How Interim Injunctions Work in China: A Study of the Burberry Case

In Chinese intellectual property (IP) litigation, including in actions for trademark infringement, a court can grant a permanent injunction de jure if it finds infringement. However, proceedings leading to a permanent injunction can be protracted. Plaintiffs often have to take their action through two instance proceedings, and a defendant can use various procedural tools to delay trial. If that happens, an interim injunction will be valuable in stopping the infringement and preventing damaging the plaintiff further. This is especially true in a trademark infringement case if a party can obtain an interim injunction to stop the sale of infringing goods early in the proceedings. This almost immediately achieves the primary goal of most brand owners in litigation: stopping infringement.

On January 29, 2021, the signature UK brand BURBERRY won a major victory in its fight against copycats in China. In Burberry Limited v. Xinboli Trading (Shanghai) Co., Ltd., Shentu Clothing (Shanghai) Co., Ltd., Peng Yazhong, and Kunshan Development Zone (the Burberry Case), the Suzhou Intermediate People’s Court granted an interim injunction in favor of Burberry in Civil Ruling (2020) Su 05 Min Chu No. 1545 Zhiyi. The injunction restrained the defendants from using, producing, or selling products bearing any trademarks similar or identical to Burberry’s trademarks and from making any false promotional statements that might cause any confusion relating to Burberry.

This article takes the Burberry case as an example to discuss the legal framework Chinese courts apply when reviewing motions for interim injunctive orders.

The Legal Framework

A Chinese court’s power to grant an interim injunction comes from the following:

• The Civil Procedures Law;
• The Trademark Law; and
• The Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Reviewing the Injunction Cases Involving Intellectual Property Disputes, Fa Shi [2018] No. 21 (the Provisions).

The Provisions are a normative judicial document created to ensure the proper review of injunction applications in IP disputes and “protect the legitimate rights and interests of the parties concerned,” promptly and effectively.

Article 7 of the Provisions states as follows:

The People’s Court shall consider the following factors when reviewing an application for an injunction:

1. Whether the applicant’s request has a factual and legal basis, including whether the validity of the IP to be protected is stable;
2. Whether the absence of an injunction will cause the legitimate rights and interests of the applicant to suffer irreparable injury or will cause difficulty in enforcement of the final judgment;
3. Whether the injury suffered by the applicant if an injunction is not in place will exceed the injury suffered by the respondent due to the injunction;
4. Whether the injunction will compromise public interests; and
5. Any other factors to be considered.

We will explore how the Suzhou Intermediate People’s Court applied Article 7 in the Burberry case.

Background to the Burberry Case

Burberry is the registered owner of the trademarks BURBERRY (no. G733385);  (no. 18236234);  (no. G732879); and  (no. G987322). Its trademarks are well recognized around the world.

The defendants, Xinboli Trading (Shanghai) Co., Ltd., Shentu Clothing (Shanghai) Co., Ltd., Peng Yazhong, and Kunshan Development Zone, made and sold clothes bearing two trademarks, BANEBERRY (no. 5735060) and  (no. 7199528), registered in 2009 and 2011, respectively. The latter bears a striking resemblance to the equestrian knight logo Burberry used until 2018. Further, the defendants made statements in various forms suggesting that their brand originated from Britain, or more specifically, Jermyn Street, London.

The defendants opened their first Baneberry stores in late 2019. Evidence shows that the defendants used the BANEBERRY trademark (in the same typeface as the

BURBERRY trademark), the  mark, and the BURBERRY check trademarks to create an effect that could cause confusion with the BURBERRY brand.

Burberry sued the defendants for trademark infringement and unfair competition in late 2020, and subsequently filed a motion for an interim injunction to protect its position until the resolution of the dispute.

Before filing the interim injunction application, Burberry gathered evidence from 40 Baneberry stores located in large malls or outlets in major cities across China. Notably, this was the same number of stores Burberry had in China. In addition, the defendants had also been selling goods on various Chinese e-commerce platforms.

Whether the Applicant’s Request Has a Factual and Legal Basis, Including Whether the Validity of the IP to Be Protected Is Stable

In applying this factor, the courts generally consider on what basis the plaintiff has a right to claim and the likelihood of infringement. Due to the preliminary nature of an interim injunction, the applicant must persuade the court that there is a good reason why it (the court) should restrict the respondent’s rights before fully hearing the facts.

In the Burberry case, the court believed that Burberry’s trademarks were well-known and had been consistently used in China.

A defense is that the defendants had a license to use the BANEBERRY trademarks, which had been registered for more than five years before the litigation. However, the court held that, since the BURBERRY trademarks have been well-known in China for a long time and were recognized as such before the BANEBERRY trademarks were registered, the BANEBERRY trademarks are at a serious risk of being considered as bad-faith registrations, and, thus, the five-year time limit against invalidation did not protect them. Therefore, the court found it very likely that the BANEBERRY marks would be invalidated. (The two BURBERRY trademarks involved in this case have been pending in the invalidation procedure as of now.)

