In September 2024, the Shanghai Intellectual Property Court (Court of Second Instance) delivered a final judgment in the long-standing trademark infringement and unfair competition case between DELIXI Group Corporation (“Delixi Group”) and Shanghai DELIXI Switchgear Company Limited (“Shanghai Delixi Switch”). This case, which spanned nearly three decades, has become a landmark example of intellectual property protection and the consequences of unfair competition. In the final judgment, the Shanghai Intellectual Property Court (Court of Second Instance) ordered Shanghai Delixi Switch to:
(1) immediately cease use of the enterprise name comprising the word “Delixi”; and
(2) compensate Delixi Group for its economic loss of RMB 5 million (about USD690,000) and its reasonable expenses Reasonable expenses incurred to stop the infringement at RMB 168,800 (about USD23,300).
Case Background
The Plaintiff, Delixi Group, is a well-known enterprise in China’s electrical industry founded in June 1984, with its business covering three major fields, namely, electric power, industrial control automation and household electrical appliances. Delixi Group has registered a number of “DELIXI” trademarks, and it claimed that the Defendant, Shanghai Delixi Switch Co., Ltd., had prominently used “Shanghai Delixi”, “Shanghai Delixi Switch” and “Shanghai Delixi Switch Co., Ltd.” on its products and in advertising, which constituted trademark infringement. At the same time, the registration and use of the enterprise name Shanghai Delixi Switch Co., Ltd violated the “Delixi” trade name rights held by the Delixi Group, constituting an act of unfair competition and causing confusion among consumers.
Court rulings
At the conclusion of the proceedings, the Shanghai Putuo District People’s Court (Court of First Instance) ruled that Shanghai Delixi Switch must immediately cease its infringement of the Delixi Group’s exclusive trademark rights from the date the judgment takes effect. Shanghai Delixi Switch was further ordered to compensate the Delixi Group for its losses, amounting to RMB 2 million (approx. USD 276,000), along with reasonable expenses Delixi Group incurred in defending its rights.
Dissatisfied with the judgment of the Court of First Instance, Delixi Group appealed to Shanghai Intellectual Property Court (Court of Second instance), seeking an order for Shanghai Delixi Switch to change its enterprise name to exclude the word “DELIXI” in its new name, and to compensate its economic loss of RMB 30 million (about USD4,142,000).
Shanghai Delixi Switch filed a concurrent appeal, arguing that its registration and use of the company name complied with lawful company registration procedures, did not infringe Delixi Group’s exclusive right to use its trademark, and did not constitute unfair competition. Shanghai Delixi Switch also contended that the case did not meet the conditions for punitive damages, that the damages awarded by the Court of First Instance were excessive, and that Delixi Group’s appeal should be dismissed.
The Shanghai Intellectual Property Court (Court of Second Instance), at the conclusion of the proceedings, found that the disputed trademark “Delixi”, after years of use and promotion by its owner, had achieved significant fame and reputation in the market. Given that Shanghai Delixi Switch operated in the same industry, it could not reasonably claim ignorance of the trademark’s popularity and influence. Instead of avoiding the use of Delixi Group’s trademark and trade name, as it should have, Shanghai Delixi Switch prominently featured the word “Delixi” on its products, advertising materials, and promotional pages. Such actions clearly demonstrated an intent to exploit the reputation of another’s trademark and led to consumer confusion and misrecognition.
Regarding the amount of compensation, since the rights holder’s losses and the infringer’s profits were difficult to quantify, the Court took the following factors into consideration when determining the compensation amount: the stronger malice of the infringement by Shanghai Delixi Switch; the longer time of infringement; the wider range of the forms of infringement; and the larger scale of the enterprise’s operation by Shanghai Delixi Switch; the fact that the disputes between the parties had gone through several rounds of administrative processes, as well as the existence of separate acts of unfair competition on some of the goods involved at the same time as the unfair competition and trademark infringement by Shanghai Delixi Switch.
Taking all the above factors into consideration, the Shanghai Intellectual Property Court (Court of Second Instance) held that the liability of Shanghai Delixi Switch be assessed based on the statutory maximum compensation at RMB 5 million (about USD23,300).
Following the above final judgment from the Shanghai Intellectual Property Court (Court of Second Instance), the dispute over the “real or fake DELIXI”, which has been raging for nearly 30 years, should now come to a satisfactory conclusion.
Key Implications
This case highlights the key role of intellectual property protection in a market economy. Effective protection of intellectual property rights not only fosters enterprise innovation and growth but serves as a crucial safeguard for maintaining fair market competition and protecting consumer rights and interests. Enterprises must enhance their intellectual property management capabilities, strengthen their awareness of brand protection, and consistently prioritise and invest in safeguarding their legitimate rights and interests. On the other hand, the judicial authorities must continue to adjudicate such cases with fairness and efficiency, guiding society toward principles of justice through their decisions. By doing so, the courts can help foster an environment that upholds respect for intellectual property rights and promotes fair competition.
Conclusion
The judgment of Shanghai Intellectual Property Court upholds the legitimate rights and interests of Delixi Group, and further serves as a warning to enterprises attempting to engage in unfair competition by free-riding on the reputation of established brands.
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