As 2024 comes to a close, it is a good opportunity to review the most inffuential IP cases in China over the past 12 months.
The following cases show that Chinese courts continue to make beneffcial explorations in various ffelds to enhance IP protection. High-compensation cases in trademark and brand protection continue to emerge as different courts make ongoing improvements and efforts to calculate damages, address infringement issues relating to foreign original equipment manufacturing (OEM) processing, combat bad-faith trademark registrations and assess distinctiveness, among other things.
Schneider Electric awarded two-fold punitive damages
In Schneider Electric (China) Co Ltd v Zhenjiang Schneider Electric Co Ltd and Schneider Busbar Co Ltd, the defendants were found to infringe on Schneider Electric’s registered trademark rights by:
using the SCHNEIDER mark on product labels, manuals and websites; and
registering the domain name 'zj-schneider.com' for e-commerce transactions.
Schneider Electric based its claims on its registered trademark SCHNEIDER and its corresponding Chinese trademark.
The court found that the defendants’ use of the disputed marks was similar to the plaintiff’s registered trademarks, causing confusion among the relevant public and constituting trademark infringement. The court also ruled that the defendants’ registration of SCHNEIDER as part of their company names and the use thereof constituted unfair competition.
The highlights of the case were:
the court’s decision to award punitive damages; and
the method used to calculate the base amount for damages.
The court calculated the damages from June 2017, which was three years before the date of ffling the lawsuit. It ultimately ordered the defendants to pay damages amounting to Rmb106 million, with two-fold punitive damages applied.
In another case brought against Suzhou Schneider Elevator Co Ltd, Schneider Electric was awarded damages of Rmb40 million.
(Cases cited: Supreme People’s Court, (2023) Zui Gao Min Zhong No 351 and Jiangsu Provincial High People’s Court, (2021) Su Zhi Zhong No 19)
Court calculates much higher damages
The Guangdong Provincial High People’s Court awarded damages of up to Rmb30 million against a persistent infringer a case relating to the mark MAPLE LEAF.
China's Trademark Law was amended on 23 April 2019 and implemented on 1 November 2019. Before this, the law permitted up to three times the actual damages. In this case, since the infringing acts spanned the period of preamendment and implementation, the court applied punitive damages of three times the damages incurred before 2019 and ffve times the base amount of damages after 2019. This decision demonstrated the court’s intention to calculate damages meticulously, as well as its determination to mete strict punishment.
(Case cited: Guangdong Provincial High People’s Court, (2023) Yue Min Zhong No 6629)
Divergent opinions on trademark infringement in foreignrelated OEM processing
In the area of foreign-related OEM trademark infringement disputes, China’s judicial practice and theoretical research have presented extensive discussions and divergent opinions over the past decade. In 2019, the Supreme People’s Court ruled in a case involving Honda that trademarks attached onto OEM products constitute trademark use and may constitute infringement of exclusive trademark rightsregistered in China. Owning foreign trademark registrations does not exempt the OEM from trademark infringement liabilities, the court stated.
In 2024, there were two inffuential cases in which the courts ruled differently. The Guangdong Provincial High People’s Court reafffrmed in a retrial ruling that the defendant’s OEM processing based on a trademark registered in Taiwan and mainly sold to Taiwan infringed on FILA’s exclusive trademark rights in Mainland China. The second-instance court had overturned the ffrst-instance court’s ffnding of infringement, holding that the activity did not constitute trademark infringement. The Guangdong High Court then overturned the decision on retrial, stating that afffxing trademarks on export goods satisffes the statutory requirements for trademark use. Even if the allegedly infringing products are exported, they may return to the domestic market in the internet era. Moreover, the defendant had failed to fulffll its reasonable duty of review and care. The retrial ruling reafffrms the principle of territoriality of trademark rights and emphasises the “reasonable duty of care” of the processing contractor.
Elsewhere, the Shanghai IP Court issued a second-instance decision in which it considered whether the use of a trademark on a sample of mechanical and electrical equipment infringed on the trademark rights of a domestic rights holder. The Shanghai IP Court’s answer was no. The court was of the view that all exported goods have the potential to return to the domestic market. It pointed out that when considering whether “goods ffowing back” affects the determination of infringement, the court should weigh and balance:
the effective protection of legitimate rights;
the interests of domestic trademark owners; and
the promotion of international trade development.
