By Seven Liu
In a landmark judgment, a Beijing court awarded RMB 10.5 million (approx. USD 1.45 million) in damages to the world-renowned sportswear brand Champion, after a Fujian-based network of companies was found guilty of large-scale trademark infringement and unfair competition.
The ruling is more than a victory for one brand. It represents a decisive step in China’s enforcement landscape, particularly in how courts deal with counterfeit groups, the use of fake companies, and the application of punitive damages in trademark litigation.
Why This Case Stands Out
1. Piercing the Corporate Veil: Holding the Real Controllers Liable
In many commercial activities and trademark filings, the companies appearing on paper are merely shell entities created solely for infringement purposes. It is unrealistic to expect that infringers would leave illicit profits sitting in these shell accounts for rights holders to claim. In such cases, identifying and suing the actual mastermind behind the scheme becomes critical.
Through in-depth investigation of financial records, company structures, and family ties, the real controller was identified. The court accepted the evidence and ruled that all parties involved in the infringement network, including the core controller (even though legally separate from the other entities), were jointly liable. This approach ensured that compensation was not just a figure on paper, but an enforceable responsibility.
2. The Substantive Application of Punitive Damages
Punitive damages were introduced into China’s Trademark Law in 2013, but courts have traditionally applied them with caution.
In this case, the court confirmed multiple aggravating factors: repeated bad-faith infringement, large-scale trademark squatting, deliberate imitation of the plaintiff’s marks in actual use, and continued sales even after enforcement actions.
Ultimately, after determining the compensatory base, the court applied double punitive damages. This sends a clear signal: repeat infringers will not only face compensatory liability but also significant financial punishment.
3. Protecting Well-Known Foreign Brands
Champion is a globally recognized brand, with a strong market presence in China. The case illustrates how Chinese courts are increasingly willing to provide robust protection to foreign trademarks with reputation, treating counterfeiting not merely as private harm but as a threat to market order and consumer trust.
Why It Matters Internationally
- For foreign rights holders: The case shows that with the right strategy, combining administrative actions, litigation, and evidence preservation, China’s courts can deliver meaningful remedies, including high damages and asset preservation.
- For Chinese businesses: It underscores the risks of free-riding on famous names. Counterfeiting through clever variations, shell companies, or misleading brand names (“Champion,” “Double Champion,” etc.) will not shield defendants from liability.
- For the enforcement environment: This ruling strengthens confidence in China’s IP regime, aligning it more closely with international standards and reassuring global investors that the Chinese market values brand authenticity and fair competition.
Key Takeaways for Brand Owners
1. Actively monitor the market: counterfeiters often operate under multiple entities. Evidence of coordination can help courts hold the true beneficiaries accountable.
2. Preserve evidence early: from online sales to trademark filings, systematic collection is key to demonstrating bad faith and scope of infringement.
3. Leverage punitive damages: Chinese courts are increasingly open to applying them when infringement is intentional and large-scale.
4. Don’t underestimate local remedies: despite challenges, Chinese litigation can deliver not just symbolic victories, but real financial deterrence.
Conclusion
This case marks a significant milestone in the fight against counterfeit brands in China. By awarding punitive damages and holding the controlling individual jointly liable, the court has sent a clear signal: trademark rights in China are not paper rights, they can and will be enforced in practice.
For global and domestic companies alike, this ruling is both a warning and a reassurance. Counterfeiting will meet harsher consequences, while legitimate brand owners can look to Chinese courts with greater confidence in protecting their long-term market value.