Docket No.: 294, second instance (终), civil case (民) , (2021) Zhejiang High People's Court (浙)

Lower Court Docket No.: 412, first instance (初), civil case (民), (2018) Hangzhou Intermediate People’s Court (浙01)

SUMMARY OF THE ARGUMENT

Taking the defendant's malice and the attendant circumstances of the infringement into account, the court applied punitive damages and supported the plaintiff's request for compensation of 30.55 million yuan ($4.7 million).

STATEMENT OF THE CASE AND FACTS

WYETH, LLC,

WYETH SHANGHAI TRADING CO., LTD.,

Plaintiffs-Appellees

v.

GUANGZHOU WYETH BABY MATERNAL AND INFANT PRODUCTS CO., LTD.,

GUANGZHOU ZHEGN’AI CONSUMER PRODUCT CO., LTD.,

QINGDAO WYETH BABY PRODUCT CO., LTD.,

CHEN XX,

GUAN XX,

HANGZHOU SHANHENG MATERNAL AND INFANT PRODUCT CO., LTD.,

Defendants-Appellants

Since the 1980s, WYETH, LLC (“Wyeth”) has applied for the registration of trademarks such as "Wyeth" and "Wyeth" in China. The approved products include baby food and infant milk powder. After long-term use and publicity, the "Wyeth" and "Wyeth" trademarks have gained a very high reputation.

Guangzhou Wyeth Baby Maternal and Infant Products Co., Ltd. (“Guangzhou Wyeth”) was established on July 27, 2010. It produced and sold baby care products such as talcum powder and shampoo with the trademarks of "Wyeth" and included “Wyeth” in its domain name. Besides, Guangzhou Wyeth implied that it was associated with Wyeth in its marketing campaigns. Guan XX and Chen XX were a couple. Guan XX established Wyeth China Co., Ltd. (later renamed Huihui Company) in Hong Kong. Guan XX and Chen XX established Guangzhou Zheng’ai Consumer Product Co., Ltd. (“Zheng’ai”), Qingdao Wyeth Baby Product Co., Ltd. (“Qingdao Wyeth”) separately or jointly. Xu XX, a relative of the former Guangzhou Wyeth’s shareholder, established Hangzhou Shanheng Maternal and Infant Product Co., Ltd. (“Shanheng”). Zheng'ai, Shanheng, and Qingdao Wyeth were authorized by Guangzhou Wyeth to sell the alleged infringing goods on the online store.

Wyeth and Wyeth Shanghai Trading Co., Ltd. (“Wyeth Shanghai”) sued Guangzhou Wyeth for trademark infringement and unfair competition at the Guangzhou Intermediate People's Court in 2011. The case was finally brought to China’s Supreme People’s Court, and the Supreme People’s Court made a decision ordering Guangzhou Wyeth to stop trademark infringement, cease using domain names containing the word “Wyeth”, and change its trademarks containing the word “Wyeth”. Guangzhou Wyeth was also ordered to compensate Wyeth for its economic losses. After that, Guangzhou Wyeth continued to use the "Wyeth", "Wyeth" and "Wyeth Little Lion" logos to produce and sell related maternal and child care products.

In December 2018, Wyeth and Wyeth Shanghai filed a lawsuit with the Hangzhou Intermediate People’s Court, requiring the six defendants including Guangzhou Wyeth to stop trademark infringement and unfair competition, and to apply for punitive damages in accordance with three times of their infringement profits and compensate of 30 million yuan and reasonable expenses of 550,000 yuan. The Hangzhou Intermediate People's Court found that the six defendants had infringed on the exclusive right of Wyeth's "Wyeth" and "Wyeth" registered trademarks, and found that Qingdao Wyeth's use of "Wyeth" in the company name constituted unfair competition. The court of first instance applied punitive damages in this case, and ruled that Guangzhou Wyeth, Chen XX, and Guan XX jointly compensated the plaintiff’s economic losses of 30 million yuan and reasonable expenses of 550,000 yuan. Zheng’ai, Qingdao Wyeth, and Shanheng should be jointly or separately liable for the aforementioned compensation amount according to their degrees of infringement.

The six defendants refused to accept the decision and all appealed to the Zhejiang High People's Court. The Zhejiang High People's Court dismissed the appeal and upheld the original decision.

ANYLYSIS

First, the case clarifies the applicable conditions of punitive damages and the calculation rules of the compensation base and multiples, and severely crack down on infringements. This case is the first case in Zhejiang Province where the Supreme People’s Court’s Interpretation on the Application of Punitive Damages in the Trial of Civil Cases of Infringement of Intellectual Property Rights has been applied. Among them, the criteria for determining the elements of “intentional” and “serious circumstances” in the applicable conditions of punitive damages, the second instance The court made further clarification. At the same time, the court of second instance calculated the infringement profits with reference to the evidence submitted by each party, and determined the scope of the compensation base based on this. Regarding the total damages, the court of second instance corrected the deviation of the first instance and separately calculated the base and multiples of punitive damages. This provided a more severe blow to curb infringement as a business, which has important reference value.

Secondly, as the actual controller of the company, natural persons should bear joint and several liability with the company to punish the infringement from the source. The second-instance judgment determined that two natural persons, Guan XX and Chen XX, and Guangzhou Wyeth constitute joint infringement and bear joint and several liability. Guan XX and Chen XX, as the company’s shareholders and actual controllers, used Guangzhou Wyeth, Zheng'ai, Qingdao Wyeth and other infringing entities as infringement tools. They not only obtained illegitimate benefits by controlling the company’s operations, but also tried to use the company. The legal personality independence system avoids tort liability and should be punished. The verdict of this case not only strengthened the crackdown on the source of the infringement, but also played a guiding role in regulating the company's business order, and was of great significance to the protection of the interests of the infringed.

Finally, in the judgment, the enterprise code is used to refer to the infringer, which reflects the implementation of the mandatory renaming regulations for the responsible entities that do not actively perform the renaming obligation. In the Supreme People's Court (2016) Judgment No. 85, the Supreme People's Court has ordered the original Guangzhou Wyeth to change the company name containing the word "Wyeth", but Guangzhou Wyeth has not changed it. Therefore, the second-instance judgment in this case refers to the original Guangzhou Wyeth with the enterprise code, which reflects the execution of the previous judgment.