The court should also consider different types of goods on a case-by-case basis. In this matter, the product involved was a sample machine, which had a close-to-zero chance of being reimported into China. Hence, domestic confusion was very unlikely.
Although the case facts differed, the divergent court judgments reffect different judicial orientations; one put emphasis on eliminating the likelihood of domestic consumer confusion and the other highlighted the negative impact to free global trade and OEM industry development. Thus, Chinese courts still disagree on the issue of OEM processing.
(Cases cited: Shanghai IP Court, (2023) Hu 73 Min Zhong No 475 and Guangdong Provincial High People’s Court, (2023) Yue Min Zai No 398)
Crocs loses inherent distinctiveness of trade dress
In this case, Crocs sued the defendants on the grounds of trademark infringement and unfair competition for their use of allegedly similar trade dress. Crocs’ claimswere based on its registered CROCS trademark and the distinctive trade dress of its classic clog shoes.
The appellate court upheld the ffrst-instance court’s ffnding of trademark infringement. Nevertheless, the appellate court overturned the lower court’s ffnding of trade dress infringement. While Crocs claimed that its classic clog shoes had three distinctive features (namely, a wide round-shaped toe, evenly distributed round holes on the upper section, and a movable strap at the heel), the court found that Crocs had failed to prove that these features had acquired secondary meaning to serve as source identiffers.
Notably, Crocs had obtained civil judgments in 2015 that protected its trade dress as well-known packaging and decoration. However, the appellate court held that in the case of shoes with similar or close characteristics appearing on the market, there was no evidence that Crocs had actively defended its rights, resulting in the shapebased trade dress becoming commonplace and losing its inherent distinctiveness.
This judgment serves as a wake-up call for rights holders. Those with distinct, unique commercial identiffers and designs should maintain active use and enforcement in the market.
(Case cited: Fujian Provincial High People’s Court, (2023) Min Min Zhong No 890)
MUJI prevails in both civil and administrative cases
Japanese home furnishing brand MUJI has been involved in multiple lawsuits against Beijing Cotton Textile Co Ltd and Beijing MUJI Investment Co Ltd over its Chinese trademark for many year. It has successfully stopped trademark registrations and use by Beijing Cotton Textile multiple times in relation to Nice classes for which MUJI already owns trademark registrations. However, Beijing Cotton Textile applied for the Chinese MUJI trademark in Class 24, covering textile products, as early as 2000. MUJI has been unable to prevent this registration after more than a decade of opposition and other dispute procedures. In 2019, based on its trademark registration for textile goods, Beijing Cotton Textile sued and succeeded in prohibiting MUJI from using its Chinese trademark on textiles (eg, towels and blankets), which attracted widespread attention.
This year, MUJI has made positive steps in two cases.
First, the Jiangsu Provincial High Court recognised MUJI as a well-known mark in promotional services. Accordingly, it prohibited:
two afffliates of Beijing Cotton Textile from using the Chinese trademark in their company names; and
the defendants from using the Chinese MUJI trademark in store signs and promotional materials.
This case also provides a relatively clear determination of what constitutes use in Class 35 (marketing services).
Second, in a retrial ruling issued in December, the Supreme People’s Court recognised that MUJI enjoyed prior trade name rights and determined that Beijing Cotton Textile’s application for a Chinese MUJI trademark infringed on MUJI’s prior trade name rights. It also held that the evaluation of the subjective state of a trademark applicant is not limited to its conduct before the trademark application date, but rather can be based on the applicant’s continuous and repeated applications for multiple trademarks over a period. Ultimately, based on Beijing Cotton Textile’s continuous preemptive registration behaviour over the years, the court found that the disputed mark was registered by improper means and should be invalidated.
(Cases cited: Supreme People’s Court, (2024) Zui Gao Fa Min Shen No 5866 and Jiangsu Provincial High People’s Court, (2022) Su Min Zhong No 356)
