New Balance Lost the Lawsuit Again What Can We Learn from That?

July 18, 2016 | Zio Z. DENG , Koko H. JIANG

The judgment of the Second Instance was issued recently after the lost of the First Instance issued in last April for New Balance Trading (China) Co., Ltd., an affiliate of U.S. sneaker maker New Balance (hereinafter referred to as New Balance China). The Guangdong Higher People's Court affirmed the first instance judgment that New Balance China shall stop infringement actions against the trademarks owned by a Chinese citizen surnamed ZHOU, and shall publish a declaration on its official website as well as its online shopping mall to eliminate negative effects; however, the amount of damages was reduced from CNY 98 millions (USD 14.7 millions) to CNY 5 millions (USD 740 thousands).

Case Review
In 2013, ZHOU brought a lawsuit against New Balance China for infringing his trademark rights “百伦” and “新百伦” (pronounced as “Bai Lun” and “Xin Bai Lun” ) before Guangzhou Intermediate People's Court. After the trial, the Court issued a verdict that New Balance China has been selling its products in the Chinese market under the name "Xin Bai Lun", which has infringed ZHOU’s trademark rights and shall pay damages to ZHOU in the amount of CNY 98 millions (USD 14.7 millions) and publish a declaration to eliminate negative effects. New Balance China appealed to Guangdong Higher People's Court. The Court still affirmed it as an infringement, but the final judgment about damages was reduced as stated above.

Here’s the partial content of the second instance verdict in regard to the trademark disputes among ZHOU, New Balance China and another Guangzhou company:
New Balance China has been using a trademark without permission on the identical product that is the same or similar to prior trademarks owned by ZHOU, which has constituted trademark infringement. Especially when they know the opposition against ZHOU’s trademark “Xin Bai Lun” raised by their affiliated company Xin Ping Heng (Chinese translation of the words “new balance”) has been rejected. In other words, New Balance China insisted on using the alleged infringing trademark “Xin Bai Lun” with fully aware of ZHOU’s prior trademarks “Bai Lun” and “Xin Bai Lun”. This kind of behavior should be regarded as infringement rather than trademark fair use.

Our Comments
From the above verdict, we can see that the judgment was given largely base on the fact that New Balance China never stop using the infringing trademark “Xin Bai Lun” knowingly. This reflects their weak risk awareness in trademark usage. On the other hand, New Balance did not take any remedy such as to change the design of the trademark or to apply a new trademark for backup purpose when they lost the opposition. It’s plain for everyone to see their lack of awareness in trademark protection strategy.

To sum up, a couple of enlightening points can be found in this case and every trademark applicant and trademark holder can benefit from that.

1. Try not to use an unregistered trademark
The biggest mistake of New Balance is to use an unregistered trademark in wide-range and for such a long time. They never perform an availability search before they launch their products to the market that carries the trademark, or we could say they just ignored what the availability search report showed.

Even a positive availability search report cannot rule out the possibility of potential prior right conflicts. We believe that to use an unregistered trademark is extremely dangerous. Hence the best way is not to use an unregistered trademark at all. Proper measures should be taken to prevent and control the risk of infringement if you have to put your unregistered trademark in use immediately. Firstly, modify the reproduction of the trademark according to the availability search report to avoid the trademark being identical to a prior one. Secondly, as the saying goes, “a big ship turns slowly”, we should minimize the loss by using an unregistered trademark in relative small scale business. Thirdly, file your trademark applications as soon as possible and do whatever you can do to clear the barriers of prior rights such as opposition, non-use cancellation, trademark dispute, etc.

2. Precautionary measures must be taken once the application gets into trouble
There are over ten million trademarks have been registered or pending in China according to the statistic provided by China Trademark Office (the CTMO). To register a trademark is getting harder and harder in China. It becomes common to run into obstacles during trademark prosecution, such as refusal and opposition. Instead of sitting there being bitter, positive actions can be taken such as to modify or change the reproduction of your proposed trademark; to file an opposition, non-use cancellation, trademark dispute against the prior trademarks; to call for an assignment negotiation or coexistence agreement with the prior owner.

3. Do whatever you can do to minimize the loss when you have already been involved in an infringement lawsuit
A trademark owner starts a lawsuit against the infringer, mostly because it can help to seize more market share or simply just want to get compensation. For that reason, after considering all kinds of circumstances, it would be a wise choice to reach an out-of-court settlement if the infringer has little strong evidences to defend. It’s much more flexible than just get it settled in court.

The above suggestions may not settle all your problems perfectly, but it does help you or your company to have a brighter future if you do pay attention to trademark strategy.