Diamond Trademark Infringement Case: Punitive‑Damage Adjustment from ¥0.5M to ¥2M
Brand Background: Centennial "Diamond" Trademark
The plaintiff, Guangdong Sanjiao Electrical Appliance Co., Ltd., holds the registered "Diamond" series trademarks. As one of the pioneering brands in China’s home‑appliance sector, the Diamond brand dates back to 1964. Trademark No.47099 “Diamond graphic + Diamond + DIAMOND” was registered on October 1, 1964 and has been renewed repeatedly and remains valid to this day.
The “Diamond” mark enjoys remarkable market reputation. It has been awarded the title of Guangdong Famous Trademark on multiple occasions. In 2014, the Trademark Review and Adjudication Board of the former State Administration for Industry and Commerce recognized it as a well‑known trademark. In February 2021, it was included in the Guangdong Key Trademark Protection List. Decades of operation in the home‑appliance industry have built a stable public association between the trademark and its right‑holder, granting it substantial market influence.
Administrative Investigation: Initial Exposure of Infringing Conduct
Prior to litigation, the infringing activities drew the attention of administrative law‑enforcement authorities.
On May 25, 2022, Sanjiao Company filed a complaint with Foshan Administration for Market Regulation, reporting that multiple local enterprises were suspected of manufacturing air‑curtain machines infringing its exclusive right to use the registered “Diamond” trademark. Taking into account that the incidents spanned five districts of Foshan and suspected infringers were potentially related, the authority arranged a coordinated enforcement operation.
At 10:00 a.m. on June 8, 2022, municipal, district and town‑level law‑enforcement teams conducted simultaneous on‑site inspections against nine enterprises. A total of 1 414 suspected infringing air‑curtain machines were seized, with an estimated value of RMB 500 000‑600 000. Six enterprises were confirmed to be suspected of trademark infringement.
Though separate from judicial proceedings, this administrative crackdown supplied critical evidence for finding the scale of infringement in the subsequent civil lawsuit.
First‑Instance Judgment: Infringement Established, Punitive Damages Denied
The defendant, Mou Zuanfeng Company, used the “Diamond” sign on its official website, product titles and display pages on Tmall, Pinduoduo and JD.com online stores, as well as on air‑curtain‑machine bodies, outer packaging and user manuals. Comparison found the accused signs confusingly similar to the plaintiff’s registered trademarks.
The defendant argued that the word “Diamond” is widely used across many industries and products; its goods carried its own prominent trademark capable of indicating source and therefore no infringement existed.
The first‑instance court held the defendant’s use constituted trademark‑use in commerce and infringed the plaintiff’s exclusive rights over six registered trademarks.
On damages, however, the court found the plaintiff’s evidence could not precisely prove actual losses suffered by the right‑holder or illegal gains obtained by the defendant. Accordingly, the claim for punitive damages was rejected. Taking trademark reputation, production‑sales scale, nature and circumstances of infringement into consideration, the court awarded discretionary damages of RMB 500 000 (including reasonable litigation expenses).
Dissatisfied with the ruling, Sanjiao Company considered the award unreasonably low and argued errors in findings of fact and application of law regarding punitive damages. It filed an appeal with the Guangzhou Intellectual Property Court.
Second‑Instance Appeal: Refined Application of Punitive Damages
The appeal brought a decisive turning point to the case.
First, the court examined e‑commerce sales statistics showing sales revenue of the infringing products exceeded RMB 6.3 million. The defendant contended part of those sales derived from fake transaction orders (“brushing orders”) but failed to produce sufficient evidence quantifying such fake transactions.
Second, Sanjiao Company applied to the court to order the defendant to submit financial books and accounting vouchers for verification of infringing profits. The defendant refused to provide such materials, constituting evidence obstruction.
Focusing on whether punitive damages should apply, the appellate court examined two statutory prerequisites: subjective intent and serious objective circumstances.
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Subjective intent: As an enterprise also based in Guangdong, the defendant ought to have known the high reputation of the “Diamond” trademark yet took no evasive measures in commercial use. More importantly, the defendant had previously attempted to register a confusingly similar trademark, which was rejected. This fact demonstrates obvious intent to free‑ride on the plaintiff’s goodwill.
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Serious objective circumstances: The defendant sold infringing goods across multiple online platforms with large sales volume and a long duration of infringement, satisfying the requirement for serious circumstances.
The court applied strict evidential standards to the defendant’s “brushing‑orders” defence: the defendant bore the burden of proving the amount of fake transactions. Its submitted evidence was inconsistent and could not objectively verify the volume of fake sales, so the defence was dismissed.
After weighing platform sales records, evidence on alleged fake transactions, industry profit margins and the trademark’s contribution to product value, the appellate court fixed the base amount for calculating punitive damages at RMB 800 000. Applying a 1.5‑times multiplier for punitive damages, the total compensation awarded reached RMB 2 000 000. The appeal was granted in full, raising damages from RMB 500 000 in first instance to RMB 2 000 000.
Case Takeaways & Legal Significance
The appellate court’s handling of the “brushing‑orders” defence provides important reference for judicial practice. The possibility of such a defence is not entirely rejected, yet the infringer bears a heavy burden of proof. Where evidence submitted by the infringer is inconsistent and cannot objectively quantify fake‑transaction amounts, the defence shall not be accepted. This reminds trademark right‑holders: when facing a “brushing‑orders” defence from the infringer, they cannot merely argue such conduct is illegal; they should actively rebut from the perspective of burden of proof and evidence admissibility.
For trademark owners, this case illustrates a feasible path for claiming punitive damages in trademark litigation. Key tactics that may reverse outcomes include submitting supplementary evidence of the infringer’s subjective malice on appeal, applying for court orders compelling disclosure of the infringer’s financial records, and making full use of sales data disclosed by e‑commerce platforms.
