Major changes affect trademark-related damages

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    The amended Trademark Law deliberated on and adopted at the fourth session of the standing committee of the 12th National People’s Congress on 30 August 2013 makes some revisions in respect of trademark-related damages, covering seven aspects. Here we will address and analyse these matters.

    夏志泽 Xia Zhize
    夏志泽 Xia Zhize
    1. The new law specifies four means of determining the measure of damages and clarifies the sequence of application. The first paragraph of article 63 of the new Trademark Law specifies that “the measure of damages for the infringement of the exclusive right to use a trademark shall be determined based on the actual losses incurred by the rights holder as a result of the infringement; if the actual losses are difficult to determine, it may be determined based on the benefits derived by the infringer as a result of the infringement; and if the losses incurred by the rights holder and the benefits derived by the infringer are difficult to determine, it shall be reasonably determined as a multiple of the royalties for licensing the trademark”.
      The third paragraph of article 63 specifies that “if the actual losses incurred by the rights holder as a result of the infringement, the benefits derived by the infringer as a result of the infringement, and the royalties for licensing the registered trademark are difficult to determine, the people’s court may render a judgment awarding damages of up to RMB3 million (US$489,000) depending on the circumstances of the infringement”.
      That means that only when the measure of damages cannot be determined by the preceding method in the sequence can the following method in the sequence be applied. First it is to be determined based on the actual losses of the rights holder, secondly based on the benefits derived by the infringer, thirdly by reference to the royalties for licensing the trademark, and finally application of the statutory damages of up to RMB3 million.
    2. The new law establishes punitive damages for infringement in bad faith. After specifying three means of determining the measure of damages, the first paragraph of article 63 of the new Trademark Law specifies that “in the case of the bad faith infringement of the exclusive right to use a trademark where the circumstances are serious, the measure of damages may be determined at not less than the amount and not more than three times the amount determined by the aforementioned method”.

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    Xia Zhize is a partner at Wan Hui Da in Beijing and a member of the Intellectual Property Special Committee under the All China Lawyers Association. He can be contacted on +86 10 6892 1000 or by email at xiazhize@wanhuida.com