Language

LEGO vs. LEPIN: How Punitive Damages work in a Trademark Infringement Case

Author: Yingying Zhu, Partner at Beijing MINGDUN Law Firm

Email: zhu.yingying@mdlaw.cn

Date: May 5, 2021

 


Introduction

 

In China, compensatory damages are also called “actual damages”, which compensate a plaintiff for the losses suffered due to the harm caused by the defendant. In addition to compensatory damages, punitive damages may be awarded by judges in some exceptional cases. Punitive damages are known as having a 'quasi-criminal' nature and serving the function of punishing the defendant in a civil lawsuit. In fact, the purposes of punitive damages are two-fold: to punish the defendant for outrageous misconduct and to deter the society from committing similar misbehavior in the future.

 

In a trademark infringement civil lawsuit, the basic principle is to monetarily compensate the plaintiff’s losses due to the defendant’s trademark infringement activities. Damages awarded in a typical trademark infringement lawsuit are meant to make the plaintiff “whole” again from a financial standpoint. That being said, punitive damages are possible in cases where the defendants are found to be willful, malicious and highly reprehensible and the circumstances of the case are severe.

 

The Guangdong High Court struck a heavy blow to a copycat of LEGO in the LEGO vs. LEPIN judgement[1] with an award of CNY30 million (USD4.56 million) as punitive damages to compensate the aggrieved plaintiff and to punish the defendants whose infringement acts were considered willful, malicious and especially reprehensible with severe circumstances.

 

As one of the landmark rulings in the landscape of awarding punitive damages under the trademark law regime, the LEGO vs. LEPIN judgement is sending a strong and positive message to brand owners who have been bitterly battling with copycats — “We've Got Your Back”.

 

Basic Facts

 

Since 2015, under the brand name “LEPIN”, Guangdong Meizhi and three affiliates had been actively engaged in copying LEGO building sets and multiple LEGO minifigures, passing off the LEGO brand, and carrying out unfair competition practices by imitating, manufacturing and selling building brick toys nearly identical with those of LEGO. In addition, the external design, packaging and manuals of LEPIN’s products were also direct imitations of those designed and used by LEGO. Furthermore, the defendants rushed to file a series of trademarks for LEPIN in relation to toys in China.

According to the figures released by a Shanghai court in a related criminal judgement,[2] during the period from September 2017 to April 2019, through the channels of online and brick-and-mortar stores selling, the defendants sold out nearly 4.25 million boxes of LEGO counterfeit toys involving 634 different LEGO models, generating a revenue of more than CNY330 million.

LEGO filed a series of civil and criminal lawsuits against Guangdong Meizhi and its affiliates in different Chinese cities to seek injunction against the defendants’ use of LEGO’s intellectual property as well as their activities of unfair competition, and to claim damages and legal expenses.

In the trademark infringement and unfair competition lawsuit filed in Guangdong Province, the court of the first instance, the Guangzhou Intellectual Property Court, found that Guangdong Meizhi and its affiliates had cloned LEGO toys since 2015 and produced numerous copycat versions under the LEPIN trademark and some other fraudulent trademarks, which are confusingly similar with those of LEGO’s. Their acts constituted trademark infringement and unfair competition. The Guangzhou Intellectual Property Court ruled that Guangdong Meizhi and the other three defendants should pay the maximum amount of statutory damages, i.e., CNY3 million (USD456,000).[3] Dissatisfied with the amount of damages awarded by the first instance court, both parties — the plaintiff and the defendants — appealed to the court of the second instance, the Guangdong High Court.

On February 26, 2021, the Guangdong High Court handed down the final judgment in this case. The Guangdong High Court multiplied by 10 times the initial damages awarded to LEGO. Guangdong Meizhi and three other defendants who are behind the clone brand LEPIN infringing upon trademark rights held by LEGO must now pay CNY30 million (USD4.56 million) as punitive damages, a large sum of damages award rarely rendered in previous trademark infringement cases.

