This article was published in the 11th issue of "People's Justice" in 2024, author: Yan Jing (retrial undertaker), Li Li (retrial undertaker), annotations omitted.
Summary of the trial
In a trademark infringement case, the seller's lawful source defense should have both subjective and objective requirements. The objective element is that the alleged infringing product is an infringing product lawfully obtained by the seller, and the subjective element is that the seller does not know or should not know that the alleged infringing product constitutes infringement, the subjective and objective elements are interrelated and inseparable, and the evidence of the objective element has a presumptive effect on the subjective element. When examining the above-mentioned subjective and objective elements, the people's court shall comprehensively consider factors such as the seller's market position, the cost of protecting the rights holder's rights, and market transaction habits, and make reasonable requirements for the seller's burden of proof;
Case No
First instance: (2020) Ji 06 Zhi Min Chu No. 81 et al. 5 cases
Second instance: (2021) Ji Zhi Min Zhong No. 25 et al. 5 cases
Retrial: (2022) Zui Gao Fa Min Zai Nos. 274, 275, 276, 277, 278
Facts of the case
Plaintiff: Nayikiel Co., Ltd. (hereinafter referred to as Nayikier).
Defendants: A shopping store in Shunping County, etc.
Nayiqier claimed that Nayiqier enjoyed the exclusive right to use the 1049419* "NATUREREPUBLIC" English and No. 948138* "Nayiqier" Chinese registered trademarks (hereinafter collectively referred to as the trademarks in question). The scope of approved use of goods is Class 3, which is now within the validity period of approval. A shopping store in Shunping County (hereinafter referred to as the shopping store) and other merchants sold aloe vera gel with counterfeit trademarks involved in the case, and their actions infringed on the exclusive right to use the registered trademark of Nayiqier, and they should bear the civil legal responsibility to stop the infringement and compensate for losses in accordance with the law, so they filed a lawsuit with the people's court.
Adjudication
The court of first instance held that the logo used on the allegedly infringing product was the same as the trademark in question held by Nayiqier, that the sale of the allegedly infringing product by the shopping store and other merchants infringed the exclusive right to use the registered trademark of Nayiqier, and that the evidence provided by the shopping store could not prove that the allegedly infringing product had a legal source and could not be exempted from its liability for compensation. Therefore, it was ordered that the shopping stores should be liable to stop the infringement, destroy the infringing products in stock, and compensate Nayiqier for reasonable expenses and economic losses ranging from 7,000 yuan to 10,000 yuan. Dissatisfied with the first-instance judgment, the shopping store and other merchants appealed.
The court of second instance held that the evidence provided by the shopping store and other merchants could not prove that the goods of the upstream merchants came from Nayiqier, nor could it prove that they had the authorization of Nayiqier, and could not achieve the purpose of proof. Since the shopping store failed to provide evidence to prove that it had fulfilled the corresponding duty of care, it should bear the adverse consequences and could not be exempted from its liability for compensation. The court of second instance rejected the appeal and upheld the original judgment. Dissatisfied with the second-instance judgment, the shopping store and others applied to the Supreme People's Court for a retrial.
After a retrial review, the Supreme Court brought the series of cases to trial and reversed the verdict in the retrial. The Supreme Court held in the retrial that the evidence adduced by the shopping store and other merchants, as small-scale retailers, basically met the standards and requirements of laws, regulations and judicial interpretations on the burden of proof of the objective elements of the lawful source defense, and could prove that it had obtained the allegedly infringing products in accordance with the legal and normal market transaction rules, and that the source of the products was clear, the channels were legal, and the prices were reasonable, and the suppliers of the allegedly infringing products had been specified. The degree of professionalism and other appropriate duty of reasonable care, so that it is presumed that the shopping store did not actually know and should not have known that the product sold was infringing, and there was no subjective fault on its part. The Supreme Court ruled to revoke the content of the corresponding judgments of the first-instance and second-instance judgments, and instead ordered the shopping stores and others to stop the infringing acts and destroy the infringing goods in stock, and at the same time rejected Nayiqier's other litigation claims.
