High court upholds trademark infringement ruling

Ti Gong

The local high court today upheld the ruling that Capital Outlets Commercial Development and Shanghai Yilang International Trade must pay Italian luxury brand Fendi 350,000 yuan (US$54,100) in compensation for trademark infringement and illicit competition.

In 2015, Capital Outlets opened in Suzhou, Jiangsu Province, renting nine stores to Yilang to sell products from brands such as Fendi and Loewe.

One year later, Fendi Adele S.r.l., the owner of Fendi’s trademark, discovered that one of the shops used its trademark on its store sign, packaging and receipts without permission. Capital Outlets also included “Fendi” on brochures, signs and articles on WeChat.

Fendi Adele sued for 1 million yuan in damages.

Yilang officials said the products it sold were not fake so it was reasonable to use the trademark. Capital Outlets claimed it hadn’t broken the law because the “Fendi” trademark was used to inform customers about the source of the products.

A local district-level court ruled in favor of the defendants, and Fendi Adele appealed to a higher court.

In 2017, the Shanghai Intellectual Property Court reversed the original judgment, ruling that Yilang and Capital Outlets had infringed on Fendi’s trademark and should pay 350,000 yuan in penalties. The court said Yilang's use of “Fendi” on its shop sign was misleading.

Yilang requested a retrial.

The high court said there are two sales models for luxury goods — selling products in brand-operated stores or exclusive shops managed by the brand, and selling products in integrated stores run by other companies with permission of the brand or brands. Therefore, a brand's trademark should not be used on an integrated store's shop sign that sells products from multiple brands.

The court added that Capital Outlets helped Yilang advertise its products and referred to Yilang's store as "Fendi," making it culpable as well.