Why Punitive Damages work in LEGO vs. LEPIN

 

To explain the awarding of the aforesaid punitive damages, the Guangdong High Court highlights the following elements of “culpability” on the part of the defendants:

1.    'LEPIN' infringement lasted for a long time, in large scale, and with high profitability.

2.    'LEPIN' infringed upon a series of the plaintiff’s commercial designations and logos. With an infringing network rich in design and organization, the defendants’ acts demonstrated an obvious malice of imitating and free riding 'LEGO', which should be categorized as a serious infringement, and should be given a heavy punishment.

3.    According to the sales data of 'LEPIN' provided by Zhejiang Taobao Network Company, it can be reasonably presumed that the sales amount of the infringing products exceeds CNY500 million. Based on the reasonable estimation of the profit rate of related industries, the overall profit of the infringing products involved should be far more than CNY160 million.

4.    The strength of judicial relief should match the reputation of the plaintiff’s involved intellectual property. After long-term use and publicity, the 'LEGO' trademark has a high popularity in the toy market and has already become the main logo used by the relevant public to identify LEGO products. Guangdong Meizhi and its affiliates had used 'LEPIN' logo for multiple times, which is very similar to 'LEGO' in terms of color combination, form of expression, overall visual effect, etc., and can easily lead to confusion among the public, thus weakening the distinctness of 'LEGO' trademark and damaging its market reputation.

5.    During the process of litigating the case before the courts, the evidence production of the two parties showed that the plaintiff was trying their best to prove the sales records of the defendants and the profits gained by them while the defendants were attempting to evade liabilities who shall then bear the unfavorable consequences of their dishonest acts during the litigation.

Therefore, LEGO's claim for compensation in the amount of CNY30 million (USD4.56 million) has been fully upheld the Guangdong High Court as the Court finds that the defendants are willful, malicious and highly reprehensible and the circumstances of the case at bar are severe.

How Punitive Damages Came into Play under the Chinese IP Laws

 

In China, intellectual property litigations especially trademark infringement litigations almost always end up with low damages awards which have long been a shared concern for intellectual property right holders. Therefore, to establish a system where awarding punitive damages would become possible has been one of the central themes of China's major intellectual property law reforms over the past decade.

 

In 2013, the China Trademark Law was amended and made the first attempt to establish a system of punitive damages for malicious infringement by providing under Article 63: “[I]f the infringement is committed in bad faith with serious circumstances, the damages shall be determined in accordance with the aforesaid method[4] based on one to three times of the determined amount.”

 

In 2019, Article 63 of China Trademark Law was amended for the damages to be ranged from “one to three times” to “one to five times”. In addition, the punitive damages system was added to the Anti-Unfair Competition Law which was amended in the same year. Furthermore, a policy-type Regulations on Improving the Operation of Business promulgated and implemented in 2019 established a punitive compensation system for infringement upon intellectual property rights.

 

In 2020, the China Patent Law and the China Copyright Law, which were amended in the same year also explicitly formulated a system of punitive damages.

 

In January 2021, the Civil Code of China, which came into effect on the very first day of 2021, provides that “[I]n case of intentional infringement of another party's intellectual property rights and under serious circumstances, the infringed party shall have the right to request the corresponding punitive damages.”

 

In March 2021, the Supreme Court of China issued the Interpretation on the Application of Punitive Damages in the Trial of Civil Cases involving Infringement of Intellectual Property Rights and timely published six typical cases of punitive damages applied in civil cases involving infringement of intellectual property rights.

 

Practical Tips on Presenting Punitive Damages Cases at Trial

 

As demonstrated in the above, with respect to trademark infringement litigation, punitive damages are only possible in exceptional cases, where the “malicious intention” of the infringer and the “serious circumstances” of the infringement could be well established. Here are some practical tips on presenting punitive damages cases at trials concerning trademark infringement:

 

·         Gather information from websites, social media and online or offline sales platforms to show method and frequency of the infringement, the duration of the infringement, the geographical scope, scale and consequences of the infringement, the unit price of the infringing products, the annual sales records of the infringer, and the average profit rates in the same or related industries.  

