On 27 September 2021 the Wenzhou Intermediate Court issued a decision awarding Siemens damages of Rmb1 million (inclusive of reasonable costs) in a trademark civil infringement proceeding. The defendants – Mr Wang and Ms Kong – manufactured fake Siemens switches, sockets and accessories. Wang had been convicted in a previous criminal prosecution proceeding.
Wang began his counterfeiting business in 2016. In July 2017 he was arrested by the public security bureau of Pizhou City (of Xuzhou) for counterfeiting Siemens switches and sockets. Given that this was his first offence and the scale of the counterfeiting business was small, in August 2017 he was released on bail pending trial. In September 2018, he was convicted of counterfeiting a registered trademark and sentenced to two years in prison and three years on probation (from 22 September 2018 to 21 September 2021) and fined Rmb100,000 by the Xuzhou Intermediate Court of Jiangsu Province.
Wang resumed his counterfeiting business almost immediately after his release. This time he colluded with Kong and relocated to Wenzhou, Zhejiang Province to resume the manufacture and sale of counterfeit Siemens switches, sockets and accessories. By the time that the police raided their premises (12 June 2019), the counterfeit products had generated over Rmb700,000 in sales. On 19 November 2020, the Court of Ouhai District, Wenzhou found Wang and Kong guilty of counterfeiting registered trademarks. In view of the fact that Wang committed multiple crimes when he was still on probation, the court revoked his probation and affirmed that the circumstances merited combining the punishment for several offences. It duly sentenced Wang to three years in prison and fined him Rmb400,000. Combined with the original sentence rendered by the Xuzhou Intermediate Court, this amounted to a cumulative prison sentence of four years and six months and fines of Rmb500,000. The court sentenced Kong to one year and five months in prison and fined her Rmb100,000.
Siemens opined that the fact that Wang had continuously and repeatedly committed trademark infringement over a long period of time and showed no sign of repentance after being subject to criminal penalties substantiated his blatant malice and the gravity of the circumstances. In early 2021 Siemens filed a civil infringement lawsuit with the Wenzhou Intermediate Court, contending that punitive damages should be applied and demanding Rmb1 million to cover its financial losses, along with reasonable expenses incurred by trying to stop the infringement.
The court resorted to the Interpretation of the Supreme People's Court on the Application of Punitive Damages to the Trial of Civil Cases involving Infringement of Intellectual Property Rights (Judicial Interpretation) to assess punitive damages.
Article 3.1 of this enumerates the metrics that courts should take into account when determining wilful infringement, including:
the type and status of the infringed IP right;
the popularity of the products involved; and
the relationship between the defendant and the plaintiff or interested parties.
Article 3.2.(5) further provides that where the defendant commits acts of piracy or counterfeiting involving a registered trademark, a court may make a prima facie presumption of wilfulness.
The court affirmed that back in 2012 the SIEMENS mark had been recognised by the Guangzhou Intermediate Court as a well-known trademark in Class 9. The fact that the defendants were engaged in counterfeiting a well-known trademark was sufficient to prove that they had committed wilful infringement.
Likewise, Article 4.1 of the Judicial Interpretation enumerates the metrics that courts should take into account when determining the severity of the infringement circumstances, including:
the infringement methods and frequency;
the duration, geographical scope, scale and consequences of the infringement; and
the infringer’s actions during the lawsuit.
Article 4.2(1) further stipulates courts may find the infringement circumstances serious if the defendant commits the same or a similar tort again after having an administrative penalty imposed or being found liable for infringement.
The fact that Wang was convicted in two criminal proceedings for counterfeiting the SIEMENS mark and that a substantial number of counterfeit goods were seized from his premises sufficed to prove the gravity of the infringement. The court thus concluded that Wang was subject to treble punitive damages.
Considering the sales amount of the counterfeit Siemens products totalled Rmb820,000 and an estimated industry profit margin of 30%, the court ascertained that the actual loss suffered by Siemens amounted to Rmb246,000. On top of that, Wang was obliged to indemnify Siemens for punitive damages of Rmb738,000. The damages plus the reasonable costs Siemens incurred in stopping the infringement well exceeded Rmb1 million. The court therefore fully supported the plaintiff’s indemnity claim and ordered Wang to pay Rmb1 million, of which Rmb200,000 was to be jointly and severally borne by Kong.
The defendants did not appeal and the decision has now come into effect.
The decision reiterates that where a civil subject is held liable in an administrative or criminal proceeding this will not prevent them from being held liable for the same act in a civil proceeding. In addition, where their property is insufficient to cover all the fines and damages imposed by the court, civil damages should be prioritised. In this way it is hoped that the application of punitive damages and clarification on the priority in bearing indemnifying liabilities will help to financially cripple counterfeiters and deter them from ever infringing again.