Commentary
The lawful source defense system in the Trademark Law stems from the principle of protecting bona fide third parties in the Civil Law, and its legislative intent is to balance the interests of intellectual property rights holders and bona fide third parties, and to protect bona fide sellers. The system aims to maintain the security of market transactions by exempting bona fide sellers from liability, and at the same time incentivizing sellers to disclose the source of infringing goods, so that rights holders can crack down on infringement at the source. In recent years, a large number of trademark rights holders have sued small supermarkets, self-employed and other scattered small businesses for trademark infringement, and many of them have attempted to make profits through litigation. However, the seller is often not the source of the infringement, and if the source of the infringement is not traced back to the source and the manufacturer is cracked down, such cases will continue to flow, which will not only double the litigation costs of the parties, but also greatly consume judicial resources. Therefore, to a certain extent, the lawful source defense system is of positive significance for promoting the realization of litigation source governance.
I. The connotation of the lawful source defense system and the problems existing in practice
Paragraph 2 of Article 64 of the Trademark Law stipulates that: "A person who sells goods that he does not know to infringe the exclusive right to use a registered trademark shall not be liable for compensation if he can prove that the goods were lawfully obtained by himself and explain the supplier." This article is the legal basis for the lawful source defense system in the Trademark Law, and its provisions contain the requirements for the establishment of the lawful source defense system and the rules for bearing legal liability. Therefore, the lawful source defense must meet the following conditions: (1) the alleged infringement is the sale of goods infringing trademark rights, (2) the accused infringer is not subjectively at fault for the sale of the infringing goods, and (3) the infringing goods sold are lawfully obtained.
In judicial practice, the above-mentioned establishment requirements must be clarified from the following aspects:
First, the alleged infringement was the sale of goods infringing trademark rights. First, the alleged infringement is limited to the intermediate link of "sales", which does not include the act of producing the goods or the use of the goods by consumers; second, the infringement of the seller's act of selling the goods has already been determined, and there is no need to repeat the argument when examining the defense of the lawful source.
Second, evidence should be adduced to prove that the accused infringer was not subjectively at fault in selling the infringing goods. Since it is often difficult for the parties to directly prove the elements of subjective fault, and the subjective and objective manifestations of the parties' acts are inevitably closely linked. The problem that is prone to exist in judicial practice is that the burden of proof for subjective elements is improperly allocated, or the burden of proof for subjective elements cannot be organically linked with the burden of proof for objective elements, resulting in the failure of the burden of proof for subjective elements.
Third, the infringing goods sold were lawfully obtained. As noted above, the legislative purpose of the lawful source defence is to protect the interests of bona fide sellers. What is meant by "good faith"? From the analysis of the article itself, that is, "it does not know and should not know" that the goods it sells are infringing goods. However, the judgment of the subjective state of the seller "did not know and should not have known" needs to be proved and presumed through objective factual evidence such as "lawful acquisition" and "explanation of the source". Therefore, in order to prove the cause of the defense, the right holder must provide evidence to prove that the infringing goods sold by it were lawfully obtained, including the basis, method, source, and whether a reasonable consideration was paid, etc. Otherwise, it would not be possible to prove that it was a bona fide seller or that it should be protected under the regime. In practice, it is difficult to grasp the standard of proof that has been lawfully obtained, and there is often a "one-size-fits-all" situation in the process of determining evidence, which makes it difficult to achieve true leniency and appropriateness in the final handling of cases. In this regard, Article 4 of the Several Provisions of the Supreme Court on Evidence in Intellectual Property Civil Litigation (hereinafter referred to as the "Provisions on Intellectual Property Evidence") stipulates that "if the defendant asserts a lawful source defense in accordance with the law, it shall provide evidence to prove the fact that the alleged infringing product or copy was lawfully obtained, including the lawful purchase channel, reasonable price and direct supplier." Where the evidence provided by the defendant of the source of the alleged infringing product or copy is equivalent to its duty of reasonable care, it may be found that it has completed the presentation of evidence as provided in the preceding paragraph, and it is presumed that it did not know that the alleged infringing product or copy infringed intellectual property rights. The defendant's business scale, degree of professionalism, market trading habits, and so forth may be used as evidence to determine the defendant's duty of reasonable care. The above-mentioned judicial interpretations clearly stipulate the allocation of the burden of proof, the scope and content of proof, and the relationship between the objective and subjective elements of the burden of proof.
