HAWORTH & LEXON
LEGAL INSIGHT
Issue 5—September 2012
The Free-Rider's Shareholders are Jointly
Liable
for
the
Infringement
Case Summary
A The Plaintiff, Societe Jas Hennessy & CO. (hereinafter referred to as “France
Hennessy”), is the owner of a set of trademarks of Hennessy, 轩尼诗 and “axe
in hand” logo, etc., which are registered in respect of alcoholic beverages
(excluding beer) in Class No. 33, France brandy, wine, alcohol and liqueur.
France Hennessy alleged that Lichang Jinhai Wine Co., Ltd. (hereinafter referred
to as “Jinhai Company”), Shenfeng International Co., Ltd. (hereinafter referred to
as “Shenfeng”, originally Hong Kong Hennessy Company), Mr Guo, Mr. Li,
Shanghai Guangli Trading Development Co., Ltd. (hereinafter referred to as
“Guangli Company”) have been producing and selling wine products with similar
trademark, name of business and domain name to its registered trademarks, and
thereby infringed the right to use of the registered trademarks, which constitutes
unfair competition. France Hennessy filed the lawsuit against the aforesaid
parties before Shanghai Pudong New Area People’s Court, requesting that the
Defendants cease the acts of infringement of registered trademarks and unfair
competition and be jointly and severally liable for the damages of RMB 1000,
000.
The court of first instance held after the trial that, (1) it was an infringement of the
right to use of the registered trademarks in issue that the Defendant Jinhai
Company, Shenfeng Company, Guangli Company used “axe in hand” logo,
“Hennessypt” and the bottle of flat gourd shape on their wine products and in the
advertisement without the Plaintiff’s authorization; (2) it was an infringement of
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LEGAL INSIGHT
Issue 5—September 2012
the right to use of the registered trademarks in issue that Shenfeng Company
used “轩尼诗” on its website; (3) it constitutes unfair competition that Jinhai
Company and Shenfeng Company used the business name of “法国轩尼诗集团
（香港）有限公司”， “法国軒尼詩集团（香港）有限公司” and “France Hennessy
Group(HK) Co. Limited” on the website in issue; (4) since Mr. Guo and Mr. Li
were the sole shareholder and director and general manager of Hong Kong
Hennessy Company, and sold the wine products in issue in the name of Hong
Kong Hennessy Company, Mr. Guo and Mr. Li’s acts shall be deemed to be the
company’s acts rather than the individual acts, hence Mr. Guo and Mr. Li shall
not assume the liability of infringement. The court of first instance decided on
December 22, 2011 that the Defendant Jinhai Company, Shenfeng Company
and Guangli Company cease the acts of infringement of registered trademarks
and unfair competition, publish a statement on the newspapers in respect of the
acts of infringement and eliminate ill effects; Guangli Company compensate the
Plaintiff for losses of RMB40,000; and Jinhai Company and Shenfeng Company
compensate the Plaintiff for losses of RMB460,000, and be jointly and severally
liable for the Guangli Company’s compensation.
The Plaintiff refused to accept the judgment of the court of first instance and filed
an appeal with Shanghai No.1 Intermediate People’s Court.
Shanghai No.1 Intermediate People’s Court made no dissent in respect of (1) –
(2) decisions of the court of first instance after the trial, but held that it constituted
acts of unfair competition against France Hennessy that Mr. Guo and Mr. Li used
“法国轩尼诗集团（香港）有限公司”， “法国軒尼詩集团（香港）有限公司” and
“France Hennessy Group (HK) Co. Limited” on the website in issue which was
registered in the name of Shenfeng Company. As to whether Mr. Guo and Mr. Li
shall take the liability of joint infringement, the court held that Mr. Guo and Mr. Li
had the common intention communication with Jinhai Company in respect of the
manufacturing and selling of the wine products in issue, and arranged the
division of work, while Hong Kong Hennessy Company was incorporated by
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LEGAL INSIGHT
Issue 5—September 2012
Jinhai Company, Mr. Guo and Mr. Li for the purpose of conducting the acts of
infringement of the registered trademark; after it was incorporated, it did not
conduct any business activities other than selling wine products in issue in China
in the name of Hong Kong Hennessy Company. In conclusion, the court of
second instance held that there was common infringement deliberation between
Mr. Guo, Mr. Li and Jinhai Company, Shenfeng Company, and all of them be
liable for the civil liability of joint infringement. The court decided on August 7,
2012 that, the Defendant Jinhai Company and Guangli Company cease the acts
of infringement of the registered trademarks of France Hennessy and unfair
competition immediately; publish on the newspapers in respect of the acts of
infringement and eliminate ill effects; Guangli Company compensate the Plaintiff
for losses of RMB40,000; and Jinhai Company, Mr. Guo and Mr. Li compensate
the Plaintiff for losses of RMB460,000 jointly and severally, and be jointly and
severally liable for the Guangli Company’s compensation.
Analysis
This is not a complex case of infringement of registered trademark and unfair
competition, and is a typical case of infringement of registered trademark as a
result of free-ride, where the primary issue is whether the shareholder or investor
of the infringing company shall be liable for the joint infringement.
Pursuant to General Principles of the Civil Law and Company Law, a company
with limited liability is of the nature of an independent legal person, which is
independent from its shareholders who assume liability towards the company to
the extent of capital contributions. This reflects the value of the “limited liability”,
whereas some free-riding companies take the advantage of it. Although the
company’s acts of infringement are conducted through the authorization by its
shareholders or investors or on their own, the owner of the trademark can pursue
the legal liability against the company only, while the shareholders or investors
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are safe from the legal liability. It makes great difficulties for the owner of the
trademarks to protect its right.
The special point of this case is that the shareholder and the officer of the
company are decided to assume the joint and several liabilities for trademark
infringement. According to the subjective intent and the nature of the acts of Mr.
Guo and Mr. Li during the process of the domain registration and overseas
company incorporation, they have constituted joint infringement with the
company and should be liable jointly and severally. It is the breakthrough of the
CONTACT US
principle of limited liability of the company.
IP Group
What should brought into attention of the owner of the trademark is that, in the
Bailey Xu
Attorney-at-law, Partner
E: [email protected]
cases of similar kind, in order to prove that the company and its shareholders or
investors conduct joint infringement, it should prove the following points: (1) the
subjective intent communication of joint infringement, (2) the objective acts of
cooperation, and (3) the causal relationship between the acts and the results,
Kevin Cheng
Attorney-at-law
thereby deciding whether it constitute joint infringement and joint and several
liability.
E: [email protected]
Celine Chen
Attorney-at-law
E: [email protected]
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