China Law Blog

Five western luxury goods makers, Prada, Chanel, Louis Vuitton, Gucci, and Burberry just won a major trademark case in the Beijing High People's Court against the Beijing-based Silk Street Market, according to this China Daily article.  The ruling requires the Silk Street Market to pay each of the five companies 20,000 yuan (approximately US $2,500) to each company for trademark rights infringement.  The Silk Street market was found liable for trademark infringement because it allowed its retail tenants to sell fake products in violation of the intellectual property rights of these five luxury goods makers. 

This decision is a watershed event in the evolution of China's enforcement of intellectual property rights because it extends liability for trademark infringement beyond just the companies actually selling the counterfeit product to the companies that lease space to the offending retailers and then turn a blind high to their selling of counterfeits. The Silk Street Market's liability for trademark violations was not for actually selling counterfeit goods, but for failing to act on the infringing retailers after being informed of the five luxury goods makers informed the Silk Street Market of its retail tenant's infringing sales:

Each of the five brand owners found counterfeits of their products in the Silk Street Market and presented them as evidence of counterfeiting in a co-ordinated act in 2005 aimed at protecting their intellectual property rights (IPR).

They filed a collective complaint against the market in a call for the prohibition of counterfeits last May. But the fakes remained on sale at the market one month later, and the brand owners decided to bring both the market and the individual stores before the court.

A representative for the Silk Street market "expressed his disappointment over the final ruling, saying it was near impossible for operators to eradicate all counterfeiting in such a large market."  Huai Xiaofeng, vice-president of the Beijing High People's Court, said the court would go to great lengths to crack down on counterfeiters of foreign products.

Additionally, Louis Vuitton won a separate, but similar, lawsuit in a Beijing court against a Beijing market called Chaowai Men's Department Store.  The court ordered this market to pay Louis Vuitton 150,000 yuan (approximately $19,000) -- about the price of 30 genuine bags -- after finding that 22 stalls within this "indoor market" were selling handbags bearing the LV trademark without Louis Vuitton's prior authorization.

Bottom Line:  These two cases are important as they show China is widening the net of trademark infringement liability to step up its intellectual property rights enforcement.  The lessons to be learned from these cases are simple.  One, register your trademark in China.  Two, if you find someone violating your trademark, send them AND their landlord a letter (in Chinese, of course) demanding the violations immediately cease.  Three, if the violations continue, sue.