In Zhou Lelun v. New Balance Trading (China) Co., Ltd. et al., the first instance awarded RMB 98 million and the second instance reduced it to RMB 5 million. The reason for this large second-instance adjustment lay in a refined assessment of the role the 'Xin Bai Lun' (New Balance) sign played in the infringement profits. The case is an important reference for the calculation of damages in trademark infringement.
Case Overview
Zhou Lelun owns trademark No. 865609 'Bai Lun' and No. 4100879 'Xin Bai Lun', registered for shoes and other goods. New Balance Trading (China) Co., Ltd. and its affiliates used 'Xin Bai Lun' as the Chinese name of their New Balance brand on sports shoes and in promotional activities. Zhou alleged infringement and sued; the first instance found infringement and awarded substantial damages.
Issues in Dispute
- Whether the defendants' use of the 'Xin Bai Lun' sign infringed the plaintiff's exclusive right to the registered trademarks;
- If infringement was established, how to calculate damages, and whether the defendants' entire operating profits could be used as the base.
Judgments and Case Numbers
- First instance: Guangzhou Intermediate People's Court of Guangdong Province, (2013) Sui Zhong Fa Zhi Min Chu Zi No. 574, judgment on April 29, 2015, ordering the defendants to stop the infringement, eliminate the impact, and pay RMB 98 million in economic losses and reasonable expenses;
- Second instance: Guangdong Provincial Higher People's Court, (2015) Yue Gao Fa Min San Zhong Zi No. 444, publicly announced on June 23, 2016, changing the award to RMB 5 million in economic losses and reasonable expenses (plus RMB 5,000 by Shengshi Company), while affirming the orders to stop the infringement and eliminate the impact;
- Key basis for the reduction: an appraisal report submitted by the defendants showed the contribution rate of the 'Xin Bai Lun' sign to their profits was about 0.76%, on which the court substantially adjusted the damages;
- Sources: public report on the Guangzhou IP Court website ('Second-instance judgment in the New Balance case: damages drop from RMB 98 million to RMB 5 million'); reposts on China Court Network; full text of the second-instance judgment available through public channels for Chinese IP judgments.
Key Takeaways
- Damages calculation returns to causation: infringement compensation must rest on the causal relationship between the infringing act and the profits, and the contribution rate of the accused sign is an important moderating factor;
- Evidence on contribution rate matters enormously: the appraisal report proactively submitted and adopted by the defendants directly cut the damages from RMB 98 million to RMB 5 million;
- The cessation orders are unaffected: adjusting the damages amount does not affect the orders to stop the infringement and eliminate the impact;
- The second-instance reversal has a demonstration effect: the case prompted cautious application of the 'presumption of total profits' in judicial practice.
Lessons for Businesses
Similarity risk assessment must come first—especially the choice of a brand's Chinese name, which should be searched before use to avoid conflict with prior registered trademarks; the accused party's room for defense is greatest at the damages-calculation stage, and it should proactively prove the sign's contribution rate, reasonable profit margins, and deductible costs; rights holders claiming high damages must provide evidence supporting causation and cannot simply extrapolate from the other side's total sales; reasonable expenses are generally limited to amounts actually incurred and documented.
To engage the services described above, you may submit a trademark monitoring request on MyTMBee, and a filed trademark agent will follow up.