Unauthorized use of the 'Six Walnuts' typeface and a similar advertising slogan on biscuit packaging boxes looked like a 'small case', yet it produced the first mediation document in China in which a trademark owner obtained punitive damages. In Hebei Yangyuan Zhi Hui Beverage Co., Ltd. v. Tengzhou Jutai Food Co., Ltd., the base was the trademark license fee multiplied by two twice, fixing punitive damages at RMB 16,000—a case regarded as substantively 'activating' the punitive damages clause of Article 63 of the Trademark Law.
Case Overview
Hebei Yangyuan Zhi Hui Beverage Co., Ltd. ('Yangyuan') owns the 'Six Walnuts', 'Yangyuan', and other registered trademarks. In May 2016, a consumer bought five boxes of biscuits produced by Shandong Tengzhou Jutai Food Company and found the packaging boxes used the same typeface as Yangyuan's 'Six Walnuts' and a similar advertising slogan, and reported it to the industry and commerce authority in Zaozhuang, Shandong. On July 8, 2016, the Tengzhou Administration for Industry and Commerce issued an administrative penalty decision ordering Jutai to immediately stop the infringement, confiscating and destroying the infringing goods, and imposing a fine of RMB 12,000.
Issues in Dispute
- Whether using the same typeface as 'Six Walnuts' and a similar advertising slogan on biscuit products constituted trademark infringement;
- Whether the infringer's refusal to provide account books and fabrication of false production and sales facts could be found 'malicious infringement under serious circumstances';
- How to select the base for punitive damages.
Judgments and Case Numbers
In July 2018, Yangyuan filed suit with the Zaozhuang Intermediate People's Court of Shandong Province. The parties signed a settlement agreement on August 27, 2018, stipulating: the license fee standard for Yangyuan's 'Six Walnuts' trademark was RMB 4,000 per batch; the defendant's infringement of the exclusive right to the trademark was malicious and serious, and the punitive damages would be the license fee multiplied by two and then multiplied by two again, i.e., 4,000 × 2 × 2 = RMB 16,000. On August 29, 2018, the Zaozhuang Intermediate People's Court issued civil mediation statement (2018) Lu 04 Min Chu Zi No. 432, confirming Jutai's payment of RMB 16,000 in punitive damages to Yangyuan.
The case was evaluated by the China Law Society's Consumer Rights Protection Law Research Society as the first case in China in which a trademark owner obtained punitive damages (source: Legal Daily report of November 13, 2018, reposted on the Shandong Higher People's Court website).
Other related cases involving the same brand include Luoyang Duolido Food Co., Ltd. et al. v. Yangyuan (first instance (2017) Jin 01 Min Chu No. 186 by the Tianjin First Intermediate People's Court; second instance (2017) Jin Min Zhong No. 585 by the Tianjin Higher People's Court), reflecting the high incidence of 'hitching on famous brands' infringement in the beverage industry (source: domestic case database of the IP laws and regulations database of the Ministry of Commerce).
Key Takeaways
- This case answered 'how to calculate': where both actual losses and infringement profits are hard to prove, the base for punitive damages may be set by reference to a multiple of the trademark license fee and then multiplied—this 'base × multiplier' approach became the standard practice thereafter;
- Refusing to provide account books is an aggravating circumstance: the infringer's withholding of account books and fabrication of false production and sales facts were directly found to be 'malicious infringement under serious circumstances';
- Administrative enforcement is the starting point of civil claims: the administrative penalty triggered by a consumer report fixed the infringing facts, facilitating the later civil action;
- Mind the version differences of the law: this case applied the 2013 Trademark Law, under which Article 63 set punitive damages at 'one to three times'; the 2019 amendment raised this to 'one to five times'.
Lessons for Businesses
Never treat 'small infringement profits' as a safety cushion. Here the infringer's sales were limited, yet the court still applied punitive damages on a license-fee multiple base, with the multiplier applied twice in a row. For SMEs, the safest course is to keep packaging, advertising slogans, and typeface design well away from others' famous trademarks; for rights holders, keep trademark license contracts and license fee payment vouchers at all times—they are the key evidence for claiming damages 'by reference to a multiple of the license fee'.
If you need these procedures handled for you, you may book the trademark monitoring service of a filed trademark agent on MyTMBee, with full assistance from material preparation through filing and follow-up.