If an operator repeatedly commits the same or similar infringing acts against the same brand owner by controlling multiple entities, the court may, based on the operator’s obvious subjective malice and intent to evade legal liability, order it to bear punitive damages in accordance with the law.
Recently, the Shanghai Higher People's Court released a batch of typical cases involving punitive damages for intellectual property infringements. Among them, the case of Guangzhou Liby Enterprise Group Co., Ltd. suing a department store in Zhangping City for trademark infringement has important reference value.
Huang, the operator of the department store, was found liable for trademark infringement by the Yangpu District People's Court of Shanghai for selling washing powder marked with logos similar to Liby’s registered trademark "Haoba Ba KISPA" on an e-commerce platform. Given that Huang had previously been confirmed to have committed similar infringing acts by an effective judgment, the court held that the case met the conditions for applying punitive damages and ultimately ordered the department store to compensate Liby for economic losses of 40,000 yuan.
Online Sale of Infringing Washing Powder Triggers Dispute
Founded in 1994, Liby Group covers multiple fields including fabric care, tableware cleaning, and oral care, owning well-known brands such as "Liby" and "Haoba Ba KISPA" as well as related registered trademarks. Among them, the "Haoba Ba KISPA" series of trademarks have established high popularity and a good reputation among consumers through long-term operation and market promotion.
Liby claimed that the department store in Zhangping City, without authorization, sold washing powder marked with the words "Haoba Ba" in its e-commerce store, which allegedly infringed its exclusive right to use the "Haoba Ba KISPA" series of registered trademarks.
Liby further pointed out that Huang, the operator of the department store, had previously been found liable for infringement by an effective judgment of the Fujian Higher People's Court for selling products infringing Liby’s trademark rights on another e-commerce platform. Despite this, the department store continued to sell similar infringing products, constituting repeat infringement with obvious subjective malice and serious circumstances. In accordance with the "Interpretation of the Supreme People's Court on the Application of Punitive Damages in the Trial of Civil Cases Involving Infringement of Intellectual Property Rights" and other relevant provisions, punitive damages should be applied.
Based on this, Liby requested the court to order the defendant to stop the infringement and compensate for economic losses and reasonable rights protection expenses totaling 80,000 yuan. During the trial of the case, the department store in Zhangping City did not appear in court to respond to the lawsuit nor submit a written defense.
Court Determines Punitive Damages Apply
After trial, the Yangpu District People's Court conducted a review focusing on two core issues: whether the alleged act constituted infringement and whether punitive damages should be applied.
Regarding the determination of trademark infringement, the court held:
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The exclusive right to use the registered trademark legally owned by Liby shall be protected. The alleged infringing product and the washing powder approved for use under the involved trademark belong to the same category of goods. The "Haoba Ba" logo used thereon is similar to the involved trademark, and there are differences in product characteristics from the genuine products. Since the defendant failed to provide evidence of legitimate source, its act should be deemed as infringing Liby’s exclusive right to use the registered trademark.
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On the application of punitive damages, the court pointed out that the involved trademark was registered relatively early and has gained high popularity through long-term use. As an operator of daily chemical products, the defendant owes a higher duty of care. However, it not only displayed and sold products bearing the right holder’s logo in its online store but also failed to provide evidence of trademark authorization or legitimate source of the goods. Notably, after Huang, the operator, was previously ordered to bear liability for similar infringing acts on other platforms, he continued to sell infringing products through different e-commerce channels. This is sufficient to confirm his obvious intent to infringe, meeting the circumstance of "repeatedly committing the same or similar infringing acts" with serious circumstances, so punitive damages shall apply.
Basis for Determining Compensation Amount
When determining the compensation amount, the court comprehensively considered the following factors:
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The defendant operated through an online store, with lower costs than physical stores.
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Referring to the gross profit margin of the daily chemical industry, the court discretionarily determined the defendant’s sales profit rate at 50%, calculating the infringement profit to be approximately 15,000 yuan.
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Combining the defendant’s business model, subjective malice of infringement, duration of the act, and seriousness of the circumstances, the court determined the multiple of punitive damages within the statutory range of 1 to 5 times.
Finally, the court ordered the defendant to pay a total compensation of 40,000 yuan, which is the sum of compensatory damages and punitive damages. The judgment has now taken effect.
Severely Punish Repeat Infringement and Guide Honest Operation
Although the amount involved in this case is not large, the judgment logic is clear and the reasoning is sufficient, reflecting the severe judicial attitude towards repeat infringement and malicious infringement. It helps guide operators to abide by integrity and respect intellectual property in the e-commerce era.
This case has two typical significances: First, it clarifies the identification path for applying punitive damages for "repeat infringement." The court not only based its decision on objective facts such as the similarity between the infringing goods and the trademark but also focused on reviewing the infringer’s prior record of being found liable for infringement, thereby confirming "knowing violation" with obvious subjective malice. This approach of linking prior and subsequent acts to comprehensively judge the subjective state enhances the operability of the punitive damages system.
Second, it demonstrates strong reasoning and quantitative capabilities in determining the compensation base and multiple. The court reasonably discretionarily determined the profit rate by referring to the industry’s gross profit margin and considering the low operating costs of e-commerce, and confirmed the final amount by comprehensively considering the infringement circumstances within the statutory multiple range. It not only reflects the basis for discretion but also balances the functions of punishment and deterrence, providing useful reference for the trial of similar cases.
