China cracks down on counterfeiters

Ray Lei Zhao of Unitalen Attorneys at Law provides a review of the New Balance court ruling in China, which was a rare win against infringement

As many people know, New Balance as a brand was born in 1906 in the famous marathon town of Boston. New Balance trainers, which have become a bestseller, have a high reputation throughout the world. In the 1980s, after New Balance trainers entered the Chinese market, the products were immediately sought out by consumers and soon ranked at the forefront of high-grade trainer brand sales.

It is worth noting that even though there are numerous different styles of New Balance trainers, all of them have a common design. On both sides of the trainer, there is always the logo styled in an uppercase ‘N’. In various advertising campaigns of New Balance trainers, ‘N’ logo always stands out, so some media outlets even refer to them as ‘N letter shoes’. Because of their unique and beautiful design, as well as long-term brand promotion, the logo is closely linked with New Balance products, meaning it has become an important source identifier. The logo has been recognized as peculiar decoration for well-known goods, which is protected under the Anti-Unfair Competition Law of China, in many civil judgments and administrative proceedings.

Due to the high popularity of New Balance trainers, the letter ‘N’ has became a primary sign to identify the source of New Balance footwear. Accordingly, there are a large number of counterfeits in the market that confuse consumers. Over the years, foreign brands have been at war with the low quality of counterfeits, which imitate almost all aspects of the original products but change the brand name, using variants such as ‘New Boom’, ‘New Barlun’ and ‘New Bunren, which have been registered and protected under China’s Trademark Law. It is difficult to stop them on the basis of similarity of English characters under the Trademark Law, so seeking protection under the Anti-unfair Competition Law is a good alternative.

According to a recent court case initiated by New Balance, the fourth defendant, Zheng Chaozhong, incorporated a company named ‘The USA New Bai Lun Sporting Goods Group’ in the US on July 28, 2014 and translated the name into Chinese as ‘The USA New Balance Sporting Goods Co’. The USA New Bai Lun Sporting Goods Group then authorised Shenzhen New Balance Sporting Goods Co (the first defendant) to produce and manufacture ‘New Boom’ sport trainers in China. The second defendant, the Jinjiang Qingyang New Bai Lun shoe factory, the third defendant, Putian Lichenng Bosidake Trading Co, and the fourth defendant, Zheng Chaozhong, together with the first defendant, Shenzhen New Balance Sporting Goods Co, jointly carried out production and sales that were suspected to be infringing acts. The most stand-out characteristic of New Boom sports trainers is the unauthorised use of ‘N’ logo, which is one of the most prominent and distinctive parts of New Balance products.

Accordingly, New Balance initiated a lawsuit against the defendants before the Suzhou Intermediate People’s Court on the grounds of trademark infringement and unfair competition, and requested a preliminary injunction.

After two hearings in August and September 2016, the Suzhou Intermediate People's Court held that the use of the ‘N’ logo on both sides of New Balance trainers is very likely to be recognized as peculiar decoration for well-known goods, so all of the defendants’ acts very likely infringed New Balance's trademark. Therefore, after New Balance provided a guarantee, the court approved and issued preliminary injunction on 13 September 2016. Most importantly, it is the first preliminary injunction issued by the Suzhou Intermediate People’s Court relating to peculiar decoration, with the full protection of a production and sales ban.

However, after the four defendants received the preliminary injunction, they refused to comply and continued production and sales. According to Civil Procedure, the Suzhou Intermediate People’s Court imposed the maximum fines against defendants: RMB 1 million against the first defendant, RMB 100,000 against second defendant, RMB 500,000 against the third defendant and RMB 100,000 against fourth defendant. A total of RMB 1.7 million had to be paid within seven days. This injunction and fine caught the attention of IP practitioners. They also highlight the Suzhou Intermediate People’s Court’s strong will for the equal protection of IP rights for both domestic and foreign owners. It is believed that the court will make the judgment and award damages to New Balance. IPPro