Fourth, the responsibility for the establishment of the lawful source defense. The Trademark Law only makes it clear that the lawful source defense can be established and the accused infringer is not liable for compensation if the above elements can be proved to be established, but it does not deny the tortious nature of the act, and correspondingly does not make it clear that the accused infringer does not bear other liability for compensation in addition to the liability for compensation. Therefore, the author believes that the premise for the understanding of the lawful source defense system is that the act of the subject of the defense has constituted trademark infringement, and even if the defense can be established, in addition to not being liable for compensation in accordance with the law, it is not excluded that the subject should bear other legal liabilities, such as stopping the infringement, destroying the infringing product, making a formal apology, and other corresponding forms of liability as stipulated in the Civil Code. Furthermore, not being liable for compensation does not mean that the plaintiff is not liable for reasonable expenses for defending its rights. Because the alleged infringement itself is infringing, the right holder's rights protection are within the scope of its rights, and the reasonable expenses for rights protection are caused by the infringement itself, even if the law provides that the infringement of a bona fide seller is exempted from liability for compensation, the reasonable expenses already incurred by the right holder should be borne by the infringer in principle. The common misunderstanding in practice is that once the defense of lawful source is established, it is considered that the actor is exempted from all legal liabilities, and there is no distinction between liability for compensation and other legal liabilities, especially whether reasonable expenses are supported or not.
II. Review and Determination of the Establishment of the Lawful Source Defense
(1) Review of objective elements
The review of the objective elements of the lawful source defense shall proceed from the original intention of the design of the system, comprehensively consider factors such as the seller's market position, the cost of protecting the rights holder's rights, and market trading habits, and make reasonable requirements for the seller's burden of proof. In addition to the application of the relevant provisions of the Provisions on Intellectual Property Evidence, the relevant provisions of the administrative regulations can also be used as a reference for determining whether the objective element is established. Article 79 of the Regulations for the Implementation of the Trademark Law stipulates that "there is a supply list and payment receipt legally signed and sealed by the supplier and verified to be true or approved by the supplier", "there is a purchase contract signed by the supplier and seller and it has been verified that it has been truly performed", "there is a legal purchase invoice and the items recorded in the invoice correspond to the goods involved in the case", etc., which are the circumstances that can prove that the goods were legally obtained by oneself under the Trademark Law.
In the Nayiqier v. Shopping Stores series of cases, individual retailers such as shopping stores are in a weak position in market business activities and their transaction methods are usually more flexible, so their burden of proof that the goods sold have a lawful source should be appropriately reduced, and it is not appropriate to be too strict on the completeness of the formal elements of evidence, as long as the evidence provided by them conforms to general trading customs, can indicate the true identity information of the supplier of the allegedly infringing products, and purchases the allegedly infringing products through lawful purchase channels and reasonable prices, it should be determined that the allegedly infringing products sold by them have a lawful source。
Take the case of Nayiqier and the shopping store as an example: according to the evidence provided by the shopping store, there was a contractual relationship between it and the supplier, Kai, for the sale of Nayiqier's aloe vera gel products, and Kai's business license showed that its business scope included the sale of cosmetics. According to the purchase and sale contract, Kai's company provided the shopping store with Nayiqier aloe vera gel products, and the evidence in the case showed that the shopping store purchased 1 0 boxes of Nayiqier aloe vera gel products from Kai at a unit price of 17.5 yuan, and the payment for the goods had been paid in full; the commodity name, the quantity of the goods, the transaction time, and the transaction amount in the above evidence could all correspond to the purchase and sale contract, which could prove that the purchase and sale contract had been truly performed. In addition, the purchase certificate issued by Kai also clearly recorded the barcode, batch number and restricted date of the Aloe Vera Gel product. After comparison, the above information is also completely consistent with the barcode, batch number and restricted date printed on the outer packaging of the allegedly infringing product. Therefore, the above-mentioned evidence provided by the shopping store shows that the transaction chain is complete, the transaction channel is legal, the transaction price is equivalent to the price of the genuine Nayiqier product, the transaction method conforms to the general trading customs, and it is indicated that the supplier of the allegedly infringing product is Kai Company. In the absence of evidence to the contrary, the above evidence provided by the shopping store should be admissible. In other words, as small-scale retailers, the evidence adduced by shopping stores and other retailers basically meets the standards and requirements of laws, regulations and judicial interpretations on the burden of proof of the objective elements of the lawful source defense, and can prove that they have lawfully obtained the allegedly infringing products. Accordingly, the objective elements of the lawful source defense raised by the alleged infringing seller in this case can be proved and should be determined.
