Chinese Copycat to indemnify New Balance 3 million damages
On November 20th, 2019, the Nanjing Intermediate Court handed down a decision, ruling in favor of New Balance Trade (China) Co., Ltd (‘NB China’), the Chinese franchisee of New Balance sneakers, in its trademark infringement and unfair competition lawsuit against the copycat Xinbailun Inc. The court affirmed trademark infringement and unfair competition, ordered cessation and awarded damages RMB 3 million and reimbursement of legal costs RMB 550,000.
New Balance sneakers had entered the Chinese market since 1990s. Established in 2006, NB China has been marketing and promoting New Balance sneakers, using the trade name “新百伦(transliteration of “New Balance”, pronounced as “Xinbailun” in Chinese). Through years of promotions, New Balance sneakers become popular among Chinese consumers and also falls victim to slavish copycats.
Xinbailun Inc, a company established in Jinjiang, Fujian Province, was found offering sneakers with the letter “N” on both sides of the shoes. Moreover, Xinbailun Inc registered “新佰伦” (‘Xinbailun’) as its trade name, with its pronunciation identical with that of NB China’s trade name and the Chinese characters almost identical with the latter. Furthermore, Xinbailun Inc uses “Niubanlunsi”, which mimics the English pronunciation of “New Balance”, as its brand name. To give the whole copycat business a legit cover, the actual controller of Xinbailun Inc registered a variety of “N” trademarks in class 25, assigned these registrations to a Hong Kong shell company, and then had the shell company license Xinbailun Inc to use these trademarks.
NB China initiated lawsuits against Xinbailun Inc before Nanjing Intermediate Court in December 2018, claiming trademark infringement and unfair competition.
1. Using a registered trademark by altering its distinctive feature constitutes trademark infringement
NB China submitted preponderant evidence, establishing through multiple angles including sales volume, advertising and judicial precedents the fact that the “” trademark has obtained high public awareness and formed a unique correspondence relationship with New Balance sneakers through long-time promotion and use in China. In terms of similarity, visual charts were illustrated to the court that dominant features of the “N” mark on Niubanlunsi shoes are highly similar to NB’s “” trademark; the “N” mark used on Niubanlunsi shoes is visually different from its “” registered trademark. Besides, NB China proves, through a market survey, that the very look-alike “N” mark used on Niubanlunsi shoes produced by Xinbailun Inc has caused confusion and misidentification among the relevant public.
In light of the above, the Nanjing Intermediate Court held that Xinbailun Inc has altered the distinctive features of the “” trademark in actual use in order to free-ride the reputation of NB’s “” trademark, which undermines the legitimate interests of the plaintiff and harms the consumer rights, for which the court found trademark infringement.
2. Using a trade name that has a certain influence constitutes unfair competition
NB China submitted abundant evidence to prove that its Chinese trade name “新百伦” has obtained high consumer awareness and distinctiveness so as to function as a source identifier of its sneakers. Xinbailun Inc, as a rival shoemaker, should have been fully aware of the plaintiff’s “新百伦” trade name, yet it deliberately registered and used in business operation the accused “新佰伦” trade name (identical pronunciation, highly similar Chinese characters), exhibiting an intention of misleading the public. The market survey also corroborates the fact that the public misconstrued that Xinbailun Inc is somehow associated with or affiliated to the plaintiff.
Based on the above findings, the court determined that the plaintiff’s trade name “新百伦” has gained certain influence and has formed a one-to-one correspondence relationship with the“” trademark and New Balance sneakers. The defendant, by using a similar trade name, has taken unfair advantage of, and is detrimental to, the reputation of the plaintiff. Therefore, the defendant’s act has constituted unfair competition and shall change its business name, and make sure that the new name does not include “新佰伦”.
3. RMB 3 Million: The upper limit of statutory damages
With respect to the compensation, the court took into account the popularity of the “” trademark, the bad faith of the Xinbailun Inc’s repeated infringement, the consequences of the infringement as well as the profit margin of the similar products, and determined the damage at RMB 3 million, the upper limit of statutory damages stipulated in China Trademark Law.
This case demonstrates the determination of the Nanjing Intermediate Court in providing efficient judicial remedy to intellectual property owners by penalizing and holding the infringers accountable.
Authored by CHEN Liang & SHAO Xianyuan