January 26, 2020

Half-a-Million Dollars In Compensation For Infringement Of Design Registered In China

Sa'ar Alon, Partner, Head of Designs Practice
Sa'ar Alon

Partner, Head of Designs Practice

Reinhold Cohn & Partners

 In a precedent-setting ruling, the Shanghai Intellectual Property Court recently awarded three million Chinese yuan (CNY) in compensation (about 428 thousand US dollars) to FOREO for infringement of its (industrial) design registered in China. This is the highest compensation the Shanghai court has awarded to date for infringement of a registered design.

FOREO is a Swedish personal care company founded in Stockholm in 2013, starting with only two employees. Today, six years after its founding, the company employs over 3000 people in 77 countries worldwide. The company develops and manufactures face cleansing brushes, electronic toothbrushes, face cleanser products and eye massagers, for private consumers and the professional market, and is well-known for combining advanced technology and material with attractive, innovative design.

In 2013 the company successfully filed an application to register a design in China aimed at protecting the LUNA product, a device designed for facial massage and cleansing and which was sold on the internet for 180 US dollars. According to figures provided by the company, a product from this line is sold every three minutes.

About two years ago FOREO filed a lawsuit with the Shanghai Intellectual Property Court against Kingdom Zhuhai Company for infringement of its registered design in connection with the industrial design product KD308, which, according to the lawsuit, was sold by the defendant during the trial. The court discussed the question of whether the defendant’s K308  infringes FOREO’s registered design and held that it infringes FOREO’s registered design despite KD308 including several deliberate changes. With the help of a court-mandated order, the plaintiff found that Kingdom Zhuhai company sold 358,074 units of the infringing product, about 35 million CNY (about 5 million USD) in sales from Chinese ecommerce platforms such as Alibaba and Tianmao. What led to the awarded compensation was the 3 million CNY in financial losses and expenses; the immediate cessation of the infringing product’s manufacture and marketing was obviously ordered as well.

The Chinese market is very important to FOREO. Notwithstanding the many counterfeits, which could be damaging to sales as well as to brand integrity and strength, the company is considered to have a very strong position in the country. For comparison, on China’s Singles Day (or Double 11) last year, the company sold 100 million CNY in LUNA products, second only to Apple’s iPhone sales. In order to protect itself and those purchasing its products against counterfeits, each of the company’s products includes a scratch ribbon or original certificate that can be keyed onto the company website.

According to data from the 2018 Global Brand Counterfeiting Report, the counterfeit market is worth roughly 460 billion US dollars, where about 80% of the counterfeit merchandise comes from China (followed by a distant second, Hong Kong, and third, Turkey). While the pros from purchasing an unoriginal product usually come down to a price lower than that of the original, the cons can be many, among them use of substances that might be hazardous to the user’s health (for example, counterfeit drugs and cosmetic products), absence of quality control that could lead to a product combusting or exploding (for example, electronic products and costumes), underage employment, some of them children, under unfair conditions in plants where they manufacture the counterfeits, and even loss of tax revenue (the state could end up charging higher tax for the original product since its price is usually higher). In some cases the counterfeits originate in Chinese criminal organizations that also, among other things, take part in drug and human trafficking (particular women).

However, the Chinese government is determined to improve the situation, by legislation (for instance, the recently passed Electronic Trade Act which holds sellers and companies accountable for the sales platforms they develop) and by setting up specialized intellectual property courts, as the ruling issued in FOREO’s favor shows, and it is also acting to enforce the rights of foreign companies that have protected their intellectual property in the country.

Raid by Chinese authorities at a factory that manufactures counterfeit FOREO products
Photo: FOREO

This article is provided for general information only. It is not intended as legal advice or opinion and cannot be relied upon as such. Advice on specific matters may be provided by our group’s attorneys.

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