A recent court ruling from Beijing Haidian District Court has determined that a company, along with five other defendants, engaged in the manufacturing and sale of counterfeit switches bearing the “Huawei” brand, which constitutes trademark infringement. Huawei as the plaintiff initiated legal action against the six defendants, seeking an end to the infringement and requesting punitive damages. They claimed a total of 20 million yuan for economic losses and 350,000 yuan for reasonable expenses.
After reviewing the case, the Haidian Court concluded that the defendants’ actions indeed amounted to trademark infringement. As a result, the court ordered the six defendants to collectively compensate the plaintiff with 20 million yuan for economic losses and 100,000 yuan for reasonable expenses.
Original posts from Haidian District Court at
https://finance.sina.com.cn/jjxw/2025-05-19/doc-inexavfy2885759.shtml?froms=ggmp
Case Summary
The plaintiff Huawei, asserts that it possesses trademark rights for several Huawei trademarks which were registered for products in Class 9, such as programmable telephone switching equipment. A valid criminal judgment indicates that since March 2016, a company, along with four other defendants, has been selling a significant number of counterfeit products featuring the plaintiff’s registered trademarks without authorization. This activity is deemed particularly egregious and constitutes the crime of trademark counterfeiting. Additionally, two other defendants were involved in the sales and distribution of these infringing products and facilitated financial transactions, thereby jointly infringing upon the plaintiff’s trademark rights alongside the initial four defendants.
Huawei contends that punitive damages should be calculated based on the profits accrued by all six defendants from their infringing activities. Consequently, the plaintiff is seeking a court order to compel the six defendants to cease their infringement of the relevant trademark rights and to collectively compensate the plaintiff for economic losses amounting to 20 million yuan, along with reasonable expenses of 350,000 yuan.
In response, all six defendants refute the plaintiff’s claims, stating that they have halted their infringing activities and that some defendants have already faced criminal penalties. They argue that punitive damages should not be applicable in this situation.
Collaborated and Organized Joint Infringements
The Haidian Court determined that the six defendants acted without the plaintiff’s consent and with the intent to profit from sales. They collaborated through a division of labor to acquire second-hand Huawei brand switches and components from various online and other sources. The defendants either disassembled, cleaned, replaced parts, and altered the serial numbers of these products themselves or coordinated with others to do so. They then repainted, packaged, and labeled these items with tags that closely resembled the involved trademarks, marketing them as new equipment. This conduct constituted a joint infringement of the trademark rights held by the plaintiff, with some of the trademarks having been previously recognized as well-known in the realm of programmable switch equipment.
The defendants engaged in a systematic and organized approach, creating a comprehensive chain of infringement. Their methods were both covert and severe, resulting in a significant scale of infringement and substantial profits. The value of the unsold infringing products that were seized alone exceeded 5.4 million yuan, with a total of five to six thousand infringing products sold. Consequently, the court deemed the actions as malicious infringement with serious implications, justifying the imposition of punitive damages.
Punitive Damages Basis and Multiplier
In determining the basis for punitive damages, the court calculated the profits from the infringement by multiplying the number of infringing products sold by their unit price and profit margin, using specific figures from the defendants’ admissions and the evidence presented. The court concluded that the total profits from the infringement for the six defendants should not be less than 14.3 million yuan. After considering the causal relationship between the trademark infringement and the profits earned by the defendants, and applying a 50% reduction, the court established that the profits gained from the trademark infringement should not be less than 7.15 million yuan.
Regarding the punitive damages multiplier, the court acknowledged that some defendants had already faced criminal judgments and paid fines. Therefore, it supported the plaintiff’s request for a threefold punitive damages multiplier. By adding the punitive damages base to the multiplied amount, the total compensation calculated significantly exceeded the economic loss compensation sought by the plaintiff. As a result, the court ordered the six defendants to jointly compensate the plaintiff for economic losses amounting to 20 million yuan and reasonable expenses of 100,000 yuan, while dismissing the plaintiff’s other claims.
Following the first-instance judgment, some defendants initially appealed but later withdrew their appeal, leading to the judgment becoming effective.
Judicial Views
This case exemplifies the intersection of criminal and civil law in trademark infringement matters. Following a determination that the infringing actions constituted a crime, it was also legally recognized as civil infringement, leading to a substantial award for punitive damages.
This outcome not only offers robust protection for the essential competitive products of high-tech companies but also acts as a significant deterrent and warning to potential counterfeiters and sellers of counterfeit goods. It effectively fosters a comprehensive governance approach that encompasses “punishing crime, compensating for losses, preventing recidivism, and guiding compliance,” thereby supporting the innovation-driven growth of the high-tech sector.
The notable significance of this case can be highlighted in several key areas:
1. The legal and organized application of an asynchronous trial approach enabled the effective and uniform resolution of court cases.
Given the number of defendants involved, some of whom were incarcerated and lacked legal representation, the court conducted hearings on-site in the prison for those defendants while facilitating online hearings for the others. This approach ensured the protection of the parties’ litigation rights and the timely progression of the trial.
2. The specific implementation of civil compensation regulations and evidence criteria was used to determine the foundation for punitive damages.
The calculation was grounded in the profits derived from the infringement, factoring in the sales volume and profit margins acknowledged by the defendants, as well as the transaction prices of similar infringing products. Importantly, the value of seized products that had not been sold was excluded to maintain objectivity and fairness in the calculation.
3. The guidelines for simultaneously applying punitive damages for intellectual property rights and criminal fines have been established, considering the nature of criminal fines to assess the multiplier for punitive damages.
In this instance, even though some defendants had already received criminal fines, punitive damages were still applied to establish liability, in accordance with Article 187 of the Civil Code and Article 6 of the Supreme Court’s interpretation regarding punitive damages in civil cases of intellectual property infringement.
To ensure a fair balance of interests among the parties, the court judiciously set a punitive damages multiplier of three times, considering that some defendants had already fulfilled their criminal fines, as well as the subjective intent and the severity of the infringement’s circumstances.