The termination of an OEM agreement and trademark license sparked an intense brand protection battle, pitting former partners against each other in court.
After the cooperation ended, a paper product packaging factory in Rugao City, Jiangsu Province, its operator, an affiliated trading company, and its legal representative continued to use the "Shuangdeng" trademark. They were sued by the brand owner – Shengda Group Jiangsu Kaisheng Shuangdeng Paper Co., Ltd. – for 3 million yuan in compensation.
From Cooperation to Litigation: A Game of Brand Protection
The "Shuangdeng" trademark was registered in 2003 and recognized as a well-known trademark in 2011. At the end of 2017, Shuangdeng Paper signed an entrusted processing contract and a temporary trademark license with the involved packaging factory. However, less than a year into the cooperation, Shuangdeng Paper notified the termination of the contract due to operational adjustments, and the trademark license was consequently invalidated.
Subsequently, the trading company controlled by Zhang Junjun continued business dealings with Shuangdeng Paper, even purchasing "Shuangdeng" toilet paper from the company’s distributors.
In October 2020, public security authorities seized counterfeit "Shuangdeng" products in the trading company’s warehouse. Zhang Junjun was investigated on suspicion of the crime of counterfeiting registered trademarks. During questioning, his wife Zhang Yuyu admitted that since Shuangdeng Paper had unpaid debts, the two had privately produced and sold paper products bearing the "Shuangdeng" brand.
At the end of 2023, Zhang Junjun was prosecuted by the procuratorate. He later received a suspended sentence and a fine after pleading guilty and accepting punishment. Following the criminal judgment, Shuangdeng Paper immediately filed a civil lawsuit for trademark infringement, claiming 3 million yuan in compensation.
Second Instance Verdict: Application and Reasoning of Punitive Damages
The first-instance court found that the packaging factory, Zhang Junjun, and Zhang Yuyu constituted joint infringement and ordered them to compensate 550,000 yuan.
Dissatisfied with the insufficient compensation, the failure to hold the trading company jointly liable, and the non-application of punitive damages, Shuangdeng Paper appealed.
The defendants also appealed, arguing that the infringement was committed solely by Zhang Junjun; the packaging factory and Zhang Yuyu were not involved, and since criminal punishment had already been imposed, the civil compensation was excessively high.
After trial, the Nantong Intermediate People’s Court pointed out that Zhang Junjun and Zhang Yuyu, as a family unit, systematically carried out the infringement through the division of labor and cooperation of the two controlled entities, and should be deemed joint infringers, with all four parties bearing joint and several liability.
Regarding the compensation amount, the court emphasized that the defendants, once authorized OEM manufacturers, were fully aware of the "Shuangdeng" brand’s reputation but continued to counterfeit and produce after the license termination, showing obvious subjective malice. Based on their admitted production and sales data, the infringement lasted over a year with sales exceeding 1 million yuan, indicating serious circumstances that met the conditions for applying punitive damages.
Considering the entire case, the second-instance court applied 1.5 times punitive damages on the basis of calculating the infringing profits, ultimately determining 560,000 yuan in economic losses and an additional 20,000 yuan in reasonable rights protection expenses, totaling over 580,000 yuan.
Judicial Interpretation: Dual Functions of Punitive Damages
The intellectual property punitive damages system aims to make up for the insufficient deterrence of compensatory damages against malicious infringement. Its application requires two elements: "subjective intent" and "serious circumstances." In this case, the defendants, knowing the brand’s reputation, continuously engaged in large-scale infringement for profit, fully meeting the applicable conditions of the system.
This case is also a model example where the Nantong Intermediate People’s Court meticulously calculated the amount of punitive damages for the first time. The judgment not only clarifies the judicial recognition standards for such compensation but also demonstrates the court’s determination to severely crack down on malicious infringement and strengthen judicial protection of intellectual property, providing strong judicial guidance for fostering a market environment that respects innovation and integrity in operations.
