Sep 11, 2017
By Sherry L. Jetter, Partner of CKR Law, Intellectual Property, Jeffrey A. Rinde, Managing Partner of CKR Law, International Securities and Global Finance, and Joy Xiao, Associate of CKR Law
The Suzhou Intermediate People’s Court awarded the Boston, Massachusetts-headquartered firm $1.5 million (RMB 10 million) after three local Chinese shoe manufacturers were found to have infringed its signature trademarked slanting ‘N’ logo. This was the largest trademark infringement award ever granted to a foreign business in China. It was a landmark victory not just for New Balance, but also for many other foreign companies that have long sought ample protection of their intellectual property in China.1
Although the size of the ruling — issued three days after President Trump ordered an investigation into China’s alleged theft of intellectual property2 — was relatively small by international standards, it was nevertheless a substantial increase compared with previous sanctions in China. Previously, it was rare for any foreign company to be awarded this amount of damages. Before China passed a new trademark law in 2014, damages in infringement cases were paltry and often fell below the maximum statutory amount of $75,000. The new legislation upped that amount to $ 450,0003. Now, the $1.5 million award is a product of this new legislation. It points to a change in China’s attitude toward piracy and an increased willingness to protect foreign intellectual property rights.
The Suzhou Intermediate People’s Court ruled that three defendants that made shoes under the brand New Boom “seized market share from New Balance” and “drastically damaged the business reputation of New Balance.”4 The court also said the three defendants behind New Boom — Zheng Chaozhong, Xin Ping Heng Sporting Goods Limited Company and Bo Si Da Ke Trading Limited5 — had relied on the “malice of free-riding,” and their actions led to “confusion by a large number of consumers”.
The court ruling was made on August 15, 2017 but has not yet been made public. The decision can still be appealed.
Since it started selling shoes in China in 1995, New Balance has been seeking legal remedy to protect its brand in China against counterfeit manufacturers, deep-discounting suppliers, and even the use of it own Chinese name, but has been defeated in the Chinese courts.
In 2013, New Balance was sued by a local Chinese shoe companying for using “百伦” and “新百伦” for its shoes. “百伦” and “新百伦” sounds very similar to the Chinese name of New Balance. New Balance lost the trial in Guangzhou intermediate court and was fined 98Million RMB (14Million USD). The court also held New Balance needed to give up using these two names for their brand because China followed a “first in registration first in right” trademark policy. The Guangdong shoe company alleged that it had registered the trademark “新百伦”(sounds like New Balance in Chinese) in June 2004, prior to the trademark registrations of New Balance. Later, New Balance appealed and the court adjusted its fine to 5,000,000 RMB( 750,000 USD), but it still lost the case. After that, New Balance had to give up their Chinese trademark name. Only the Guangdong shoe company can use “新百伦” as the name for its products. New Balance can only use -“新百伦贸易（中国）有限公司” as their registered company name, and in its product, New Balance can only use “NB” or “New Balance” while the Guangzhou Chinese company is still selling shows with the “新百伦” logo. Furthermore, the court issued affirmative injunctions requiring New Balance to publically announce a clarification at their local flagship stores to eliminate any misunderstanding.
The $1.5 million ruling is a turning point in support of new legislation and policies in China. As Chinese companies have begun producing and exporting more advanced products and gaining valuable intellectual property of their own, Beijing has sought to bolster its trademark law, increasing the damages awarded to foreign companies in infringement cases and fining counterfeiters.
As many Chinese counterfeiters have moved beyond just making knockoffs to copying everything about a brand, short of the entire name, many American companies face challenges, like New Balance has from pirate companies like New Boom, New Bar Lun, and New Bunren6, as well as “trademark squatters” (granted trademark registrations as the first companies to file there, rather than based upon use of a mark as in the United States), all of which are protected under China’s trademark law,
CKR Law recommends that all international companies protect their intellectual property rights prior to expanding into China. As important, international companies should develop a comprehensive market strategy and protocol for entry into and risk mitigation and risk management when issues arise in China. CKR Law can provide intellectual property advice, including trademark registration, in China through its U.S., European, Hong Kong and China offices. Clients active in or intending to engage in activities in global business are strongly encouraged to contact CKR Law at:
Sherry Jetter, firstname.lastname@example.org
Jeffrey A. Rinde, email@example.com
Joy Xiao, firstname.lastname@example.org
1SUI-LEE WEE, Sui-Lee. “New Balance Wins $1.5 Million in Landmark China Trademark Case” visiting: http://fortune.com/2017/08/23/new-balance-china-infringement/
3Bach, Natasha. Visiting: https://www.nytimes.com/2017/08/22/business/china-new-balance-trademark.html?mcubz=1&_r=0 “Why New Balance’s Trademark Infringement Victory in China Is Such a Big Deal” visiting: http://fortune.com/new-balance-chinese-trademark/
4Retail Asia , “Chinese shoemakers ordered to pay New Balance $1.4 million” https://www.retailnews.asia/chinese-shoemakers-ordered-pay-new-balance-1-4-million/
5Li, Pei. “Chinese court awards New Balance $1.5 million in trademark case” visiting: https://www.reuters.com/article/us-new-balance-china-trademark/chinese-court-awards-new-balance-1-5-million-in-trademark-case-idUSKCN1B317X
6Bach, Natasha. Why New Balance’s Trademark Infringement Victory in China Is Such a Big Deal visiting: http://fortune.com/new-balance-chinese-trademark/