·         Raise evidence to show the reputation of the plaintiff’s involved trademarks or products, the duration of the use, the geographical scope, scale and popularity of any advertising activities, records of being protected by any previous administrative or judicial actions and comparable licensing fees of the involved trademarks.

·         Show to the judge that the defendant still commits infringement upon intellectual property rights after being notified or warned by the plaintiff or party of interest. 

·         Consider having communications with the defendant notarized and bringing notaries to meetings with the defendant.  

·         Review the defendant’s trademark filings for evidence that it has applied for illegitimate trademarks, a fact that increases the possibility that a court will find bad faith.  

·         Check the defendant’s litigation history to see if it has a prior record of being sued by other legitimate brand owners.  

·         Review corporate records to see if the defendant was a previous trading partner of the plaintiff’s business.  

·         Consider bringing the following facts to the judge: the defendant forges, destroys or conceals any evidence of infringement; the defendant obtains huge benefits from the infringement or causes huge loss to the plaintiff’s business due to the infringement.

·         Seek a court order asking the defendant to provide its sales records, account books and original receipts relating to the infringement, and if the defendant refuses to provide them without any justified reason or provides any false account book or other documents, the court may determine the base number for calculating the amount of punitive damages by referring to the plaintiff’s claim and evidence.  

·         Notarized evidence of bad faith has a unique and important probative value before the court.

·         With preliminary evidence of infringement, a preservation action seeking to preserve evidence of infringement including sales records, account books and original receipts can be an effective weapon. 

 

Conclusion

 

In China, the call for awarding punitive damages has been intensified due to the increase in malicious infringement, the importance for adequately compensating the plaintiff and the need for deterrence.

 

The LEGO vs. LEPIN judgement of the Guangdong High Court is a crucial milestone in the long struggle by brand owners and advocates to remedy the bitter fact of “high enforcement costs of the IPR owners and low infringement costs of the infringers”. This decision and the continued amendments to the China Trademark Law and other major IP laws strengthen the position of legitimate IPR owners against malicious copycats and counterfeiters. 




Footnotes


[1] Lego Group vs Guangdong Meizhi, etc., Guangdong High Court: (2020) Yue Min Zhong No. 1642.

[2] The Third Branch of Shanghai Municipal People's Procuratorate of the People's Republic of China vs Li Haipeng, etc., Shanghai High Court: (2020) Hu Ling Zhong No. 105. Under this criminal judgment, nine principals of LEPIN were heavily fined and sentenced to jail due to their criminal acts of copyright violation upon various LEGO toys.

[3] Lego Group vs Guangdong Meizhi, etc., Guangzhou IP Court: (2016) Yue 73 Min Chu No. 1692.

[4] “The aforesaid method” means: “[T]he amount of damages for infringement upon the right to exclusively use a registered trademark shall be determined according to the actual losses suffered by the right holder from the infringement; where it is difficult to determine the amount of actual losses, the amount of damages may be determined according to the benefits acquired by the infringer from the infringement; where it is difficult to determine the right holder's losses or the benefits acquired by the infringer, the amount of damages may be a reasonable multiple of the royalties”, as provided under Article 63 of the China Trademark Law.


