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Shanghai Intellectual Property Court: Continued Trademark Infringement After Notice Can Lead to Punitive Damages

The Shanghai Intellectual Property Court affirmed a lower court’s judgement awarding Huayi Brothers (华谊兄弟公司)  punitive damages for trademark infringement since the defendant, Huayi Cinema Era (某时代华谊影城), continued infringing after being put on notice via a cease and desist letter.  The Shanghai IP Court also affirmed an injunction and a requirement for Huayi Cinema Era to change its name.

Infringing Cinema

Per the Shanghai IP Court,

Huayi Brothers Company was established in 2004, and applied for the registration of trademarks “Huayi Brothers” and “Huayi” on services class 41 for film production and film projection. Since June 2010, Huayi Brothers has opened cinemas in major cities. In 2014, the trademark “Huayi Brothers” was determined to be a well known trademark in class 41 for film production and program production services. A Times Huayi Cinema was established in December 2017. It is an individual industrial and commercial household.

In June 2019, Huayi Brothers found that a Huayi Cinema Era used the logo “Huayi Cinema” in its entity store operation and on WeChat, and used “Huayi International Cinema” on a ticketing platform operated by a certain company for publicity and operation, and its cinemas had formed a certain scale and achieved a high profit . In August of the same year, Huayi Brothers sent a lawyer’s letter to Huayi Cinema Era, requiring it to immediately stop infringing upon its right to the exclusive use of trademark and the unfair competition, change the name of the enterprise, make public aplogies, and compensate 4 million RMB for economic losses. Huayi Cinema Era continued the infringement after receiving the lawyer’s letter. Therefore, Huayi Brothers filed a lawsuit in the court on the grounds that the aforesaid acts of Huayi Cinema Era constituted trademark infringement and unfair competition, requiring Huayi Cinema Era to cease the infringement and unfair competition, to change the enterprise name, and claimed punitive damages of 4 million RMB and reasonable expenses of rights protection of 35,000 RMB.

The court of first instance held that: Since film production was closely related to upstream and downstream of the film projection industry, and the trademark “Huayi” in the trademark at issue had relatively high reputation, the use of such logos as “Huayi” by Huayi Cinema Era  in its services might cause the relevant public to mistake it for having a special relationship with Huayi Brothers Studio when browsing the WeChat account, buying tickets online, going into the cinema to watch movies and consuming food and drinks. It easily caused confusion so the aforesaid act constituted infringement on the exclusive right to use the registered trademark of Huayi Brothers Corporation. Without any justifiable reason, Huayi Cinema Era used the registered trademark of Huayi Brothers Company as the trade name in its enterprise name, which was obviously malicious freeriding on Huayi Brother’s goodwill and misled the relevant public, so it was determined that its act constituted unfair competition. The court of the first instance determined the trademark licensing fees based on the subjective intent and infringement Huayi Cinema Era, and applied the punitive damages of three times based on the said amount. It ruled that Huayi Cinema Era should immediately stop the trademark infringement and unfair competition, change the enterprise name, and compensate for economic losses and reasonable rights defense expenses totaling over 930,000 RMB.

Huayi Cinema Era refused to accept the judgment and appealed. The Shanghai IP Court, as the court of second instance, dismissed the appeal and sustained the original judgment.

The Shanghai IP Court explained the decision,

When applying punitive damages for infringement of intellectual property rights according to the provisions of relevant judicial interpretations, the factors such as the type of the infringed object, the status of the subject’s rights, the popularity of the relevant product, and the relationship between the defendant and the plaintiff shall be taken into consideration in determining the intentionality of infringement.

If the defendant continues committing the infringement after being notified and warned by the plaintiff, it may be determined that the defendant has the intention of infringing upon the intellectual property right.

In this case, the Huayi Brothers’ trademark  has achieved high popularity and  Huayi Cinema Era should be aware of this and under this circumstance, Huayi Cinema Era still infringed the relatively well-known registered trademark of Huayi Brothers when providing services.

Further, Huayi Cinema Era continued to operate cinemas after the trademark owner has provided notice of infringement.

In conclusion, Huayi Cinema Era’s infringement was determined to be subjectively malicious.

The continuation of infringement after receiving the notice of the trademark owner is an important consideration for determining the defendant’s subjective intent and they should bear the legal liability for intentional infringement.

Ultimately, the court applied punitive damages, with the amount of punitive damages determined at three times the royalty for trademark licensing. In judicial practice, some tortfeasors continue their tort without paying attention to the notice of the right holders such as the lawyer’s letter. In respect of the above-mentioned circumstances, the judgment of this case is significant. The lawyer’s letter and other notices given by the trademark owner are important considerations in judging the application of the subjective intent for punitive damages, and should not be ignored by the infringer. Therefore, the infringer shall, upon receipt of the notice from the trademark owner, timely take measures to avoid possible further infringement.

The full announcement is available here (Chinese only).



Principal, and Director of the China Intellectual Property Practice

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