August 6, 2018 People's Daily Online

Recently, Shanghai Intellectual Property Court made the final judgment of upholding the first-instance judgment of the trademark infringement dispute case filed by Michael Kors (Switzerland) International GmbH (hereinafter referred to as Michael Kors Company) against Shanghai Asia and Pacific Leisure Shopping Co., Ltd. (hereinafter referred to as Asia and Pacific Company), Shanghai Huiyang Clothing & Gifts Market Operation & Management Co., Ltd. (hereinafter referred to as Huiyang Company) and Chen, namely, the three Defendants should immediately desist from infringing the exclusive right to use the registered trademarks of Michael Kors Company, and compensate Michael Kors Company for its economic losses and reasonable costs of RMB 70,000 yuan.

It is worth noting that, in the case, market managers, Asia and Pacific Company and Huiyang Company, were held accountable together with the seller of fake products. In this regard, the undertook judge of the case suggested: “the managers of shopping malls should strengthen management, and take countermeasures in case of any act infringing intellectual property rights by the store, otherwise, they will be held accountable together with the fake product seller to for intellectual property infringement.”

Stores selling fake products are charged with infringement

Asia and Pacific Plaza is located nearby a Shanghai metro station, and its main businesses include sale of commodities such as general merchandise, property management and shop leasing. Both the northern and southern plazas of that underground market have been under the management of Asia and Pacific Company since 2002. In January 2008, Asia and Pacific Company contributed to establish Huiyang Company, which is in charge of managing the first ground floor (hereinafter referred to as the Market Involved) of the southern plaza and providing management service for clothing and gift operators therein.

Michael Kors Company is the trademark owner of “MICHAEL KORS”, “MK MICHAEL KORS” and “MICHAEL MICHAELKORS”. All the trademarks aforesaid are still within the period of validity, enjoy a high reputation after continuous use and extensive promotion, and have certain influence on relevant consumers.

Michael Kors Company discovered that many shops in the Market Involved had been engaged in selling fake products labeled with its registered trademarks for a long term, and hence took Asian and Pacific Company, Huiyang Company and Chen to Pudong New Area People's Court of Shanghai (hereinafter referred to as Pudong Court).

After trial, Pudong Court concluded that, in consideration of the workmanship, materials, selling price of the alleged infringing products and other factors, it could be affirmed that the alleged infringing products infringed the exclusive right to use the registered trademarks involved of Michael Kors Company. Chen failed to provide evidences that the alleged infringing products sold by him/her came from a legal source or were licensed by the trademark owner, therefore, his/her act of selling the alleged infringing products infringed the exclusive right to use the registered trademarks of Michael Kors Company, and he/she should desist from infringement, and bear the liability for compensating the economic losses and reasonable expenses.

In the case, as market managers, Asian and Pacific Company and Huiyang Company should practice reasonable duty of care to acts of intellectual property infringement occurred within the Market Involved. After discovering some shops in the Market Involved were suspected of infringement in March 2016, Michael Kors Company sent the lawyer’s letter immediately to Asian and Pacific Company and Huiyang Company, and found similar suspected infringing acts again in June of the same year. Although the two companies appointed some personnel to conduct routine inspection, the inspection log did not prove they made special inspection or took other effective measures on the shops suspected of infringement.

Pudong Court held that, Asian and Pacific Company and Huiyang Company took certain measures to manage the Market Involved, but such measures failed to effectively curb the infringing acts, thus creating a favorable environment for the shops involved to continue the infringement. Their acts should be affirmed as “intentional provision of convenience for infringing the exclusive right to use trademarks of others and helping others to commit the act of infringing the exclusive right to use trademarks” as specified by the Trademark Law.

After trial, Pudong Court made the first-instance judgment, ordering Asian and Pacific Company, Huiyang Company and Chen to desist from the trademark infringement immediately, and jointly compensate Michael Kors Company for its economic losses and reasonable costs of RMB 70,000.

Market management needs to be improved

Asian and Pacific Company, Huiyang Company and Chen refused to accept the first-instance judgment and appealed to Shanghai Intellectual Property Court.

With respect to the grounds of appeal provided by Asian and Pacific Company and Huiyang Company, Shanghai Intellectual Property Court held that, Asian and Pacific Company was the only shareholder of Huiyang Company, and attended multiple conferences on fighting against intellectual property infringement in metro business areas during 2009-2017 by sending representatives. This proves that Asian and Pacific Company is actually involved in the operation and management of the Market Involved, thus, it shall bear the legal liability for related infringing acts. Shops in the Market Involved repeatedly committed the act of selling products infringing the exclusive right to registered trademarks involved in the case, and the market managers should practice stricter duty of care after getting the infringement warning, but Asian and Pacific Company and Huiyang Company did not take effective measures to prevent recurrence of infringement, constituting a contributory infringement, therefore, they should bear the liability for infringement.

With respect to the grounds of appeal provided by Chen that Michael Kors Company did not have adequate evidences that he/she sold fake products, Shanghai Intellectual Property Court concluded after the trial that Chen did not provide the source of the products involved or certificate of authorization by the trademark owner; the workmanship and materials of the products involved were inferior; the selling price of the products involved was far lower than the normal selling price of products under that brand. After taking full consideration of the factors above, as Chen fails to provide counter-evidences, it is highly probable that the products involved can be identified as infringing.

Whereby, Shanghai Intellectual Property Court rejects the appeal of the three Appellants and affirms the original judgment.

The undertook judge of the case said: “compared with common markets, it is much more difficult to manage metro business areas due to its large volume of visitors, concentrated shops and numerous categories, so the operators and managers of such business areas shall not only have eyes for economic benefits, neglect their managerial responsibility, indulge acts of selling fake products and let it become worse, or even take the role of ‘property manager’ as a shield to avoid responsibilities when charged with infringement, otherwise, they will be accomplices for selling fake products and do a disservice to their corporate images.” (Feng Fei)