Trademark Infringement Dispute｜Guangdong Sanjiao Electric Appliance Co., Ltd. v. Guangzhou Jingzuanfeng Electric Appliance Co., Ltd.

Case Overview

This case concerns a trademark infringement dispute. Dissatisfied with the first-instance judgment rendered by the Baiyun District People’s Court of Guangzhou, the appellant, Guangdong Sanjiao Electric Appliance Co., Ltd. (hereinafter “Sanjiao Company”), filed an appeal. Although the appellee, Guangzhou Jingzuanfeng Electric Appliance Co., Ltd. (hereinafter “Jingzuanfeng Company”), also filed an appeal, it failed to pay litigation fees within the statutory period, and its appeal was deemed withdrawn.

Sanjiao Company lawfully acquired six Class 11 registered trademarks containing the word “DIAMOND” and corresponding graphic elements through equity assignment in 2022. This series of trademarks enjoys high market reputation and has been recognized as Famous Trademarks of Guangdong Province and Guangzhou City. Among them, the “DIAMOND & Graphic” mark has been officially identified as a Well-Known Trademark.

In 2021, after evidence collection, Sanjiao Company discovered that Jingzuanfeng Company used the word “DIAMOND” and highly similar identifiers on air curtain products across multiple e-commerce platforms including Tmall, Pinduoduo and JD.com, as well as on its official website. The infringing marks were extensively applied in product names, promotional pages, product bodies, outer packaging and product manuals. Sanjiao Company instituted legal proceedings before the trial court, requesting the defendant to cease infringement and compensate economic losses of RMB 5 million plus reasonable enforcement expenses of RMB 50,000 in the first instance.

The first-instance court confirmed trademark infringement and ordered statutory compensation of RMB 500,000. Sanjiao Company filed an appeal on the grounds that the first-instance judgment failed to verify the actual sales volume, refused to apply punitive damages, and imposed an excessively low compensation amount, requesting a revised compensation award of RMB 2 million.

During the second-instance proceeding, the court verified that the defendant’s total infringing sales revenue on Tmall and Pinduoduo reached RMB 6,305,661.97. The defendant claimed that the sales data included fake brush order transactions but failed to submit valid supporting evidence. The defendant also unjustifiably refused to submit core business documents including operating account books, constituting evident evidence spoliation.

Key Case Difficulties

1. Application Criteria for Punitive DamagesThe core dispute in the second instance lies in the determination of subjective intent and serious infringement circumstances. The court needed to review whether the first-instance court’s refusal to apply punitive damages — due to the lack of a clear compensation base and insufficient proof of intentional infringement — was legally proper.

2. Verification Standards for Infringing Sales RevenueThe defendant alleged that platform sales data contained massive fake brush order records and that certain price-tagged promotional products were irrelevant to the disputed goods. The case required judicial review on the evidential validity of the brush order defense and whether sales revenue of promotional products should be included in the total infringing turnover.

3. Discretion of Compensation Calculation Base Under Evidence SpoliationAs the defendant refused to submit business account books, profit margins and other critical evidence, the actual infringing profit could not be directly calculated. The court needed to reasonably determine the calculation base for punitive damages by referring to industry profit margins and the trademark’s sales contribution rate under the evidence spoliation rule.

4. Boundary Distinction Between Trademark Use and Fair Descriptive UseThe defendant argued that the use of the word “DIAMOND” merely described product quality features, and air curtain machines belonged to a different sub-category from electric fans, the approved goods of the plaintiff’s trademarks. The key difficulty was to determine whether the defendant’s use constituted source-identifying trademark use under the Trademark Law, rather than a genuine descriptive fair use.

Judgment Result

Final Judgment Case No.: (2023) Yue 73 Min Zhong No. 2043 (Guangzhou Intellectual Property Court)

The second-instance court upheld part of the first-instance rulings and revised the compensation amount, with the final judgment as follows:

1. Sustained Injunction ReliefGuangzhou Jingzuanfeng Electric Appliance Co., Ltd. shall immediately cease all acts infringing the exclusive right of Sanjiao Company’s six “DIAMOND” series registered trademarks.

2. Revised Compensation AwardThe original first-instance compensation of RMB 500,000 was revised to RMB 2 million (covering both economic losses and reasonable enforcement expenses), payable within ten days from the effective date of the judgment.

3. Dismissal of Excessive ClaimsAll other claims filed by Sanjiao Company were dismissed.

4. Litigation Cost AllocationFirst-instance litigation fees of RMB 47,150: RMB 14,238.37 borne by Sanjiao Company and RMB 32,911.63 borne by Jingzuanfeng Company. Second-instance litigation fees of RMB 18,300: fully borne by Jingzuanfeng Company, which shall directly reimburse the prepaid fees paid by Sanjiao Company.

5. Core Judicial Finding on Punitive DamagesThe second-instance court confirmed that the defendant constituted evidence spoliation. Its malicious trademark application and continuous multi-platform infringement demonstrated obvious subjective intent and serious infringing circumstances, satisfying the statutory conditions for punitive damages. The court determined a compensatory base of RMB 800,000 and applied a 1.5-fold punitive multiplier, resulting in the final total compensation of RMB 2 million.

Typical Case Significance

1. Clarifying the Dual Criteria for IP Punitive DamagesThis case clarifies the judicial determination rules ofsubjective intent + serious circumstances for trademark punitive damages. Where an infringer maliciously applies for similar trademarks and continuously conducts cross-platform infringement with full knowledge of the high reputation of the prior trademark, coupled with asset transfer behaviors (two registered capital reductions during litigation), such acts shall be deemed intentional and serious, justifying the application of punitive damages. The judgment provides authoritative judicial guidance for the application of punitive damages in similar trademark disputes.

2. Strengthening the Application of Evidence Spoliation Rules in IP LitigationIn response to the common practice where infringers unjustifiably refuse to submit business account books, profit data and sales records, the court clarified that on the basis of the obligee’s prima facie evidence, the court may determine the compensation base by referring to industrial benchmark data. This ruling compels infringers to fulfill their evidential obligations and effectively addresses the long-standing difficulties of “difficult evidence collection and low compensation awards” in IP enforcement.

3. Defining the Legal Boundary Between Trademark Use and Fair DescriptionThe judgment confirms that the use of core words from others’ registered trademarks in product names, packaging and promotional materials constitutes trademark infringement if the use functions to identify commodity sources, rather than merely describing product attributes. Even if the involved goods are in different sub-categories from the approved specifications, such use may still constitute infringement, strengthening the cross-class protection for well-known and famous trademarks and safeguarding the core source-identifying function of trademarks.

4. Regulating E-commerce Trademark Infringement PracticesThe court comprehensively admitted multi-platform sales data from Tmall, Pinduoduo and JD.com and rejected the defendant’s defensive arguments based on alleged fake orders and promotional price prefixes. It explicitly confirms that e-commerce transaction data constitute valid factual basis for calculating infringing profits, standardizing trademark use behaviors in the e-commerce ecosystem and reinforcing online IP protection order.

5. Demonstrating Strict Judicial Protection Over Malicious IP InfringementBy raising the compensation award from RMB 500,000 to RMB 2 million through punitive damages application, the second-instance judgment substantially increases the cost of malicious trademark infringement. It fully reflects the judicial stance of severely punishing bad-faith IP violations, effectively protects legitimate trademark rights and interests, and guides market players to respect IP rights and standardize commercial operations.