In the event of a trademark infringement, the trademark owner’s main interest lies in stopping the infringer’s unlawful acts of use. However, because the legal proceedings and restoring the integrity of the infringed Trademarks costs money, the infringer should also pay compensation. However, the Chinese trademark law sets limits on the amount of compensation. The latest jurisprudence of China’s highest people’s court shows that these limits are not absolute.

The world-famous US company 3M from Minnesota had owned the trademark “3M” in China for many years for goods in Class 17 (rubber, plastic). In 2005, the Chinese company Changzhou Huawei Advanced Material Co., Ltd (“Huawei”) applied to register the trademark “3N” for Class 19 (non-metal construction materials). The US company filed an opposition against this trademark registration with the trademark office and ultimately won the appeal in 2013.

Shortly after this success against “3N”, the US group followed up with a trademark infringement suit against the Chinese company and demanded an injunction and damages. Huawei tried to defend itself with various arguments: The Trademarks “3M” and “3N” were not confusable. “3N” had been used for years for products that were cheaper than those of “3M”, so that Huawei had built up its own market. Moreover, Huawei never intended to imitate the “3M” Trademarks. Rather, 3N is the abbreviation of the initials of Huawei’s slogan, namely “New Concept, New Technologies, New Products”.

However, the court did not find Huawei’s arguments convincing. It judged the “3M” trademark to be well-known and considered the Trademarks to be visually similar. Infringement intent was also to be assumed, as Huawei had never used the alleged slogan in advertising. As a result, a significant market share and the considerable customer base had therefore been achieved due to the unlawful use of the infringing Trademarks. The arguments put forward were therefore no defense against the claim for damages.

Huawei nevertheless refused to submit its business records to show the duration and scope of production and sales of the infringing products as well as the infringer’s profit. The court therefore assumed that the actual profit would be far above the (then applicable) statutory maximum damages of RMB 500,000. As a result, it ordered Huawei to pay damages of RMB 3.5 million, an amount far in excess of the (then) statutory maximum.

The case went all the way to the Supreme Court, but it upheld the verdict in its entirety.

Note: Although the statutory limits for damages are now higher in China (RMB 3 million), they are still too low for major disputes by international standards. However, this judgment shows that Chinese courts are prepared to push the limits further in special circumstances. It can be assumed that Huawei’s refusal to open its accounts was a key reason for the decision. Blocking information should not be rewarded.