The infringement party forges the authorization letter, and based on the false authorization, develops dealers to open stores all over the country, and subsequently sells infringing goods and uses similar decoration of stores, which constitutes trademark infringement and unfair competition. If the cooperation between the infringing party and its distributor conforms to all the requirements of the franchise legal relationship such as the licensed use of franchise resources, the control of business mode and the corresponding consideration, the two parties shall establish the franchise contractual relationship, which constitutes joint infringement and shall bear joint liability.

HBI Brand Clothing Enterprise Co., LTD. (hereinafter referred to as HBI Company) production and sales of Champion brand series of commodities in the world has a high visibility and reputation. Since 1984, HBI has registered the "Champion" series of trademarks for a number of goods and services, including Category 25 "Clothing, Shoes", Category 35 "Advertising, promotion (for others)", Category 18 "Backpacks, purses" and Category 21 "water bottles". The overall decoration style maintained by HBI stores has established a relatively unified and stable relationship with the "Champion" brand stores, which has become an important image to identify the "Champion" brand stores in addition to the "Champion" store recruitment and LOGO. Therefore, HBI company's store decoration constitutes the unfair competition law protection has a certain impact of "decoration".

HBI Company found that Anhui Weisi Trading Co., LTD. (hereinafter referred to as Weisi Company) set up a number of "Champion" brand stores to sell counterfeit "Champion" related brand products, and it positioned itself in "Champion" brand stores. It is similar to HBI's "Champion" brand store in terms of decorative elements and overall business style.

After investigation, the company has signed a cooperation Agreement with Shaoxing Jinshuangniu Knitwear Co., LTD. (hereinafter referred to as Jinshuangniu Company). The parties agree as follows: "1. Jinshuangniu is the authorized party of ChampionEurops.R.I., a subsidiary of HanesBrandsInc in the United States, and has the agency right and sales right of HanesBrandsInc's brand Champion in China (authorized categories include: Clothing, shoes, accessories).  Jinshuangniu has the right to suggest and guide the marketing plan of VUS, and the right to examine and standardize VUS 'product advertising. 3. The company shall ensure that the sales volume of each store authorized to operate is: 10 million yuan/year in first-tier cities, 8 million yuan/year in second-tier cities and 6 million yuan/year in third-tier cities. Vus shall not fabricate the products covered by this contract without authorization, nor sign any contract related to Champion brand with any third party in its own name, otherwise Jinshuangniu shall have the right to unilaterally terminate the agreement without any compensation or compensation, deduct the deposit in full, and reserve the right to pursue VUS for legal liability. Vios may only sell the products of Champion's European line and American Life line provided by Jinshuangniu. If VIos sells products outside the above scope, Jinshuangniu has the right to cancel the authorization of VIOS and claim the losses arising therefrom from VIos. 4. The retail price of Jinshuangniu Company to Weiss Company shall be the sales price designated by Jinshuangniu Company. Vix Company shall pay Jinshuangniu Company a deposit of 1 million yuan within one week after signing this Contract. If VIx Company violates the terms of this contract, Jinshuangniu Company shall have the right to deduct the deposit according to the breach of this contract. Viz Company shall sign a sales contract with the designated company of Jinshuangniu Company before June 10, 2019, and pay 30% of the purchase price of the order contract as a deposit, otherwise this contract will not take effect. This contract is valid from June 5, 2019 to June 5, 2021. 5. Jinshuangniu shall ensure that the relevant qualifications provided are true and valid and comply with the relevant provisions of Chinese law."

HBI filed an action with the Court of First Instance, seeking an order that:

1. Jinshuangniu Company and Weisi Company shall immediately stop infringing on the exclusive right of HBI Company's "Champion" and other registered trademarks, that is, immediately stop selling and importing goods with the infringing mark of "Champion"; Immediately stop using the infringing "Champion" logo in any way on store signs, packaging bags, shelves, promotional materials, and promotional activities on premises, distribution channels, etc.;

2. Jinshuangniu shall immediately stop forging, issuing and using false "Champion" brand authorization documents; Stop authorizing others to open "Champion" stores and develop the regional distribution system of "Champion" brand goods; Stop authorizing others to use the "Champion" logo;

3. Weis immediately stops the infringement of using false "Champion" brand license documents;

4. Jinshuangniu Company and Weisi Company shall immediately stop using unfair competition acts that are identical or similar to the unique packaging decoration of HBI Company's authorized specialty stores;

5. Jinshuangniu Company and Weisi Company shall immediately stop the false publicity and unfair competition by claiming that Jinshuangniu Company and Weisi Company have the right to operate the "Champion" brand agency and other misleading related public to believe that Jinshuangniu Company and Weisi Company have the right to operate the "Champion" brand agency;

6. Jinshuangniu Company and Weis Company shall immediately stop engaging in unfair competition acts that violate the principles of voluntariness, equality, fairness and good faith, and violate laws and business ethics;

7. Jinshuangniu Company and Weiss Company shall publish written statements on their trademark infringement and unfair competition in prominent positions in China Industry and Commerce News and Sina Weibo to eliminate the impact;

8. Jinshuangniu Company compensates HBI Company for economic loss of 15 million yuan and reasonable expenses of 1 million yuan; The company shall be jointly liable for 3.2 million yuan of the aforementioned compensation amount of 16 million yuan;

9. Jinshuangniu Company and Weiss Company shall bear all litigation costs of this case.

After the trial,The Court of First instance ruled that Jinshuangniu Company and Weiss Company shall immediately stop infringing on the exclusive right of HBI company's "Champion" and other registered trademarks and unfair competition acts from the effective date of the judgment, including: Selling infringing products, misleading distribution authorization and authorization, confusing business site recruitment, decoration, display of goods, promotional activities, advertising, etc.;Jinshuangniu Company and Weiss Company shall publish a statement in China Industry and Commerce News and Sina.com within 30 days after the effective date of the judgment to eliminate the impact; Within 30 days from the effective date of the judgment, Jinshuangu Company shall compensate HBI Company for the economic losses caused by the infringement of registered trademark rights and unfair competition and the reasonable expenses of 2.2 million yuan to stop the infringement, and Vix Company shall bear joint and several liability for the above compensation.

