Keywords: asset, trademark infringement, litigation, judgment, court, owner, copyright, civil case, court judgment
 

Trademark infringement litigation can make or break some companies. With such cases becoming increasingly common yet also complex, Tim Meng and Linda Zhao of GoldenGate law firm, present a guide to understanding the laws and processes surrounding trademark litigation.

In recent years, trademark infringement cases in China have become more numerous and increasingly complex. Because such litigation serves as the final defense of trademark holders' rights, conflicts arising from such cases are much more serious than those in other dispute resolution proceedings. In some cases, a company's survival may hinge on the outcome of such litigation, especially when the trademark in question ranks among the company's most important assets. Therefore, it is important for Chinese trademark holders to have an understanding of both the procedures involved in and the skills necessary to undertake trademark litigation.

Procedures
Generally speaking, the procedures involved in trademark litigation include evidence collection, complaint filing, acceptance of the complaint by the court, evidence exchange, a court hearing and the rendering of a judgment.

Evidence collection
Evidence in trade mark infringement cases is primarily divided into three types: evidence proving the owner's prior rights, evidence demonstrating the alleged infringement and supporting evidence for damages claims.

With regard to trademark protection, China is a "first-to-file" rather than a "first-to-use" jurisdiction. Generally speaking, except for well-known trademarks, registration is a prerequisite for seeking protection. Claims based solely on "prior use" will be comparatively weak. Accordingly, a Trademark Certificate is the key piece of evidence in trade mark litigation. Other intellectual property and related rights, such as trade dress, copyright, and trade name are also very helpful.

Evidence of infringement may deal with the manufacture and/or the sale of the item in question, depending on whether the producer, the seller, or both are jointly named as defendant(s). Evidence can be presented in a number of forms, including advertisements, catalogues, brochures, invoices and/or the product itself, so long as all evidence originates from the defendant.

It is common practice for all such evidence to be notarised by a notary public. In this way, evidence may be preserved in a more authoritative and persuasive manner. Failure to notarise certain kinds of evidence, including evidence of the sale of an infringing product, may constitute a fatal weakness in a trade mark infringement case. On the other hand, if administrative action was conducted prior to the filing of a civil case, the Administrative Penalty Decision would be valuable evidence directly proving the infringement activities.

Damages can be calculated in one of two ways. Firstly, based on profits made through the trade mark infringement, which usually refers to the number of products or services sold and the profit per unit. Or, alternatively, damages may be based on the financial losses suffered by the brand owner due to the infringement. This can refer to a decrease in sales of the brand owner's products or services and the profits thereby lost.

In practice, these two methods for calculation of damages are often strongly challenged by the infringer, owing to the difficulty in proving a direct relationship between the infringement and the infringer's earnings and/or the brand owner's losses. Thus, in most cases, statutory damages are a more feasible alternative. A maximum of Rmb500,000 ($73,000) in statutory damages may be awarded, the specific amount depending upon the seriousness of the infringement.

The following factors are considered by the court when calculating this: the period and negative consequences of the infringement to the brand owner; the damage to the reputation of the infringed trademark; reasonable expenditures to prevent infringements well as royalty fees; and the type, period and scope of the trade mark license agreement, which is considered as an important reference in estimating the valuation of the infringed trade mark.

Evidence of bad faith on the part of the defendant, such as professed ignorance of a cease and desist letter sent by the plaintiff before the court proceedings or any business relationship between the infringer and the brand owner, would also be taken into consideration by the court for the purposes of determining damages.

In addition to the above-mentioned, the reputation of the right owner's trade mark will be taken into consideration when judging the similarity of the marks, as will identifying the scope of confusion caused to the public when determining damages. Only evidence originating previous to the date of the alleged infringement will apply.

A note regarding forms: unless the counterparty consents, original documents are strictly required, and all evidence obtained abroad should be notarised and legalised.

Complaint filing
As with other civil cases, the complaint should be filed with the court where either the defendant is domiciled or where the infringing act took place. All foreign-related trade mark infringement complaints should be filed with the intermediate-level People's Court or with a higher court, depending on the damages claimed. In some large cities such as Beijing, Shanghai, and Nanjing, some District Courts appointed by the Supreme People's Court are qualified to deal with foreign-related IP infringement cases.
Exchange of evidence
When necessary, evidence exchange procedures may be requested by either the plaintiff or by the court ex officio.

At this stage, additional evidence will be filed by each party within the prescribed time limit, usually 30 days after receiving the written notification from the court. Both parties must pay careful attention to this timeframe, because only newly acquired evidence will be accepted after this procedure is complete.

Upon receipt of the counterparty's submission as transmitted by the court, the party involved will examine the authenticity and validity of the evidence. For example, they may seek to determine whether the evidence is fabricated or altered, whether the acquisition and form of the evidence meet the requirements of the law, and whether the evidence is relevant to proving the facts claimed. Challenges to the authenticity, validity, or relevance of evidence are made during the formal court hearing.

Court hearing
A court hearing is comprised of the opening stage, investigation, arguments and closing statements.

In the opening stage, the court will need to identify the legal position of the parties and/or their representatives. Rules for proper conduct will be announced, including requirements for those observing the proceedings, and a ban on recording and photography unless otherwise allowed by the court.

The investigation phase focuses on the evidence and facts of the case. Opinions regarding the authenticity and relevance of evidence should be provided for each item of evidence submitted by the counterparty. In addition to documentation, audio/video materials and witnesses, expert opinions can be presented during this stage. Questions will be raised by the judges and/or jury in order to make the facts clear.

Arguments shall focus on the key issues of the case. Each side will be heard, their cases based on the facts and legal basis. This phase can become very heated as each side seeks to make its case.

Finally, each party will make a final statement as a summary of their legal opinion regarding the dispute(s) in question.

Judgment
The court's judgment will usually be announced publicly during the court hearing, or subsequently sent to the concerned parties. The judgment made by the court of first instance is subject to appeals to higher level court(s). Chinese courts abide by the principle that the judgment made by the court of second instance is final, excepting a very few cases in which the party concerned may request that the Supreme People's Court retry the case, although in practice, this is rare.

Source: http://www.managingip.com/Article.aspx?ArticleID=2176052