A French wine producing company has been ordered to pay a Chinese company $5 million following a lengthy trademark dispute.
Castel has been ordered to pay Shanghai-based wine company Shanghai Banti Wine and its owner Li Dao Zhi after a court upheld a ruling which deemed it had unlawfully used the trademark ‘Ka Si Te.’
The fine, issued at the Zhejiang Provincial High Court on July 16, upheld an initial decision from the Wenzhou Intermediate Court in April.
It is thought to be one of the largest compensation rulings seen in an IP case in China.
Luke Minford, chief executive of Rouse LLP, who spent 14 years working on IP matters in China, said it was an “unusual level of damages” and that a trademark infringement fine would normally be closer to $15,000.
Highlighting similarities with a patent ruling at the same court involving French electrics company Schneider Electric, Minford said: “The issue here is not so much with the Chinese court’s interpretation of the law, because in both the Schneider case and in this instance the criticism is more that they interpreted the law narrowly rather than incorrectly.”
In 2007, Schneider Electric was ordered to pay the equivalent of $48m in damages for infringing the patent of a Chinese company. Schneider appealed against the fine but later agreed to pay around $23m.
Minford continued: “The real issue is how to prove the profits obtained from infringement. Most Chinese infringers do not keep records at all of what income they gained from their activity, so the plaintiff is forced to rely on a limited claim of statutory damages.
“However, when a foreign company is sued for infringement, not surprisingly the court will discover very well kept accounting records that show actual income and margin. The result is that they are able to make an award based on profits gained from the infringing activity, which unlike statutory damages, can be unlimited.”
Castel, which was established in 1949, began using the words Ka Si Te, a Chinese transliteration of Castel, for its marketing in China.
However, it failed to register it as a trademark allowing Li, who had spotted its popularity, to register the mark himself.
Upon discovering it was being used for Li’s secondary company Shanghai Ka Si Te Wine Co, Castel attempted to get it revoked.
But Li sued for unlawful use and, after a ruling which deemed Li the rightful owner, Castel was ordered to pay the fine.
Castel appealed, but the decision was upheld and, in turn, Castel has now been ordered to make a public apology to Li.
According to DLA Piper LLP, the case should stand as a warning for foreign companies to protect their brand.
“If a trademark pirate registers the equivalent Chinese brand first, the brand owner faces the threat of losing the Chinese brand and, worse still, being sued by the pirate for using it,” it said in a document written by its Chinese representatives.
“The primary lesson therefore is regardless of how famous and well-known a brand is elsewhere around the world, time should be taken to devise a Chinese language equivalent of a brand and brand owners should invest time and money in registering the Chinese language brand as well as the Western brand.”