In the Courts: Holding the Landlord Liable - New Tools for the Counterfeit Crackdown in China

AuthorJoseph Simone
PositionPartner with Baker & McKenzie, which assisted the fashion brands

Groundbreaking decisions issued by courts in Beijing over the past two years, which have been hailed by the Supreme Peoples' Court as among the Top Ten IP cases of 2006, point to new strategies for tackling the problems of counterfeiting in China's retail and wholesale markets. The cases, involving leading fashion brands, confirm the right of trademark owners to pursue civil and administrative liability against the landlords of street markets who provide premises to vendors known to be dealing in counterfeits. In this article for WIPO Magazine, Joseph Simone, a partner with Baker & McKenzie, which assisted the fashion brands, explains the decisions and outlines related developments

Brand owners in the fashion and clothing industries have for many years been concerned that standard approaches to combating anti-counterfeiting in Chinese markets have not been sufficient in deterring further violations. Working closely with the Chinese authorities, a group of luxury brand owners in the fashion industry have adopted new strategies which aim to encourage landlords to become partners in anti-counterfeiting work, or else risk civil actions for contributory liability.

Litigation

Trademark legislation in China-and indeed all countries-does not specify the conditions under which landlords may be held liable for contributory infringement. It has therefore been up to the courts to do so.

The first round of test cases in China was filed in September 2005 by the brand owners of Chanel, Burberry, Gucci, Louis Vuitton and Prada against the landlord of the Xiushui Market - also know as the "Silk Market" - together with five individual vendors. Each of these vendors had been identified as selling the plaintiffs' brands on at least two occasions. The plaintiffs issued warning letters to the landlord seeking assistance in stopping the infringements. The landlord had ignored the letters.

The decisions of the Beijing No. 2 Intermediate People's Court in these cases confirmed that, after receiving notice of violations by particular vendors, the landlord must take prompt and effective measures to stop the infringements. The court also ruled that the landlord and vendors should be jointly and severally liable to pay compensation for losses, plus enforcement costs, totaling around US$2,500.

The landlord appealed. But in final decisions issued in April 2006 the Beijing Higher People's...

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