On December 19, 2005, the Beijing No. 2 Intermediate Court delivered its
decision to find a landlord company jointly liable for its tenant's trademark
Beijing's Xiu Shui Market (Silk Street) was notorious for its sale of fake luxury
goods. There was little effective enforcement against individual vendors, who
were mostly transient street traders. At the end of 2004, the market was closed
down by the government. In January 2005, an in-door market called New Xiu
Shui Market was opened nearby with same vendors. In the opening ceremony,
the management of the market promised that it would not allow sale of
On March 23, 2005, the Beijing Municipal Administration for Industry and
Commerce (Beijing AIC) issued a bulletin, banning sale of goods with 23 high
profile brand names in any of the city's markets operated similarly. According to
the bulletin, goods with listed brand names sold in the markets shall be deemed
counterfeit and be confiscated. Repeated offenders will be punished and required
to leave the market. Managements of the markets may be punished if no efficient
measures against counterfeiting were taken.
In May 2005, the Quality Brands Protection Committee (QBPC) of the China
Association of Enterprises with Foreign Investment, on behalf of Louis Vuitton,
Gucci, Chanel, Prada and Burberry, notified landlord Beijing Xiushui Haosen
Clothing Co. Ltd. of the sale of counterfeits in the market. After finding that
counterfeits were still on sale, the QPBC filed a lawsuit with the Beijing No.2
Intermediate Court against the landlord and five individual vendors, claiming
damages of around US$300,000. The landlord argued that it had posted notices
at the premises prohibiting the sale of counterfeits and, upon receipt of the
complaint, it had stopped leasing booths to vendors QBPC found to be selling
The court found that the defendant failed to take effective measures to stop the
ongoing sale of unauthorized products after the trademark owners notified it, and
thus facilitated infringement. The court held that the defendant should be jointly
and severally liable for the conduct of the vendors. The five plaintiff companies
were each awarded damages of approximately US$2,500.
The China Trademark Law does not have an express provision on a landlord's
liability for contributory infringement. However, Article 50 of the Implementing
Rules of Trademark Law states that the "provision of storage, transportation,
postage, concealment and convenience to facilitate infringement of exclusive rights to use a registered trademark" constitutes an infringement.
After issuance of this court decision, Beijing AIC imposed penalty on the same
landlord on the same ground.
The defendant has appealed the court decision.
On April 18, 2006, the Beijing High People's Court issued its ruling, ordering five
tenants of New Xiushui Market and the landlord of the market, Beijing Xiushui
Haosen Clothing Co., Ltd. to pay 20,000 yuan (US$ 2,470) compensation jointly
to each of the five plaintiffs, Chanel, Louis Vuitton, Gucci, Prada and Burberry for