The Supreme People's Court of China Affirmed CNY 106 Million in Damages! Schneider Electric China vs Zhenjiang Shinaide Electric Appliance and Chen Yuehong

Recently, the Supreme People's Court of China affirmed the CNY 106 million in damages that were awarded against Zhenjiang Shinaide Electric Appliance Co., Ltd. (“Zhenjiang Shinaide,” 镇江施耐德电器有限公司) and Chen Yuehong by the court of first instance in the case of Schneider Electric (China) Co., Ltd. (“Schneider Electric China,” 施耐德电器（中国）有限公司) vs Zhenjiang Shinaide and Chen Yuehong, which involved trademark infringement and unfair competition.

Schneider Electric Se holds the trademark registrations for “” and its Chinese equivalent “施耐德” (Shi Nai De), covering electric switches and generatrix, among others, in Class 9. Schneider Electric China is the licensee of the above trademarks. Zhenjiang Shinaide and Shinaide Generatrix Jiangsu Co., Ltd (“Shinaide Generatrix Jiangsu,” 施耐德母线江苏有限公司) used the trademarks “Schneider” and “施耐德” (Shi Nai De) on generatrix grooves and switch cabinets, and the distinctive element of their company names is also “施耐德” (Shi Nai De). Schneider Electric China initiated a civil action against their use of the trademarks “Schneider” and “施耐德” for trademark infringement as well as the use of company names for unfair completion. During the litigation, Shinaide Generatrix Jiangsu dissolved itself in an improper procedure, and its shareholder Chen Yuehong was added as a defendant by Schneider Electric China.

The court of first instance found that the use of the said trademarks by Zhenjiang Shinaide and Shinaide Generatrix Jiangsu amounts to trademark infringement. In addition, the court found that it constitutes unfair competition for Zhenjiang Shinaide and Shinaide Generatrix Jiangsu to use “施耐德” (Shi Nai De) as the distinctive element of their company names, which is likely to be confused with the trademarks and trade name of Schneider Electric China.

In light of the above, the court of first instance ordered that Zhenjiang Shinaide stop using the said trademarks and company name.

Regarding the damages, the court of first instance ascertained that the amount of profit obtained from the infringement by Zhenjiang Shinaide and Shinaide Generatrix Jiangsu was CNY 35.33 million. Considering the serious influence of the infringement and the bad faith of the infringers, the court held that punitive compensation should be applied in this case and tripled the amount of damages based on the obtained profit, ordering that Zhenjiang Shinaide and Chen Yuehong jointly pay Schneider Electric China punitive damages up to CNY 106 million. Zhenjiang Shinaide and Chen Yuehong appealed against the court decision to the Supreme People's Court of China, where the appeal was dismissed and the original rulings were affirmed.

This case shows that China’s courts are endeavoring to protect international brands and crack down on malicious infringements of international property rights, and punitive measures are used in such civil actions more and more frequently. In addition, by ordering the shareholder of Shinaide Generatrix Jiangsu to undertake its company’s liabilities, the court effectively prevented the infringer from evading the liabilities by dissolving its company.