The case of XX Group Company v. Guan X Company, Bai X Company, Su X over trademark infringement
The case of XX Group Company v. Guan X Company, Bai X Company, Su X over trademark infringement
[Keywords]
civil, intellectual property, trademark right, cross-border trade, legitimate source defense
[Case summary]
XX Group Company with its registered domicile in the United State of America is the exclusive licensor of trademark Emporio Armani on watches in the world, the exclusive license of No. 302203 trademark for watches in China mainland included. XX Group Company discovered in inquiry that XX cross-border e-commerce company (Guan X Company) exhibited and sold fake Emporio Armani watches on a WeChat-based app, purchased on the said app the accused infringing products, and had them notarized. The notarized wristwatches were examined and ascertained as fake products. Guan X Company claimed that the accused infringing products that he sold came from Bai X Company, and that he, as e-commerce platform, had already deleted, blocked and disconnected link of the accused infringing products upon receiving litigation materials, and demanded the seller to remove the articles. Bai X Company claimed that the accused infringing products came from a third-party company, and the profit margin was extremely small. Su X was the sole owner of Bai X Company. XX Group Company believed that Guan X Company, Bai X Company and Su X infringed upon its trademark, and sued them to the court, requesting that Guan X Company, Bai X Company and Su X immediately cease to sell and store the infringing products, destroy the unsold infringing products, scrap the packages, prints, and accessories bearing the infringing logo, dismantle bulletin boards and billboards printed with the infringing logo, and compensate 5,000,000 yuan for economic losses.
The court heard the case and held that XX Group Company as the exclusive licensor of No. 302203 trademark in the world was a suitable plaintiff in this case; Guan X Company opened on WeChat the said app to provide transaction services, and should be ascertained as e-commerce platform; Bai X Company used the said app of Guan X Company to sell the accused infringing products, which were verified as fake goods by examiner appointed by XX Group Company, and, for absence of evidence that proves otherwise, the examination outcome was adopted, therefore, Bai X Companys selling the accused infringing commodities constituted an act of trademark infringement; Guan X Company, as it did not distinguish self-operated businesses from third-party businesses on the said app, failed to perform its duty of audit and supervision according to the law, and helped with the marketing and selling activities, should be deemed as should be aware of the infringing act, and should bear joint liabilities for trademark infringement with Bai X Company in proportion to their fault; Bai X Company did not have clear evidence when selecting product suppliers, and could not prove it had exercised due diligence in supplier audit, while Guan X Company failed to examine whether Bai X Company had obtained any authorization for the accused infringing products, therefore, the two companies legitimate source defense was unjustified. In this case, the amount of compensation was determined according to the reputation, identifiability and market influence of the trademark involved, the fact that the accused party was a cross-border selling business operator, the profit margin of watches, the average purchase price, sales volume, and the amount of sales with taxes.
[Verdict]
The court made out the (2023) Qiong 73 Min Chu No. 31 civil judgement on April 23, 2024, ordering Guan X Company and Bai X Company immediately cease infringing upon the exclusive rights of the registered trademark involved in the case, including the sale and storage of the infringing products, destroy the unsold infringing products, and packages, prints and accessories bearing the infringing logo, and dismantle bulletin boards and billboards printed with the infringing logo; Bai X Company and Su X jointly compensate 765,447.15 yuan, and Guan X Company bear the joint compensation liability of 200,000 yuan within the compensation of Bai X Company and Su X. After the announcement of the first-instance judgement, Guan X Company, Bai X Company and Su X earnestly performed within the appeal period their legal obligations as set forth in judgment, and the case was properly resolved. At the conclusion of the case, the relevant party, to express gratitude, presented banners to the judge in charge of the case.
[Significance]
Cross-border trade involves different standards at product origin, making the products difficult to trace, and the consumers are highly concerned about whether they can obtain genuine products in their purchase. The consumers confidence in products is core to the continuous, fast and effective growth of cross-border trade. To ensure fair, unified and open market competition in the free trade port, we need equal, strict intellectual property protection. By handling foreign-related trademark infringement cases arising from cross-border trade, we may help, guide and regulate cross-border traders to properly understand the legal consequences of selling fake products, and know where lies the infringement, what is the liability and what are the standards. This case is a model case concerning cross-border trade in Hainan Free Trade Port, which will urge business operators to exercise due diligence when examining the source of their commodities. In this case, the court employed the foreign partys evidence to ascertain the subject identity, adopted the examination opinions supplied by the right holder, and examined the legitimate source defense from the perspective of the business owners prudence and rationality in business operation, and clearly articulated that cross-border e-commerce companies when doing business should select brands with proper authorization and exercise due diligence in selection. Legitimate source defense is a circumstance of exception to exempt the offender from compensation liabilities, which requires both subjective and objective conditions, and should be examined based on the nature and scale of the business. In adjudicative practice, the court strengthening the comprehensive consideration of the subjective and objective conditions of legitimate source defense will urge cross-border traders to perform their due diligence in ascertaining legitimate source and clear authorization. After the judgement was made out, the court explained the law and reasoning, urged the parties to performance their obligations, promoted the substantive resolution of the dispute, achieved the organic unity of legal and social effects, made the rule of law the core of economic development, and boosted a law-based business environment through the administration of law.