In addition, it is worth noting that in the second paragraph of Article 64 of the Trademark Law, "description provider" In other words, if the seller is required to prove the entire supply chain, the burden of proof on the seller is excessive, and the legislative effect of the system cannot be achieved; if the seller can prove that the product it sells originates from the right holder, its sales act does not constitute infringement, which is contrary to the legislative objective of the lawful source defense system, that is, there is no need to consider whether the lawful source defense system applies。
(2) Review of subjective elements
According to the evidence provisions, the grasp of the seller's subjective state should start from the examination of the evidence of the lawful source of the alleged infringing product, and make a comprehensive judgment based on the specific facts of the case and trading habits. In general, the scale of the seller's business, professionalism, market trading habits, etc., can be used as evidence to determine its duty of reasonable care. In addition, in the process of determining the subjective elements, a comprehensive judgment may also be made based on other facts and evidence, such as: whether the purchase channel conforms to commercial practice, whether the price of the goods is significantly lower than the market price, whether the accused infringer refuses to provide accounting documents such as accounts and sales records, or whether the accounting documents submitted are true, whether there is any transfer or destruction of physical evidence after the occurrence of the case, or whether there is a situation of recidivism after the case has been dealt with, and whether there is a situation of recidivism after being dealt with for similar violations. Article 27 of the Trademark Infringement Judgment Criteria implemented by the State Intellectual Property Office in 2020 has relevant provisions on this.
Medium- and small-scale retailers have different cognitive abilities as to whether the allegedly infringing products are infringing than commercial entities of a certain scale, and if the evidence of legal source provided by the seller is equivalent to the degree of its duty of care, it can be presumed that it is subjectively unaware that the product it is selling is infringing. In the Nayiqier series of cases, the alleged infringing product, Nayiqier aloe vera gel, was a low-priced daily cosmetics with relatively meager market prices and product profits, and the seller's shopping store was an individual industrial and commercial household, with a small business scale and a low degree of professionalism, so it was not appropriate to require too high a requirement for the seller's cognitive ability to determine whether the products sold were infringing. Judging from the evidence provided by shopping stores and other merchants, the evidence adduced by them can prove that they have obtained the allegedly infringing products in accordance with the legal and normal market transaction rules, and the source of the products is clear, the channels are legal, and the prices are reasonable. professional degree and other appropriate duty of care, so that it is presumed that the merchant involved in the case did not actually know and should not have known that the products sold were infringing products, and there was no subjective fault on its part. In addition, the shopping stores and other merchants also provided copies of the authorization letter from Yipin Cosmetics Company, the upstream seller of Kai's company, to obtain the Nayiqier aloe vera gel product and the relevant import customs clearance certificate to prove that they were not subjectively at fault. Although the defense of the lawful source of the merchant such as a shopping store is established does not require it to prove the evidence of the entire supply chain of the allegedly infringing product sold or the source of the right holder, the photocopy provided to the people's court by the merchant as a terminal seller without holding the original evidence is of certain assistance to the right holder to trace the source of the infringing product, and it also has a reference role in the people's court's review of the subjective and objective elements.
In summary, the shopping store and other merchants have completed their burden of proving that the allegedly infringing products have a lawful source and have exercised reasonable care, and their lawful source defense is established, and the merchants involved in the case should not be liable for compensation in accordance with the second paragraph of Article 64 of the Trademark Law. The second-instance judgment that the relevant evidence provided by the shopping stores could not prove that the goods of the upstream merchants came from Nayiqier, nor could it prove that they had the authorization to Nayiqier, so the determination that the defense of lawful source could not be established was improper, and the retrial judgment corrected it.
3. Responsibilities of bona fide sellers
As mentioned above, when the defense of lawful source asserted by the seller in accordance with Article 64, Paragraph 2 of the Trademark Law is established, the seller shall not be liable for compensation, but it will only be exempted from the civil liability for damages made by the specific actor, and not all types of civil liability. It can be seen that the defense of lawful source is not a defense of non-infringement, and even if the defense of lawful source is established, it does not change the tortious nature of the act of selling infringing products. Therefore, if the defense of lawful source is established, the bona fide seller should still bear other corresponding tort liabilities such as cessation of infringement in accordance with the provisions of Article 179 of the Civil Code, such as the legal liability for stopping the infringement and destroying the infringing goods determined by the retrial judgment of this series of cases.
