Chanel SA, Prada Holding NV and three other luxury goods makers won the first copyright verdict against a mall operator in China, their lawyer said, a step toward curbing US$60 billion in yearly piracy costs to global companies.
Beijing Xiushui Haosen Clothing Market Co., which operates Beijing's "Silk Street" shopping mall, failed to stop vendors selling known pirated goods, according to a translation of a December 19 verdict e-mailed by Joseph Simone, a partner at Baker & McKenzie in Hong Kong. The court ordered the landlord and vendors to pay US$13,000 compensation.
Burberry Group Plc, LVMH Moet Hennessy Louis Vuitton SA and PPR SA's Gucci unit also won damages from the landlord of the mall, in a bustling Beijing street that attracts bargain-hunting tourists from around the world. China is the world's fastest-growing major economy, with 299,500 U.S. dollar millionaires in 2004, according to a June Capgemini SA-Merrill Lynch & Co. report.
"As far as I am aware, it is the first civil action" in China against a landlord renting stores to vendors of pirated goods, said Douglas Clark, a Shanghai-based partner at Lovells, the fifth-largest law firm in the UK, according to Legal Week magazine in August. "This should send a message to all landlords in China that they cannot blindly lease their premises to tenants without taking responsibility for their actions."
Wu Weishuang, who identified himself as a lawyer for Haosen, declined to comment on the lawsuit.
"The award is insignificant as it probably couldn't even cover the legal costs involved," said Audrey Shum, an associate at Clifford Chance LLP, the world's largest law firm. "But it is a good sign as it shows China is willing to take a step forward to extend obligation to landlords, telling them not to turn a blind eye to the issue."
Porcia Leung, Louis Vuitton Asia Pacific spokeswoman, Ada Hung, a spokeswoman at Gucci in Hong Kong, Gillian Leung, a spokeswoman at Chanel in Hong Kong and Rita Tong, a spokeswoman at Prada in Hong Kong declined to comment. Simon Jim, a spokesman at London-based Burberry didn't return a call seeking comment. Chanel, LVMH and PPR SA are based in Paris, and Prada is based in Milan.
"As the operator and manager of the Xiushui Jie Mall, Haosen has an obligation to timely and effectively halt the infringement of other persons' exclusive right to use their registered trademarks," according to the translated court decision e-mailed by Baker & McKenzie.
Haosen "may be held to have provided conditions facilitating infringement" of trademarks, Shao Mingyan, presiding judge at Beijing Second Intermediate People's Court, said in his decision, according to the e-mail.
The December 19 verdict against Haosen is "a good start," Lovells' Clark said. "It's important that people do this action and over time, people will take IPR a bit more seriously."
The U.S., Japan and Switzerland have called on China to prove its patent and trademark protections are working. More than a year after China pledged to curb piracy, industry groups say that more than 90 percent of movies and software sold in the country are illegal copies.
The government of the eastern Chinese city of Shanghai plans to shut down this year the Xiangyang Road Market, which is involved in about 80 percent of the city's trademark lawsuits, the official Xinhua News Agency said. Vendors in the market sell counterfeits of such companies as LVMH and Chanel, Xinhua said.