The trademark infringement and unfair competition dispute brought by Xiaomi Technology Co., Ltd. and Xiaomi Communications Co., Ltd. against Zhongshan Benteng Electric Appliance Co., Ltd. and others is one of the typical cases on punitive damages in civil IP infringement cases released by the Supreme People's Court. The case found 'Xiaomi' to be a well-known trademark and applied punitive damages against the defendant that had registered and used the mark maliciously to free-ride, fully supporting the plaintiffs' claim of RMB 50 million in damages.
Case Overview
The defendant Zhongshan Benteng Electric Appliance Co., Ltd. applied in November 2011 to register the '小米生活' (Xiaomi Life) trademark (Class 11, covering electric cookers and other goods), and thereafter used the '小米生活' sign extensively on induction cookers and other household appliances, also engaging in acts such as imitating Xiaomi's trademarks and false advertising. In 2018, the TRAB found the registration had been obtained by improper means and declared the '小米生活' trademark invalid; in 2019, the Beijing Intellectual Property Court issued an administrative judgment dismissing the defendant's related claims. Xiaomi then filed a civil infringement suit, claiming punitive damages.
Issues in Dispute
- Whether the 'Xiaomi' trademark had reached well-known status at the time of the accused conduct;
- Whether the defendant's conduct constituted trademark infringement and unfair competition;
- Whether punitive damages could apply, and how to determine the multiplier and the amount.
Judgments and Case Numbers
- First instance: Nanjing Intermediate People's Court of Jiangsu Province, (2018) Su 01 Min Chu No. 3207;
- Second instance: Jiangsu Provincial Higher People's Court, (2019) Su Min Zhong No. 1316;
- Result: the court found 'Xiaomi' to be a well-known trademark and the defendant to have committed trademark infringement and unfair competition. The first instance calculated RMB 55.46 million at two times the infringement profits and fully supported Xiaomi's claim of RMB 50 million; the second instance adjusted the multiplier to three times, finding infringement profits of RMB 20.39 million and three times amounting to RMB 61.18 million, while still maintaining the first-instance award of RMB 50 million;
- Selections: the third case in the 'Typical Cases on the Application of Punitive Damages in Civil IP Infringement Cases' released by the Supreme People's Court on March 15, 2021; Top 10 Typical Cases of Jiangsu Courts 2019;
- Sources: typical cases release page of the Supreme People's Court official website; the 'IP Vision' series of the official media of the Jiangsu Higher People's Court.
Key Takeaways
- Punitive damages requires both 'intent' and 'serious circumstances': the defendant knowingly free-rode on the fame of the 'Xiaomi' trademark, registering similar marks and using them on a large scale, showing evident subjective malice;
- Base and multiplier are two steps: punitive damages first fixes the base by actual losses, infringement profits, or a reasonable multiple of the license fee, and then multiplies;
- Infringement profits may be reasonably estimated: where the defendant refuses to produce account books, the court may reasonably estimate based on industry profit margins, sales scale, and other factors;
- Administrative and civil findings corroborate each other: the administrative conclusion that the trademark was invalidly registered can serve as powerful evidence of malice in the civil case.
Lessons for Businesses
The 'free-riding' strategy of hitching onto a famous brand carries extremely high risk—beyond cessation and damages, it can trigger punitive damages; brand owners should accumulate well-knownness evidence in daily operations, including fame materials, promotional investment, sales data, and media reports, which underpin cross-class protection and punitive damages; an accused party's refusal to cooperate in producing evidence carries adverse consequences, as the court may presume infringement profits under the evidence rules; and the invalidation of a registered trademark does not, in itself, extinguish civil liability for prior infringing acts.
For the specific procedures above, you may book an invalidation filing on MyTMBee, and a filed trademark agent will provide full assistance.