Further, the defendants had used identical fonts; similar logos, hang tags, and packaging; and the Royal Warrant. Given the circumstances, the court held that it was likely to find that the defendants infringed the BURBERRY trademarks because the clothes they produced and sold likely confused and misled consumers.

The court also determined that it was likely to find that the defendants engaged in unfair competition. Evidence indicated that BANEBURRY was not a British brand and Xinboli had no business in the UK. The defendant seemed to be free-riding on Burberry’s fame through imitation and false advertising.

Whether the Absence of an Injunction Will Cause the Legitimate Rights and Interests of the Applicant to Suffer Irreparable Injury or Will Cause Difficulty in Enforcement of the Final Judgment

This factor relates to the need for an injunction. Article 10 of the Provisions states that irreparable injury may occur if:

1. The respondent’s action will compromise the applicant’s goodwill, personal rights such as right to publish, privacy, etc., and cause irreversible injury;
2. The respondent’s action will make it difficult to control the infringement action and evidently aggravate the applicant’s damages;
3. The respondent’s infringement will cause the applicant’s relevant market share to be evidently reduced; and
4. The respondent’s action will cause the applicant to suffer any other irreparable injury.

In the Burberry case, the court found that Baneberry’s infringement occurred on a massive scale, online and offline, and that this may have resulted in Burberry losing a huge part of its market share, leading to unquantifiable losses.

Moreover, the scale of infringement also led to mass consumer confusion. Many consumers misidentified BANEBERRY products for BURBERRY products and subsequently complained to e-commerce platforms and the authorities. A failure to grant an injunction would have damaged the goodwill associated with the BURBERRY brand and weakened the distinctiveness of the BURBERRY trademarks.

Additionally, an injunction was urgently required as the Chinese New Year holidays, a peak period for clothing sales in China, were imminent. The presence of knockoffs in the market during that period would have caused irreparable injury to Burberry.

Whether the Injury Suffered by the Applicant if an Injunction Is Not in Place Will Exceed the Injury Suffered by the Respondent Due to the Injunction

Some countries call this factor the balance of convenience test. An important question here is whether monetary compensation could have made up for any potential injustice. If one could measure the adverse effect of an injunction on the respondent in financial terms, it is more likely that a court would agree to grant an interim injunction.

To protect respondents, applicants must provide guarantees to cover the respondent’s potential losses from a mis-granted interim injunction. This requirement allows justice to proceed swiftly while protecting those accused of infringement from vexatious litigants.

A cash deposit is usually an acceptable form of guarantee, though a court may also accept cash-like instruments such as a letter of guarantee issued by an insurance company or some other suitable entities. Courts will examine the creditworthiness of guarantors before approving guarantees.

In the Burberry case, the court considered these factors:

• The goodwill Burberry had managed to cultivate after a century of effort;
• The stability of its brand; and
• The brand’s widespread public recognition.

The court also considered the form of the accused acts and found a high likelihood of infringement. The injury that an interim injunction might cause to the defendants is limited to monetary losses. In contrast, no injunction for Burberry might cause it irreparable harm and massive confusion and misidentification among consumers.

The court accepted bank letters of guarantee from Burberry to cover the RMB 6 million (approximately US $861,000) it had requested as a guarantee.

Whether the Injunction Will Compromise the Public Interest

Public interest is an indispensable factor in all cases in China. As a legal principle, all court decisions are ultimately for that purpose.

The court held that, in market sectors where consumers would not generally exercise special care to distinguish between goods and knockoffs, tolerating infringement would confuse and mislead consumers and yield a mass of consumer complaints, which would cost third parties, including shopping malls and e-commerce platforms, money and time. The court viewed these costs as a waste of the public’s resources.

Burberry provided evidence that Chinese consumers who had purchased BANEBERRY products had already complained of being misled into buying copycats. Granting an interim injunction would be helpful to maintain normal market order and protect consumer interests.

The Burberry case has its own circumstances. However, it seems reasonable to conclude that the grant of an interim injunction to safeguard good market order and protect consumer interests is always in the public interest if infringement is likely.

Conclusion

While permanent injunctions for IP infringements are common in China, preliminary and interim injunctions are less so. Brand owners seeking an interim injunction can take these practical steps to strengthen their applications:

1. Provide evidence of the basis of their trademark rights, including proof of their brand being famous and reputable enough to attract bad-faith free-riders.
2. Provide evidence that infringement has occurred, along with the scale of infringement.
3. Provide evidence of irreparable injury, including potentially unquantifiable harm such as a loss of market share, widespread confusion among consumers, or harm to their goodwill.
4. Provide evidence of the urgency of the situation, such as the possibility of aggravated losses and other time-sensitive factors, or that there is a likelihood that a final judgment might be frustrated if action is not taken immediately.
5. Prepare a guarantee in the form and for the amount the court will accept.

These steps supplement those laid out in the Provisions.

The Burberry case is still pending before the Suzhou Intermediate People’s Court. Given the circumstances and the comments the court has made, the interim injunction could become permanent, guaranteeing success for Burberry. The court is also likely to apply punitive damages.

Although every effort has been made to verify the accuracy of this article, readers are urged to check independently on matters of specific concern or interest. 

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