Hylands' Case Included in the Five Classic Cases of Punitive Damages for Intellectual Property Rights Made at Beijing Courts

In recent years, China has attached great importance to the protection of intellectual property rights and has vigorously improved and promoted the application of punitive damages so as to better reinforce the role of the legal and regulatory system in the protection of intellectual property rights. On the occasion of the 22nd World Intellectual Property Day, the Beijing High People's Court released "Five Classic Cases of Punitive Damages for Intellectual Property Rights Made at Beijing Courts" on April 25. The infringement case of "Erdos" trademark right which was represented by Liyun ZHAO's team from Hylands was honorably included in the list. The case has been selected as one of the "Representative Cases of Applying Punitive Damages in Civil Cases of Infringement of Intellectual Property Rights" issued by the Supreme People's Court and "Representative Cases of Beijing Intellectual Property Court for the Second Anniversary" issued by the Beijing Intellectual Property Court. 

Plaintiff: Inner Mongolia Ordos Resources Co., Ltd. (hereinafter referred to as "Ordos") 

Entrusted Agent: Liyun ZHAO, Linjuan LI Lawyers of Beijing Haotian Xinhe Law Firm (former name) 

Defendant: Beijing Miqi Trading Co., Ltd (hereinafter referred to as "Miqi") 

On March 28, 1998, Erdos obtained the registered trademark No. 979531 by means of assignment, which was approved to be used on goods such as apparels, knitted garments, shirts and pants in Class 25 and was recognized as a renowned trademark on apparel goods by the Trademark Office on January 5, 1999. On February 14, 2004, Erdos further improved the foregoing trademark and registered the exclusive right to obtain the trademark No. 3240572 in the case involved in Class 25 Apparels and Other Commodities. 

Miqi sold woolen dumplings and other commodities closely related to the approved use category of the trademark in question through its "Miqi Clothing Store" on the Tmall platform. Upon notarized purchase and examination in court, the accused infringing products were marked with the characters of "Erdos" in the prominent part of the wrapping paper. Upon comparison, the distinctive marks of the allegedly infringing products were exactly the same as the text part of the trademark involved, and were determined by the court to constitute infringement. 

As for the specific amount of compensation, according to the deposition of the lawyers, Miqi sold a total of 10,447 pieces, and the court made a discretionary decision on the final award based on the base figure in conjunction with the average unit price and profit margin. The court also indicated that, given the fact that Miqi, as an operator of "woolen yarn, scarf yarn, cashmere yarn and other commodities closely related to clothing, would have been aware of the popularity of the trademark in question, and its prominent use of the 'Erdos' logo, which was almost identical to the trademark in question, in its own online store and the long infringement, with obvious subjective malicious intent and serious infringement, it was appropriate to determine the amount of compensation in accordance with twice the profit of Miqi due to infringement". 

This case is a representative case of relatively accurate determination of the base amount of punitive damages. The determination of the base amount of punitive damages is the key to calculating the amount of punitive damages. In this case, the infringement profits of the infringer were employed to calculate the base for punitive damages, with three necessary calculation indicators in determining the infringement profits. 

First, the sales volume of infringing goods.

Second, the price of infringing goods. In case of infringing goods with normal and discounted prices, their average unit prices should also be considered. 

Third, the profit margin conferred by the copyrighted trademark on the price of the infringing goods, i.e., the IPR contribution. 

This indicator is subject to reasonable discretion in the context of the copyrighted trademark and the circumstances of the infringement. In this case, factors such as the popularity of the copyrighted trademark, the similarity between the infringing trademark and the copyrighted trademark, the position of the infringing trademark in the infringing goods, the prominence of the infringing trademark in the infringing goods, the prominence of the infringing trademark in the display of the infringing goods, and the nature, reputation and influence of the infringing goods sales stores were fully considered to determine the proportion of the copyrighted trademark in the price composition of the infringing goods. In this case, the base amount of punitive damages = sales quantity x average unit price x IPR contribution. Such calculation method and the consideration of IPR contribution have certain significance for the trial of such cases.