In a lawsuit filed by Siemens AG (“Siemens”) against Ningbo Qishuai Electrical Appliance Co., Ltd. ("Qishuai") and four others for trademark infringement and unfair competition involving the trademark "西门子" (Siemens in Chinese), the Supreme People's Court found the defendants guilty on both counts. The defendants refused to submit any financial data, but the Court imposed 100 million yuan (Approx. USD 13.8 million) in damages.
Siemens owns registered rights in China to the trademarks "西门子" and "SIEMENS" for, inter alia, washing machines. The marks enjoy a high level of recognition and market share as a result of extensive long-term promotion and use. They have been recognized as well-known trademarks in China.
Qishuai established a shell company, Shanghai Siemens Company, to try to disguise its direct role in the production of infringing products. Another affiliate of Qishuai acquired China trade mark registration no. 9845563 "SiMBMC" covering washing machines. Even before Siemens’s sued, counterfeit washing machines labeled with the name "Shanghai Siemens Electrical Appliances Co., Ltd." and "SiMBMC/SIMBMC” had been seized repeatedly by the administrative authorities and multiple media platforms and forum websites commented on Qishuai's sales of alleged counterfeit SIEMENS products.
In its decision, the SPC concluded that the actions of Qishuai Company and the other defendants constituted trademark infringement and unfair competition and ordered them to pay 100 million yuan (Approx. USD 13.8 million) in damages based on the following:
- Although Siemens filed the lawsuit before the current Anti-Unfair Competition Law came into effect, the evidence demonstrated that the infringement continued after the law's implementation, making application of the revised law appropriate.
- Qishuai's use of the name "Shanghai Siemens Electrical Appliances Co., Ltd." on washing machines constituted trademark use. The distinctive identifying feature "西门子" is identical to the plaintiff’s trademark "西门子", which was likely to cause public confusion. Thus, Qishuai’s actions constituted trademark infringement.
- The use of the company name "Shanghai Siemens Electrical Appliances Co., Ltd." on product packaging and in promotional activities by Qishuai could easily mislead the public into believing mistakenly that the infringing products were related to or produced by the plaintiff. This behavior constituted unfair competition through the unauthorized use of another's well-known trade name and registered trademark.
- Given Qishuai's refusal to submit financial data, the SPC used media reports as a basis for calculating total sales and also considered various other factors, such as the plaintiff's trade name reputation, the defendants' malicious intent, and the scale of infringement and its duration, to determine compensation in the amount of 100 million yuan (Approx. USD 13.8 million), which was in excess of the statutory maximum limit.
In this case, the infringer established an offshore shell company with an intent to deceive, but this did not affect the court's determination of trademark infringement and unfair competition. In calculating compensation, the court applied the “evidence obstruction system”, which in effect penalized the defendants for their refusal to provide financial data, and which resulted in a very substantial compensation award.
