit made per a pair of shoes was around 10 to 15 RMB. Using this formula, we can see that if 1,000,000 pairs of shoes were sold at 10 RMB profit per pair of shoes then the profits made already reached 10 million RMB. This is even before we take into account the franchising fees.
What does this mean for brand owners?
With the above calculations in mind, one could argue that the payout of 10 million RMB is, in fact, far too low. The loss suffered by New Balance, the trade mark owner, far outstrips what they received in compensation. Further, the ratio between the illegal profits gained by the infringers and what they eventually had to pay out is similarly disproportionate. However, New Balance only ever sought 10 million RMB when filing the suit. Consequently, the court decided that the loss of New Balance and the profit of infringers were both higher than the 10 million RMB claimed by New Balance.
So why did New Balance not ask for a higher amount of damage and why is this judgment so acclaimed? The interesting development that this case presents is not so much to do with how much was paid out for the infringement, it’s more about how the compensation figure was reached upon by the court. As mentioned above, the court applied two formulas rather than the statutory damage scheme. The reason that the 10 million RMB comes as a surprise is because these schemes are rarely applied due to the sheer amount of evidence required in order to apply them. Collecting evidence of sufficient quality is very difficult and so it is in turn a challenge to persuade a court to utilize that evidence and apply the formulas. Further, Chinese courts have very harsh and rigid rules on what kind of evidence can be accepted. This is likely why New Balance were quite conservative in only asking for 10 million RMB. Therefore, the most noteworthy part of this case is not the high amount of damage itself, but how the court accepted evidence to prove such amount of damage.
Interestingly, the court also fully supported the payment of reasonable expenses to New Balance. The payment of 800,000 RMB in expenses is rather unusual in this kind of case.
Trade mark owners are often hesitant when considering whether to launch a law suit against an infringer. A typical concern is that the costs in carrying out legal action are high whilst the amounts of compensation received are usually pretty low. This case gives IP right owners a very encouraging signal, which is that if you prepare a case well and collect evidence properly, there is a strong possibility for you to recover your investment on the legal procedure, gain compensation for infringement and, finally and most importantly, defend your product’s place in the market.
Chinese
新百伦公司商标案----掀起巨额赔偿的盖头来
这篇文章探讨了最近的一个“里程碑”式的商标案件。在这个案件中，法院判定新百伦公司赢得了一千万的商标侵权赔偿。本文分析了这个高赔偿额是怎么计算出来的，以及这对于权利人来说意味着什么。
背景
北京时间2017年8月15日，美国总统特朗普签署行政备忘录，指示美国贸易代表莱特希泽针对中国贸易侵犯美国技术和知识产权的行为提起301调查。几天后，关于新百伦公司在中国法院赢得一千万高额赔偿的商标案又成为媒体的焦点。有意思的是，网上公布的该案的判决书上的日期也是2017年8月15日，跟行政备忘录的签署是同一天。当然，本文要探讨的不是日期的巧合，而是这一千万的高额赔偿是怎么计算出来的，以及这一千万的高额赔偿对于知识产权权利人来说意味着什么。
一千万的高额赔偿是怎么来的？
中国商标法规定了几种赔偿额的计算方式：（1）商标权人因侵权所受的损失；（2）侵权人因侵权所获的利润；（3）参照商标许可使用费的倍数合理确定；（4）法定赔偿。由于收集证据难度较高，实践中更多的是适用法定赔偿。2013年修改的商标法将法定赔偿的最高额从50万提高到300万，这是法院近年来判决的商标侵权案件的赔偿额比以往有所提高的一个重要原因。
但是新百伦公司的这个商标案件的赔偿额的确定并不是基于常用的法定赔偿模式，法院采用了商标权人的损失的计算方式，同时还计算了侵权人的侵权获利用以佐证。
商标权人的损失按照如下公式计算：侵权商品的销售数量x该注册商标商品的单位利润（在本案中即新百伦公司的鞋子的最低售价x新百伦公司的利润率）。根据法院采纳的证据证明，被控侵权产品在2015年和2016年的销量至少在100万双，而新百伦公司在其官网上销售的运动鞋最低价为269元，新百伦公司的净利润为14.47%。按照上述公式，新百伦公司因为侵权所遭受的损失最起码为1,000,000 x 269 x 14.47% =38,924,300元。这个数字已经远远超出了一千万的赔偿额。
侵权人的利润按照另外一个公式计算，即侵权商品销售量x该商品的单位利润。除了销售侵权商品外，被告同时还从其代理商那里收取了超过410万的加盟费。根据其中一位被告陈述，其每双鞋获利十几元。根据上述公式，一百万双鞋乘以10元的最低利润，就已经达到了一千万元，而这还没有计算加盟费。
这对商标权人来说意味着什么？
从上述计算方式和计算出来的数额来看，其实一千万的赔偿额并不高。新百伦公司因侵权遭受的损失远超过他们获得的赔偿，而且侵权人的非法获利也远高于他们要支付的赔偿额。但是新百伦公司在起诉时仅主张了一千万的损害赔偿，法院确认新百伦公司的损失和侵权人的获利均超过一千万元并全额支持了新百伦公司的赔偿主张。
所以，为什么新百伦公司不主张更高的赔偿额？为什么这个判决依然广受好评？
该案让笔者特别感兴趣的，并不是赔偿的具体数额，而是该赔偿额是如何计算出来并被法院所确认的。如上所述，法院采用了两个计算公式，没有采用法定赔偿的模式。一千万的赔偿额之所以能成为一个让人惊喜的数字，主要是因为实践中法院不太使用这些公式来计算赔偿额，因为这些公式的适用需要大量的证据。本身收集符合法院要求的证据就是比较棘手的事情，更不用说要说服法院采纳这些证据并适用上述公式了。这可能也是新百伦公司保守地主张了一千万赔偿额的主要原因。所以，对笔者来说，这个案件最值得关注的，并不是高额赔偿本身，而是法院如何采纳证据来证明这个赔偿额。
另外，法院的判决书里也提到全额支持新百伦公司主张的80万元律师费，这个数额对于商标侵权案件也是比较少见的。
商标权利人在考虑是否要对侵权人提起诉讼的时候通常会比较犹豫，主要的担忧是成本太高而赔偿额太低。这个案件给了权利人一个积极的信号----如果你能做好案件的准备工作尤其是做好收集证据的工作，权利人还是有很大的机会能够回收诉讼成本，获得侵权赔偿，当然，更重要的是能够维护权利人的产品的市场地位。