The American shoemaker’s victory is seen as a win for many other foreign companies that have long complained Beijing has not done enough to protect their brands.
BEIJING — A Chinese court has ruled that three domestic shoemakers must pay New Balance $1.5 million in damages and legal costs for infringing the American sportswear company’s signature slanting “N” logo, in what lawyers said was the largest trademark-infringement award ever granted to a foreign business in China.
It is a victory not just for New Balance, but also for many other foreign companies that have long complained Beijing has not done enough to protect their brands. And while the size of the ruling — issued three days after President Trump ordered an investigation into China’s alleged theft of intellectual property — was relatively small by international standards, it was nevertheless a substantial increase compared with previous penalties.
“I haven’t heard of a foreign company getting this level of damages,” said Douglas Clark, an intellectual-property lawyer who has practiced in China and Hong Kong for 25 years.
In the decision, the Suzhou Intermediate People’s Court, near Shanghai, ruled that three defendants that made shoes under the brand New Boom “seized market share from New Balance” and “drastically damaged the business reputation of New Balance,” according to a copy of the decision, which was sent to The New York Times by the American company.
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The court said the three defendants behind New Boom — Zheng Chaozhong, Xin Ping Heng Sporting Goods Limited Company and Bo Si Da Ke Trading Limited — had relied on the “malice of free-riding,” saying their actions led to “confusion by a large number of consumers,” according to the ruling, which was made last week but has not yet been made public. The decision can still be appealed.
The court ruling reflects the Chinese government’s determination to confront the problem of piracy, which has long plagued many companies in a country where fake shoes, bags — even meat — are widely available.
But many counterfeiters have moved beyond just making knockoffs to copying everything about a brand, short of the entire name. In New Balance’s case, the American company faces challenges from New Boom, New Barlun and New Bunren, all of which are protected under China’s trademark law.
In China, trademarks are awarded to the first company to file for them and, unlike in the United States, businesses typically don’t have to give a reason for filing for them.
New Balance has sought to take all of them on. Since it started selling shoes in China in 1995, the Boston company has fought against dozens of counterfeit manufacturers, battled a rogue supplier who exported its shoes at a deep discount and struggled over the use of its Chinese name in the courts.
It has not been wholly successful. In April 2015, a Chinese court fined New Balance around $16 million after it lost a lawsuit to a man who had registered the trademark for the Chinese name of New Balance. The American company appealed and the fine was later reduced to about $700,000. New Balance is appealing the decision, which would go to China’s Supreme Court, according to Daniel McKinnon, New Balance’s senior counsel for intellectual property.
Still, the company is making progress.
In April, a court in the eastern city of Hangzhou awarded New Balance $500,000 in damages after ruling that a company that made New Bunren shoes infringed the American company’s trademark. That same month, the Suzhou court fined five companies for breaching an injunction prohibiting them from selling shoes with the “N” logo.
Last week’s ruling has given the company “a renewed confidence in our aggressive intellectual-property protection strategy within China,” McKinnon said.
“By analogy, if the China marketplace can be thought of as a schoolyard, New Balance wants to make it abundantly clear we are the wrong kid to pick on,” he said in an email.
The $1.5 million ruling is a product of new legislation in China. Before the country passed a new trademark law in 2014, damages awarded in most infringement cases were below the maximum statutory amount of about $75,000. The new law increased that to about $450,000, making the New Balance award particularly significant.
As Chinese companies have begun producing more advanced products and gaining valuable intellectual property of their own, Beijing has sought to bolster its trademark law, increasing the damages awarded to companies in infringement cases and fining counterfeiters.
Chinese law does not follow precedent, but courts around the country do look to decisions nationwide for cues. As a result, Scott Palmer, an intellectual-property lawyer, said the New Balance ruling bodes well for a number of cases he has before Chinese courts.
“I don’t think this is a one-off,” Palmer said. “This is a fairly high-profile case, but I think that it falls squarely within a trend, in which the direction is more toward more significant damage awards when indeed it is warranted.”