As for the cost of rights protection, it is the cost incurred by the right holder to stop the infringement, which is independent of the economic losses suffered due to the infringement, and is different from the damages for infringement in terms of legal attributes, so the expenses for rights protection should not be exempted together with the amount of damages in principle. In this regard, the Supreme Court has made clear provisions in Article 1 6 of the Several Provisions on Issues Concerning the Application of Law in the Trial of Patent Dispute Cases (amended in 2020). Therefore, even if the seller's defense of lawful source is established and the seller is not liable for compensation, in principle, it should still compensate the right holder for the reasonable rights protection expenses incurred by the right holder to obtain the relief of stopping the infringement. However, whether the litigation claim of the right holder for reasonable rights protection costs should be ultimately supported should also be analyzed based on the specific facts of the case and the circumstances of the evidence. If the right holder has a batch of rights protection and the evidence of relevant rights protection costs cannot be calculated one by one, the bona fide seller may be exempted from the liability to compensate for the rights protection costs in accordance with the principle of fairness. This is an exception to the principle of reasonable rights protection costs, and aims to further guide rights holders to focus on cracking down on infringement at the source, so as to prevent rights holders from neglecting to protect their rights or allowing infringement, and then obtain compensation far beyond the actual losses by filing lawsuits in batches.
In the Nayiqier series of cases, Nayiqier asserted that the shopping store and other sales entities should bear the responsibility for compensating for its rights protection expenses, but whether its litigation claims should be supported should also be comprehensively determined in light of the specific circumstances of the case and returning to the legislative intent of the lawful source defense system.
First of all, although Nayiqier claimed that the shopping store and other merchants should compensate for its rights protection expenses, it never provided relevant evidence to the people's court, so it should bear the adverse legal consequences.
Secondly, the provisions of the lawful source defense system on the exemption of bona fide sellers from liability are on the one hand to encourage bona fide sellers to actively disclose product source information, and on the other hand, it is also to protect the trust interests of bona fide sellers based on the normal market transaction order. In this case, first, the infringement circumstances and consequences of the infringement were significantly minor for the shopping stores and other merchants, and in comparison, the rights protection expenses claimed by Nayiqier amounted to 10,000 yuan, a large difference between the two; Under such circumstances, if the merchant such as a shopping store still bears the cost of rights protection, it will not only violate the principle of fairness, but also cannot fully reflect the incentives and protection of bona fide sellers under the lawful source defense system.
Thirdly, since Nayiqier failed to provide corresponding evidence of his rights protection expenses in this case, his rights protection expenses in this case could not be separately accounted for. To sum up, in order to reflect the incentives and protection of bona fide sellers under the lawful source defense system, and at the same time guide the intellectual property rights holder to actively claim rights against the manufacturer of the source of infringement, and to lawfully and reasonably protect rights, the Supreme Court did not support Nayiqier's litigation claim on rights protection expenses.
In summary, in accordance with the provisions of Article 64, Paragraph 2 of the Trademark Law, the Supreme Court found that the defense of the lawful source of the shopping store and other merchants in the series of cases was established, and then ruled to revoke the corresponding content of the first and second instance judgments, and instead ordered the shopping store and other merchants to stop the infringement and destroy the infringing products in stock, and at the same time, the judgment rejected Nayiqier's other litigation claims.
The trial and adjudication of the Nayiqier series of cases show that judicial practice can interpret and analyze the law and make reasonable judgments on batch litigation cases of trademark infringement through the correct use of the legal source defense system, so as to guide the right holder to protect the rights of the source of litigation against the manufacturer, and avoid filing a large number of similar lawsuits nationwide, so as to waste judicial resources and increase the litigation costs of the parties. The retrial judgments of this series of cases have released a signal to encourage rights holders to focus on cracking down on the source of infringement, reduce the number of lawsuits against small businesses, and promote the realization of the management of the source of litigation. 、
Source: People's Justice
编辑：Sharon