HONG KONG – New Balance’s $1.5 million win in its latest trademark case in China may be, as it claims, the largest-ever payout to a foreign firm in the country but experts believe it doesn’t represent a major shift by Chinese authorities.
“Kudos to New Balance for pursuing the claims, for winning the case,” said Dan Harris of Harris Bricken LLP, who has penned China Law Blog since 2006. “It’s great that the dollar figure is something starting to approach what the actual damages were. The dollar figure is higher than is typical but there’s no new law here. The dollar amounts have been rising in China so this not a revolution.
“Lawyers are not really talking about this case, the media is. Nobody in my firm has even said look at what has happened with the New Balance case and they would if it would impact our client cases going forward,” Harris said.
The Shanghai Intellectual Property Court, which began in 2014 as China’s first specialized IP court, noted that in the year to April, it had awarded “heavy damages in some cases, directed especially at such malicious behaviors as repeated or intentional infringement.” It included a 4.92 million renminbi settlement in favor of Hugo Boss and 3 million renminbi for BMW.
“In the past, a key problem with trademark enforcement in China was that court-awarded damages were too low to be a genuine deterrent for counterfeiters and pirates — instead, they were seen as a routine cost of doing business,” said Edward Chatterton, cohead of intellectual property and technology in Asia for DLA Piper.
Although all the lump sums are small when compared to global standards, the amount in damages has witnessed an upward trend in China.
“China’s global importance as a marketplace for goods and services grows every year,” Chatterton explained, “putting pressure on international brand owners to ensure that their IP is protected. China is also experiencing a huge surge of domestic innovation, meaning that more and more Chinese businesses are relying on the IP system to protect their brand and innovations.”
China trademark filings jump 68.6 percent year over year and patents, 44.7 percent, according to the World Intellectual Property Organization.
Alibaba’s recent campaign to put a stranglehold on fakes is a much more impactful development than the New Balance ruling, in Harris’ opinion. While it was just a little over a year ago when Alibaba founder Jack Ma said at the company’s investors day that “fake products today are of better quality and better price than the real names,” the firm’s stance shifted dramatically once the country was returned to the U.S. Trade Representative Office’s notorious markets list in December. It has since streamlined its take-down notice process, called for harsher legal punishments for counterfeiters, and struck an alliance with Kering in a move that also got the luxury conglomerate to drop a lawsuit against the Chinese giant.
“I don’t think it’s a relevant question whether Jack Ma believes in the concept of IP,” Harris said. “Is Alibaba fighting counterfeits? The answer is yes. The reason why is they’ve determined they can make more money by fighting counterfeiting than not fighting.”
A week ago, Hangzhou launched its first cyber court using Alibaba cloud technologies that will allow cases to be heard from beginning to end online, providing an advantage for foreign rights holders who would otherwise need to show up physically in court.
Even more impactful would be the upcoming conclusions of a probe ordered by President Trump to fight the theft of U.S. intellectual property by Chinese firms. The investigation, authorized last week, will investigate whether China forces “U.S. companies operating in China to turn over intellectual property.”