HBI Company and Jinshuangniu Company both refused to accept the judgment of the first instance and appealed to the court of second instance. After hearing, the appeal was rejected and the original judgment was upheld.

Second, the gist of the judgment

The Court of second instance held that without the permission of HBI Company, the owner of the registered trademark of "Champion" brand, Weisi Company opened a number of "Champion" brand stores and sold counterfeit "Champion" brand products, which constituted infringement of the exclusive right to use the registered trademark of HBI company and unfair competition. The qualitative conduct of Jinshuangniu Company in this case should be reflected in the following aspects:

1. Jinshuangniu Company has established a franchise contract relationship with VUS Company, which constitutes joint infringement with VUS Company in this case.Jinshuangniu Company argued that the Cooperation Agreement signed between Jinshuangniu and VUS Company was not effective because VUS company did not pay the deposit, and the two parties only had a sales relationship established by the Sales Contract. Throughout the cooperation process between Jinshuangniu Company and VUS Company, Jinshuangniu Company collected the deposit from VUS Company and issued a letter of authorization to VUS Company for the designated address store, and VUS Company applied for the mall settlement with the letter of authorization. Jinshuangniu Company and VUS Company signed a sales Contract and provided goods to them, which are both obligations agreed in the Cooperation Agreement. The main obligations agreed upon have been fulfilled and accepted by the other party. Jinshuangniu claims that the Cooperation Agreement does not take effect on the grounds that Weis has not paid the deposit after signing the sales contract. Jinshuangniu Company claims that its authorization to VUS company is a sales authorization and does not involve other rights, but according to the principle of "one-time exhaustion of trademark rights", the act of re-selling the legally obtained goods does not need to be authorized separately. As a mature commercial subject, Jinshuangniu Company and VUS Company should be fully aware of this. According to the Cooperation Agreement, Jinshuangniu Company emphasizes that it is "Championeurops.R.I., a subsidiary of HanesBrandsInc in the United States, and has the right to operate and sell HanesBrandsInc's brand Champion in China". Accompanied by a letter of authorization signed in the name of ChampionEurops.R.L, the authorization referred to shall be beyond the rights of the sale of goods. Jinshuangniu shall receive a deposit of RMB 1 million from VUS in accordance with the contract, and shall have clear restrictions on the address, annual sales quota, sales product limit, sales source limit and sales price of VUS physical sales store, and shall have the right to suggest and guide marketing programs, review and regulate product advertising, and guide the handling of complaints and service requests from product end users; In fact, Jinshuangniu Company also received a deposit from VX Company, and controlled the decoration style, LOGO and poster of VX Company's store. The behavior of Jinshuangniu Company that VX Company paid to the company outside the case rather than to Jinshuangniu Company is not inconsistent with the agreement in the Cooperation Agreement that VX Company paid to the company designated by Jinshuangniu Company. According to the relevant provisions of the Regulations on the Administration of Commercial Franchise, Jinshuangniu Company licensed the sale of the trademark goods involved in the case to VUS Company through the signing of the Cooperation Agreement between the two parties, clearly defined the business model of VUS Company, and collected a deposit of 1 million yuan in addition to the commodity price. The relationship between Jinshuangniu Company and VUS Company is not a simple purchase and sale of goods, but the cooperation between the two parties fully fits all the requirements of the franchise legal relationship such as the licensed use of franchise resources, the control of business mode and the corresponding consideration.

2. The accused infringing products are from Jinshuangniu Company.First of all, the notarial certificate of the first instance of HBI company showed that the distributor on the tag of the goods sold by VSI Company for suspected infringement of shirts, T-shirts and other goods was Jinshuangniu Company, and Jinshuangniu company did not provide evidence to prove that the tag was falsely marked in its name, or that it had legal sources for related products; Secondly, the franchise relationship between Jinshuangniu Company and VUS Company, the "purchase and sales contract" signed by Jinshuangniu Company and Vus company agreed that the supply amount of autumn and winter 2019 goods reached 4 million, and the annual sales amount of Vus company in Hefei was at least 8 million. Therefore, Jinshuangniu Company's statement that it only sold hats worth more than 10,000 yuan to Weiss Company is unreasonable. Jinshuangniu Company purchased the products of VUS Company through notarization to prove that they were not sold by its company. Since the notarization time was half a year after the notarization and evidence collection of HBI company, it could not be used as counterproof of the evidence given by HBI company.

Regarding the reasons for the appeal that Jinshuangniu claims that it has not participated in the operation of VUS Company, has no knowledge of the advertising, marketing and publicity behavior of VUS Company's Swan Lake Wanda Plaza store on the third-party platform, and should not bear the liability for trademark infringement. After investigation, WeIS company settled in Swan Lake Wanda Plaza with the authorization letter delivered by Jinshuangniu Company, opened, decorated stores and their subsequent operation and publicity, and the "Cooperation Agreement" signed by Weis Company and Jinshuangniu Company also agreed that Jinshuangniu Company has the right to review and standardize Weis Company's product advertising. Therefore, the court of second instance held that Jinshuangniu Company's reasons for appeal in this section were inconsistent with the facts and were not accepted. (Source: Win on IP)

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