What’s fair when calculating TM infringement damages?

The Guangdong Provincial Higher People’s Court recently rendered an appeal judgment ordering the defendant, New Balance Trading (China) (NB China) to immediately cease infringing upon Zhou Lelun’s registered Chinese trademarks “百伦” (“Balance”, as in New Balance) and “新百伦” (“New Balance”) and compensate him in the amount of RMB5 million (US$754,000). However, previously, the Intermediate People’s Court of Guangzhou Municipality had set the measure of damages in its judgment at RMB98 million. Such a large discrepancy drew the authors’ attention to the issue of how the measure of damages in trademark infringement cases is calculated.

The trademark “百伦” was registered by a company in 1996 for footwear, and was transferred to Zhou in 2004. Later in 2004, Zhou applied for the trademark “新百伦”, against which an opposition application was filed by NB China’s affiliate, New Balance Athletic Shoe (NB US). However, the Trademark Office nevertheless approved registration of the trademark “新百伦” in 2011.

NB US secured registration of the trademarks “NEW BALANCE”, “NB” and “N” for such goods as footwear, in 1983. NB China, using “新百伦” in its company name, was established in 2006. In 2007, NB US licensed the above-mentioned English trademarks to NB China.

However, NB China, fully aware of the successful registration of the trademark “新百伦”, nevertheless used the Chinese trademark, together with its English trademarks, on Tmall and other such websites. Consequently, Zhou sued NB China and one of its distributors for trademark infringement and sought compensation for economic losses of RMB98 million.

Wang Yadong is the executive partner and Lu Lei is a partner at Run Ming Law Office