The China Rules of Evidence Series – Online Purchase of Infringing Products and Forum Shopping in Trademark Infringement Cases
In China, to succeed in an intellectual property (IP) infringement lawsuit, it is beneficial to have the case heard in a court that specializes in IP disputes (e.g., the IP courts in Beijing, Shanghai and Guangzhou). Securing a court that is away from the domicile of the infringer may also be beneficial, as it will reduce the risk of the court being influenced by local factors, and and the unknown legal environment will force the defendant to increase its defensive efforts.
In China, IP infringement generally gives rise to tort-like claims. The jurisdiction for such suits is either the domicile of the defendant or where the wrongdoing, or purchase, took place. Therefore, through a process of forum shopping (i.e., acquiring a sample of the infringing product in the desired jurisdiction), the plaintiff can determine where the IP litigation takes place. Filing a suit where the infringing product was purchased, rather than where it was manufactured, requires the plaintiff to find a third-party trader that sells the infringing product in the desired jurisdiction and involve them in a purchase trap tied to the manufacturer.
However, what happens if there is no third-party trader selling the infringing product and the only way to purchase the “evidence” is by placing an order online? Where is the place of the wrongdoing? Is there any other rule that may apply to determine whether there is an alternative to the domicile of the defendant? What if there is more than one defendant?
In the past, Chinese case law has provided little guidance. Courts adopted different standards and, with there being no binding precedents aside from the decisions of the Supreme People’s Court, judges have adopted rather inconsistent positions. However, in the recent case Guangdong Martinel Clothing Co., Ltd., Zhou Lelun v. New Balance Trade (China) Co., Ltd. & Nanjing Dongfang Shopping Mall Co., Ltd., 2016 Supreme People’s Court judgment No. 107 (Min Xia Zhong No. 107), the Supreme People’s Court finally provided a clear answer to the above questions. In particular, the Supreme People’s Court concluded that in a case in which the evidence of a trademark infringement was purchased directly from the infringer/defendant through an online transaction, the deriving civil lawsuit shall be alternatively subjected to (i) the jurisdiction of the People’s Court where the infringing act was committed (including the place where the damages were suffered), (ii) the jurisdiction of the People’s Court where the infringing commodities were stored, sealed and detained, or (iii) where the defendant has its domicile.
The Martinel Case
In the Martinel case, New Balance Inc. sued two Chinese entities and one individual before the Nanjing Intermediate Court, after having acquired evidence of their trademark infringements online from the city of Nanjing. Two of the defendants, which were domiciled in Guangzhou, objected to the court jurisdiction. The Nanjing court rejected the objection, espousing the line of arguments advanced by the plaintiff, New Balance. In particular, New Balance had based its forum shopping on the provision of article 20 of the 2015 Supreme People’s Court Interpretation on China Civil Procedure Law. This norm allows the buyer in a contractual dispute concerning the purchase of goods to sue the seller at the place of domicile of the buyer, if the subject matter of the contract is delivered via the information network (place where the contract is performed). New Balance argued that it had concluded contracts with the defendants and both had delivered the goods via the internet to New Balance in Nanjing. Therefore, it was entitled to sue the defendants in that city. By using the above provision, New Balance not only founded the jurisdiction of the court on its Chinese domicile, but also unified two originally separate infringements in one sole legal action. The defendants appealed the court decision to reject their objection to jurisdiction with the Supreme People’s Court.
The Supreme People’s Court overruled the decision of the court of first instance, stating that Article 20 of the Supreme People’s Court Interpretation on China Civil Procedure Law is not applicable to a claim of trademark infringement because the main evidence of infringement was purchased via the internet. The court concluded that trademark infringement claims are tort claims and as such are only subject to the rule on jurisdiction provided by Article 6 of the 2002 Supreme People’s Court Interpretation Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks. This norm simply reflects the general principle of jurisdiction that is applicable to all tort cases: sue at the forum of the domicile of the defendant or that of the locus commissi delicti
The decision of the Supreme People’s Court is binding on all People’s Courts and will put an end to disputes over the purchase of evidence of infringement online and forum shopping. It will surely make it more difficult for rights holders to build evidence acquisition strategies. In practice, when evidence of infringement is purchased online from the infringer directly, it will be difficult to move the forum away from the domicile of the defendant. The decision also held that in the case of separate infringements by independent defendants, the plaintiff will have to file separate lawsuits against each defendant unless a competent court unifies the different cases upon the consent of all involved parties.