  • 相关资讯 More
  • 点击次数: 1000001
    2025 - 08 - 22
    作者:刘艳玲随着科技的发展,越来越多的发明不再局限于单一技术领域,而是跨越多个技术领域形成创新,这种跨领域的技术创新会产生全新的商业价值和应用场景。先来假设一个场景,假如你或你的团队深耕大健康产业,你们注意到中医理疗市场2019年规模达2920亿元,到了2023年市场规模已经初步统计超过7000亿元,未来增长空间巨大,因此希望在中医理疗市场拓展业务。相比于传统的针灸、推拿、艾灸、拔罐和刮痧等保健方法,你们想结合现代技术提供有市场竞争力的产品和服务。人工智能技术和机器人技术是未来的发展方向,因此看好与电或磁相关的中医理疗产品和服务。上面描述的这类技术创新就涉及多个技术领域,需要了解甚至掌握中医、信息通信技术(ICT)和机械设计等相关知识才能实现创新,很明显这需要团队合作,因为一个人甚至一个团队不可能具备这么多技术领域的知识储备。而且,可能还需要能提供相应技术和/或产品部件的外部供应商支持。通常来说,技术专家大多熟悉的是自己从事的技术领域的最新发展,较少了解其他领域的技术及其发展,希望横跨多个技术领域进行研发创新并商业化落地,那么熟悉专利检索和分析是非常必要的。下面以这个场景为例来介绍专利检索和分析。 第一步,学习和了解业务方向的技术和市场发展情况,确定专利检索主题。随着医学的发展,现代科学已发现生物电和人体细胞、血液、经络和神经都有关系。中医讲究气血循环、经络畅通,气血之“气”为人体之“电气”,即人体生物电。经络是导电的,也即“电气”会循着人体经络流动。因此,将专利检索主题初步确定为利用电技术作用于人体经络实现理疗的发明创新。第二步,进行初步专利检索尝试。这里我们选择国家知识产权局提供的公共专利检索数据库https://pss-system.cponline.cnipa.gov.cn/conventionalSearch为例进行说明,当然你也可以选择其他免费或收费的商业专利数...
  • 点击次数: 1000000
    2025 - 08 - 15
    作者:张琳自我国上世纪80年代开始推行社会保险制度、到90年代各地陆续实施了社会保险制度以来,存在大量用人单位未为劳动者缴纳社会保险的情况。很多劳动者当时并未意识到社会保险的意义和价值,同时每月还可以多到手一些工资,因此并未对此提出质疑。随着人们法律意识的增强,许多劳动者开始认识到了社会保险在养老、看病等方面的价值,开始运用法律武器维护自身的权益。特别是将于2025年9月1日生效的《最高人民法院关于审理劳动争议案件适用法律问题的解释(二)》再一次将社保问题推到了风口浪尖。劳动者社保维权的其中一种方式是向社保部门投诉要求用人单位补缴在职期间的社会保险。但是,如果劳动者无法提供与用人单位的劳动合同,社保部门就无法认定双方之间存在劳动关系,进而无法启动社会保险稽核程序。在这种情况下,劳动者就需要先通过劳动仲裁/诉讼程序确认其与用人单位之间存在劳动关系,之后再带着确认双方劳动关系的裁决书/判决书向社保部门投诉。但是,由于有些劳动者已离职多年,时过境迁,有些用人单位已经注销了,这种情况下劳动者还能否通过劳动仲裁/诉讼主张确认劳动关系?把谁作为被申请人/被告?确认与谁存在劳动关系?这种确认劳动关系之诉是否受仲裁时效或诉讼时效的限制?确认劳动关系后还能否向社保部门投诉要求补缴社保?鉴于我国各地经常就劳动争议和社保等问题出台地方性法规、政府规章、司法文件、规范性文件等,各地劳动仲裁机构和人民法院基于对现有劳动相关法律的理解不一致和地方规定的不一致在同类劳动争议案件中往往作出不一致的裁判结果,本文引用北京的两个案例对上述问题进行分析和讨论,仅供大家参考。 一、案例简介案例一:邢某与某红公司劳动争议案件(参见北京市朝阳区人民法院(2022)京0105民初75494号民事判决书、北京市第三中级人民法院(2024)京03民终9047号民事判决书)邢某于1983年8月1日至1984年3月3...
  • 点击次数: 1000003
    2025 - 08 - 08
