Keywords : trademark infringement ; unfair competition ; damages

First-instance case number: (2017) Yue 03 Min Chu No. 540

Second instance case number:(2019) Yue Min Zhong No. 957

Synopsis

In March 2017, the Hong Kong-based jewelry retailer Luk Fook Holdings Limited (Luk Fook) sued an infringer called Shenzhen 6+ Fook Jewelry Co., Ltd. (6+ Fook) before the Shenzhen Intermediate Court on the ground of trademark infringement and unfair competition.

For its defense, 6+ Fook challenged the distinctiveness of Luk Fook’s trademarks, arguing the Chinese characters of these trademarks, which represents luck and fortune, are widely used in the jewelry industry, and are devoid of distinctiveness. 6+ Fook also claimed that its trademarks were not similar to Luk Fook’s cited marks, and that, through constant use, they had established a distinct reputation.

The first-instance court ruled in favor of the plaintiff, on the basis of trademark infringement. The court however dismissed the plaintiff’s unfair competition claim and awarded damages and reasonable cost total RMB500,000.

Luk Fook appealed to the Guangdong High Court (GHC), insisting on its unfair competition claim.

Judge's Comment

The GHC confirmed the first instance judgment based on trademark infringement, but reversed its finding that unfair competition could not be established.

GHC affirmed that: 1) Luk Fook has acquired a high reputation through continuous promotion, 2) the trademarks “Luk Fook” is not a commonly-used expression in Chinese but unique words coined by the plaintiff, and 3) the plaintiff has established, since 1991, a stable correspondence with the cited trademarks.

GHC cited Article 58 of the Trademark Law (using other’s registered trademark or unregistered wellknown trademark as trade name) and Article 2 of the Anti-Unfair Competition Law (the good faith principle) and found that the defendant, which was founded in 2004, deliberately exploits the reputation and goodwill of the plaintiff’s cited trademark, which was registered in 1997, caused confusion among consumers and eroded Luk Fook’s market share, thus constituted unfair competition.

In terms of the damages, GHC found that the lower court’s damages of RMB 500,000 was not reasonable and should be raised to 6 million, considering the defendant’s intentional trademark infringement and unfair competition, the massive scale of its business operation and the enormous profit yielded from the infringement, which far exceeded Luk Fook’s claim of RMB 6 million.

The court considered the following parameters in its calculation of the damages: the reputation of the cited trademark, the scope of the infringing acts, the contribution of the litigious marks to the profit and the deliberateness of the infringement.

Some of the evidence was originated from the defendant. The business scale of the defendant was found on its website, and the scope of infringement was corroborated by the evidence submitted by the defendant during a trademark administrative procedure by which it had attempted to prove the reputation of its brand. These evidences along with the profit margin of other jewellers of similar size was found admissible by the court.