Determining joint and several liability in trademark infringement cases

With continued improvements in intellectual property (IP) infringement legislation and intensified efforts to crack down on IP infringers, acts of trademark infringement are also changing, from the previously often seen infringement by a single entity to more complex joint infringements by multiple entities. Accordingly, determination of the joint and several liability for infringement by co-infringers has become more important.

The main legal basis for such determination is article 130 of the general provisions of the Civil Code, reading: “where joint infringement by two or more persons causes injury to another, the co-infringers shall bear joint and several liability therefore”. The article, by examples, gives accounts of the way in which a joint infringement is manifested in trademark infringement cases, and of the determination of joint and several liability of the infringers.

A typical case

In a trademark infringement case the infringer may, hoping to evade legal liability, gradually change its infringement model from traditional infringement by a single entity to the more complex joint infringement by multiple entities. A commonly seen model is as follows: infringer A applies for a trademark similar to a certain famous trademark for goods or services in a different but related class, and then licenses such trademark to company B, which it controls; company B, as licensee, uses the licensed trademark cross-class for goods or services identical to those of the famous trademark, manufacturing and selling infringing products, or engaging in the provision of a service. Through this model, the infringer intends, on the one hand, to hitchhike on the famous trademark to obtain illegal profits and, on the other, to evade legal liability as the actual main planner and operator of the infringement.

If a trademark infringement action is instituted solely against company B, then company A completely evades legal liability. Subsequently, it may well further establish companies C, D, etc. to continue its infringement in the same manner. In this way, even if a victory is won in the trademark infringement case against company B, because the liability of company A was not pursued, the damage incurred by the rights holder nevertheless remains serious. Accordingly, in such cases it is imperative to pursue the joint and several liability for infringement of company A, to block it from escaping its legal liability. Only in this way can the lawful rights and interests of the rights holder be protected to the greatest extent.

Determination of liability

As specified in the general provisions of the Civil Code, to guard against company A evading its legal liability, it is necessary to gather evidence in respect of the following matters to prove its joint infringement:

Affiliation between companies A and B. As the final infringing products are provided by B, the initial evidence gathered will naturally be the infringing products produced by company B. However, in such cases, there are usually innumerable threads of connection between companies A and B. Accordingly, it is necessary to gather evidence of the existence of the affiliation between the two.

Such evidence can be obtained by gathering information on such aspects as whether there are shareholders and senior management personnel common to both companies A and B, whether their business addresses, landline telephone numbers, fax numbers and official websites are identical or linked, and whether there is evidence of an affiliation between the two companies in terms of their official certifications, other online or physical publicity, and then by analysing and solidifying the evidence.

Joint infringement by companies A and B. Once basic evidence of the affiliation between companies A and B has been obtained, the key is still evidence that can show that companies A and B jointly engaged in the trademark infringement. Such evidence includes:

1. Licensing of the trademark by company A to company B. Pursuant to the Trademark Law, when a party licenses its registered trademark to another, it is required to monitor the quality of the goods on which the licensee is using its registered trademark. Additionally, the trademark licensing contract is required to be submitted to the Trademark Office for the record. Accordingly, the licensing contract under which company A licenses use of the trademark to company B needs to be carefully analysed, and the above-mentioned legal provisions fully used to determine the legal liability in respect of the infringing products that is bearable by company A.
2. Joint infringement by companies A and B at the production stage. As, in such cases, there is generally a control relationship between companies A and B, company A will naturally direct or actively participate in the production of the infringing products by company B. At the production stage, it is necessary to pay attention to company A’s possible participation in the provision of the representations of the infringing trademark, the supervision of the production of the packaging for the infringing products, the sampling and inspection of the infringing products themselves, the securing of the relevant licences and certificates for the infringing products, the ex-factory transport of the infringing products, etc.
3. Joint infringement by companies A and B at the distribution stage. In contrast to the production stage, evidence of joint infringement by company A in the distribution stage is relatively easy to obtain. At the distribution stage, it is necessary to pay attention to the evidence relating to company A’s participation in the sale of, and the publicity for, the infringing products. For example, whether companies A and B publicise and promote the infringing products on the same website, whether when publicising the infringing products they use the same publicity brochures, whether the sales personnel use business cards with the names of the two companies on them, or the same promotional materials to publicise the infringing products, and other online and offline evidence that shows their joint infringement.

It is seen that the infringement methods used by trademark infringers have also gradually become more complicated and furtive. It is only by not relying solely on surface evidence of infringement, and digging out the real infringement planner and operator behind the curtain and making it bear joint and several liability for infringement, that infringements can be effectively curbed and the lawful rights and interests of trademark rights holders protected.

Frank Liu is a partner and Si Jiamu is a trainee at Chang Tsi & Partners in Beijing