    作者:金涟伊《中华人民共和国商标法》(以下简称“商标法”)第三十条规定:“申请注册的商标,凡不符合本法有关规定或者同他人在同一种商品或者类似商品上已经注册的或者初步审定的商标相同或者近似的,由商标局驳回申请,不予公告。” 该法条是商标审查实践中判断商标是否应予核准注册的重要法律依据。 尽管该条款本身并未出现“混淆”二字,但《最高人民法院关于审理商标民事纠纷案件适用法律若干问题的解释》及《北京市高级人民法院商标授权确权行政案件审理指南》等配套规范,已将“容易导致混淆”确立为独立的评判要件。司法实践中,法院援引本条时,除审查标识是否“相同或近似”、商品是否“同一种或类似”外,还需进一步评估是否存在混淆可能。本文拟以某公司诉国家知识产权局商标驳回复审行政纠纷一案为切入点,探析《商标法》第三十条中“混淆可能性”的认定尺度与适用逻辑。 一、《商标法》第30条规定与混淆 现行《商标法》明文提及“混淆”的法条只有3条,即第13条对驰名商标的保护条款、第42条关于转让的条款,以及第57条关于侵犯注册商标专用权的条款。但在商标相关司法解释、部门规章等法规中,“混淆”是商标法第30条认定商标近似的重要判断依据。 2010年《最高人民法院关于审理商标授权确权行政案件若干问题的规定》第16条规定,人民法院认定商标是否近似,既要考虑商标标志构成要素及其整体的近似程度,也要考虑相关商标的显著性和知名度、所使用商品的关联程度等因素,以是否容易导致混淆作为判断标准。 而2019年北京市高级人民法院发布的《商标授权确权行政案件审理指南》第15条进一步明确了,“适用商标法第三十条、第三十一条时,可以综合考虑商标标志的近似程度、商品的类似程度、引证商标的显著性和知名度、相关公众的注意程度以及诉争商标申请人的主观意图等因素,以及前述因素之间的相互影响,以是否容易造...
  • 点击次数: 1000009
    2025 - 07 - 25
    作者:陈巴特运输毒品罪指的是在中国境内,通过携带、邮寄、利用他人或交通工具等方式,将毒品从一地转移到另一地。该罪行具体表现为改变毒品的所在地。作为毒品犯罪链条中的重要环节,运输毒品的行为为毒品的流通提供了条件,加剧了毒品的泛滥,不仅严重危害公民的身心健康,还可能导致社会治安问题频发,甚至关系民族兴衰、国家安危。从社会危害性来看,运输毒品罪无疑属于性质恶劣的犯罪类型。因此,厉行禁毒、依法严厉打击包括运输毒品犯罪在内的毒品犯罪,是党和政府的一贯立场和主张。【基本案情】王某和妻子均是执业药师,且一同就职于中部某市中心医院药房。与药品药材打交道,成为夫妻二人日常工作。幸福的家庭,稳定的工作,较高的收入,在这个三线城市,二人简直是大多数人“羡慕嫉妒恨”的对象。然而,天有不测风云,正是这份职业以及优越的生活,加之王某为人厚道、乐于助人的性格,给王某带来牢狱之灾,给家人生活长期蒙上巨大阴影。2021年9月某天,王某的一个普通朋友范某来电话,称因治病需要,其从西南某市购进一箱中药,想让王某率先看一看药材真假好坏,让王某提供医院的地址,用于接收从西南某市邮寄过来的中药。王某未加思索便同意并提供了地址。几天后,范某再次致电王某,称中药包裹已到医院收发室,收件人为“贾某”,收件电话尾号为“XXXX”,让王某帮忙取一下。王某仍然没有过多考虑,大摇大摆地去医院收发室取包裹。在医院收发室,一个并非收发室工作人员的陌生男子简单询问后,将一个纸箱包裹交给王某。王某抱着包裹就往外走,没走几米,感觉很不对劲儿:收发室的人他都认识啊,今天怎么是一个说着普通话的陌生人将包裹交给他?又想到范某吸毒,曾经引诱过自己吸毒,难道包裹里……简直不敢往下想!但王某也不能确定包裹里到底是什么,于是将包裹放在一旁,抽上烟,静观其变。很快,几名陌生人向王某围过来,简单询问后,便亮出“真家伙”将王某铐住,将其带至当地公安机关讯问。在...
× 扫一扫,关注微信公众号
铭盾MiNGDUN www.mdlaw.cn
Copyright© 2008 - 2025 铭盾京ICP备09063742号-1犀牛云提供企业云服务
X
1

QQ设置

3

SKYPE 设置

4

阿里旺旺设置

5

电话号码管理

6

二维码管理

展开