Trademark Infringement Liability of Real Estate Lessors in China Law

By Luo Yanjie

In a recent news report (note: the link is in Chinese), Guang Dong OPPO Mobile Telecommunications Co., Ltd, the holder of trademark OPPO used in mobile phones, filed a lawsuit against a company and the lessor of its store, claiming ceasing the infringement and the compensation. Beijing Fengtai District People’s Court judged the joint liability of infringement of the both the shop and the real estate lessor and shall compensate the plaintiff 10, 000 yuan.

This is a typical trademark dispute arisen by the shop’s infringement and then lead to the liability of the market which is the real estate lessor, and in the similar cases, the market tends to feel being wronged for what it provides is the real estate renting not the conducts or aids in the infringement, yet the court will judge the establishment of the infringement liability. Today, we would like to analyze the liability taking in the similar cases.

I. The legal ground of real estate lessor’s liability

As provided in Article 50 of Implementation Regulations of Trademark Law:

“Any provision of convenience to storage, transportation, mailing, hiding of other’s intentional infringement against the trademark right could constitute the infringement against the trademark”.

The selling of trademark infringing products by the market store is surely kind of infringement against others’ trademark rights, and as to the market, the real estate renting could be deemed as the convenience to others’ infringement (at least to provide the place to conduct the infringement). Therefore, once the trademark holder could prove the intention or willingness of the market, the market shall accordingly take the liability of infringement.

II. When could establish the “willingness” of the infringement?

Like many other disputes, the “willingness” is a subjective spiritual act, which in most time is difficult to prove. The market’s willingness of the infringement shall be judged from the appearance of its conduct.

It shall be first pointed out that, by Management Measures of Counter Renting for Business, its Article 8 says:

“In the business of counter renting, the lessor shall fulfill the following obligation:

…

(2) to supervise the lessee’s following on the rules and regulations of the business market, and to make prompt report any violation against laws & regulations and any conducts damaging the interests of the consumers to the relevant departments”

Hence, the market shall have the statutory obligation to supervise any possible infringement from the stores. Like in the lawsuit of Xiushui Street vs. Channel (Brief of the case: Channel found the illegal selling of its knockoffs in Xiushui Street stores, and then sent the lawyer’s letter to the managing office of Xiushui Street, and in the meantime made the notarization over the infringement. When latter found the continue of the infringement and nonfeasance of the Xiushui Street managing office, Channel then filed a lawsuits against them), the court judge the infringement liability and saying “Xiushui Street Company, as the managing party of Beijing Xiushui Street Clothing Market, shall be responsible for any infringements found in the market against trademarks and thereby take proper action to cease and prevent that infringement”.

Under such situation, when there occur the omission of market’s duty fulfilling of the store’s infringement, we could determine the willingness of the market of the infringement, who shall thereafter take the joint liability of the infringement. In practices, the right owner chooses the lawyer’s letter to demand the action from the managing party to cease the infringement, and if no reply or action could be seen from the managing party, the court will judge the willingness of the market. Like in the case of Xiushui Street, the court judged the willingness of Xiushui Street market for the consideration of it has subjective intent, and therefore it shall take the infringement liability.

Besides, even the right owner has sent no lawyer’s letter, when the infringed trademark has adequate reputation in the market, and a big amount of the infringing products could be found selling the market, the court shall also have the right to determine the willingness of the market in aiding the infringement. (the specific argument shall be conducted in each case, and we do not extend the discussion here)

III. The way to escape the risk of infringement aiding of real estate lessor

It’s not difficult to conclude from the above discussion, the risk of infringement is not little for the market; especially those only have attention on economic gains, for they could not claim for the duty exemption by pretending no awareness of the infringement. For this, we suggest the market managing party to consider the following ways for a risk reduction.

1. Agreement in contract for no infringement against any third parties.

The agreement is namely the warning clauses as mentioned, and these shall be the minimum care obligation and the legal basis of the liability exemption of the market.

2. To demand the submission of IPR certificate from the market managing party

For the stores selling famous branded products, the managing party shall examine the right certificate or any equivalent papers from the stores, once the store could not or fails to show such documents, the managing party shall forbid the sales in the market. Once the managing party could exercise the rules strictly, in our opinions, it could generally lead to the liability exemption of the market even there’s the infringement from the stores, like the counterfeit of the documents.

3. To act promptly after the right holder’s lawyer’s letter or similar documents

In such a situation, the market shall promptly demand the provision of right papers from the stores, as well as the specification on the issues. When no reply could be provided or the store fails to reply in time, the managing party shall order the stop selling of the store, or report to the administrations. While when the store could provide a reasonable explanation of their sales, the market shall immediately notice the right owner, and demand the right owner to settle the problems on his own.

4. Remedy clauses in the leasing contract

The remedy has two main parts: one is to order the store compensate the losses thereby suffered by the market; the other is to make up the rent losses after the termination of the lease contract for the store’s violation against the warning clauses. These two clauses could remove stores’ fear of infringement risk.

Lawyer Contacts

You Yunting

86-21-52134918

youyunting@debund.com, yytbest@gmail.com

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Trademark Infringement Liability of Real Estate Lessors in China Law

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