(By Luo Yanjie) In 2001, the globally known sportswear brand Adidas acquired a trademark certificate issued by the Trademark Office of the State Administration of Industry and Commerce (“SAIC”), namely a certificate numbered 1489454 for the “three slants” trademark, which was approved in Class 25 for clothing, ball shoes, hats, socks and other similar products; in addition, the certificate numbered 1536558 for the “three slants” trademark was approved in Class 18, which covers bags, clothing case, traveling bags and belts. On June 21 2003, Adidas transferred the trademarks to its affiliates.
Subsequently, Adidas purchased sports shoes with the mark “AILE” in the Jian Li Jia Store. On the inner side of the upper sole of the shoe there was a “three slants” design substantially similar to that of Adidas’ “three slants” mark., Due to this purchase, Adidas filed for a notarization. Adidas believed the trademark infringed its trademark, and therefore filed a lawsuit against its manufacturer, Ai Le Company, and the Jian Li Jia Store for selling the shoes in question.
The Beijing No.1 Intermediate People’s Court, who heard the case for the first instance, held the following: The “three slants” mark on the shoes produced by Ai Le looked substantially similar to those carrying the Adidas mark, and the overall resemblance between the two products worked in Adidas’ favor. The “check” image on the shoes did not affect whether the shoes would be considered substantially similar or not, and the similarity of the marks was considered adequate to constitute a likelihood of confusion among the relevant consumers. Jian Li Jia Store and Rui Guan Company both sold the allegedly infringing product in their places of business, and therefore should assume joint liability, and make the requisite compensation under principles of civil liability.
The Beijing No.1 Intermediate People’s Court made the following findings: 1. Ai Le Company shall immediately stop the production, marketing, and selling of the products infringing Adidas’ trademark rights under the No. 1489454 trademark, and; 2. Jian Li Jia Store shall immediately cease the selling and marketing of said products infringing the trademark rights under the No. 1489454 trademark owned by Adidas. Dissatisfied with the decision made in the first instance by the Beijing No. 1 Intermediate People’s Court, the Ai Le Company appealed to the Beijing Higher People’s Court.
As held by the Beijing Higher People’s Court, pursuant to the Trademark Law of China, despite the exclusive rights Adidas had transferred to a third party(its affiliates) on June 21, 2003, Adidas was still within its legal right to claim the alleged infringement against its registered marks occurred before that date. Furthermore, the Court held that such a right to claim infringement against is marks would not be transferred to any assignee as a result of a trademark transfer.
The Beijing Higher People’s Court, taking into consideration the fact that Adidas was no longer the trademark holder of the disputed trademark when it filed its lawsuit, decided that it would not support Adidas’ claims against Ai Le, Jian Li Jia and Rui Guan to cease the manufacture or selling of the allegedly infringing products in question. The Court held that the original decision in support of Adidas’ lawsuit, ordering the cessation of any marketing or selling of the allegedly infringing products by Ai Le, Jian Li Jia, and Rui Guan lacked any basis in law, and the facts did not support such a decision. Moreover, the amount of compensation determined by the original court, to wit, RMB 450,000, was considered an unreasonably high amount. However, due to the fact that neither Jian Li Jia Store nor Rui Guan Company had submitted any evidence to prove their unawareness of the alleged infringement occurring as a result of their manufacture and sales of the allegedly offending products, both parties should then assume joint liability in undertaking the duty of compensation along with Ai Le Company.
Based on this, the Beijing Higher People’s Court made the following decision: within ten days following the effective date of this decision, Ai Le Company shall compensate losses of RMB 250,000 as suffered by Adidas, and; within ten days after the effective date of the decision, Ai Le Company, Jian Li Jia Store and Rui Guan Company shall jointly compensate Adidas RMB 50,000 for losses sustained as a result of trademark infringement.
Lawyer Comments:
This is a typical trademark infringement case. The infringed party used to own a globally known sports brand, and the following points are worthy of the reader’s attention:
1. Only the owner of a trademark has the legal power to demand the cessation of infringing behavior by another party.
Pursuant to the laws of Tort Liability and other relevant laws, civil tort liability shall include cessation of infringement, amending consequences, formal apology, and compensation. This so called “stop infringement” order refers to the infringer stopping its ongoing or continuous misconduct, resulting in undue damage to another’s lawful benefits, and its main function is to timely prevent further infringement and avoid the exacerbation of damages to the lawful rights of the trademark holder. From this, we can determine that it is typically the rights holder who has the advantage of making a “stop infringement” order in actual practice. However, in this case, due to the fact Adidas is no longer the trademark holder, the infringement made by the infringer would not cause any “enlargement” of damages, and for this reason, the court in the second instance refused to recognize a claim of “stop infringement.”
2. Subsequent to the transfer of a trademark, the transferor can still claim his/her rights against any infringement of the subject mark before its transfer.
According the court’s opinion in the second instance, Adidas may still claim rights against any infringement before the transfer of the mark, and such a right is not transferred with the transfer of the trademark. The above decision made by the court in conformance with accepted judicial practice, and yet as a civil right, the ownership of the trademark right shall be subject to the agreements set forth between the relevant parties. Therefore, once a court is able to actively examine a transfer agreement parties to a trademark transfer transaction, it will then be able to actually confirm that the transfer does not include the right to claim infringement that occurred before the subject transfer. Pursuant to this line of judicial reasoning, a decision could then be made on a clearer and more accurate basis.
3. The salesman of the infringing product shall assume the responsibility to prove no liability for infringing a mark; otherwise, the seller shall assume joint liability with other named infringing parties.
As regulated in the Implementation Rules of Trademark Law:
“To sell infringing products, with the awareness of the seller, that the product is not an infringing product, the seller could be determined to be free of liability when it is able to prove that it has acquired the product through legal methods and can identify the supplier.” However, the burden of proof lays with the seller. The seller in the case, Jian Li Jia Store, failed to submit such evidence, and therefore assumed liability to contribute to Adidas’ compensation. On that note, pursuant to Paragraph 1 of Article 9 of Tort Liability Law, “[…] to incite or aid another’s infringement, shall result in undertaking joint liability with the infringer.” For this reason, the court in the second instance ruled that Jian Li Jia Store assume joint liability for the infringement claim within the territory of urban Beijing.
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