30 November 2020TrademarksMuireann Bolger

Chinese coffee seller slapped with $3.2m civil suit over counterfeit Starbucks

A Chinese company, Shuangshan Food (Xiamen), has been accused of selling counterfeit  Starbucks coffee, in a suit which has made the highest ever compensation demand in a consumer civil public interest litigation in China.

On November 22, 2020, the  Jiangsu Provincial Consumer Protection Committee announced it had filed a  public interest lawsuit against the company. The suit has become the first consumer civil punitive damages public interest litigation in the east Chinese province and has demanded a record RMB 21 million ($3.2 million) in compensation.

In February 2018, the  Wuxi City Market Supervision Department received a tip-off suggesting that there were counterfeit ‘Starbucks’ brand coffee being sold.

Following an investigation by the department, it found that the coffee trademarked as a ‘Starbucks’ brand sold by Shuangshan was counterfeit.

Consequently, the department notified the Wuxi public security department, which later verified that Starbucks had not authorised the coffee sold by Shuangshan.

The Xinwu District Procuratorate prosecuted Shuangshan for the sale of the counterfeit coffee and in December 2019, five people were convicted in the case's criminal trial and sentenced to up to five years in prison by a Wuxi court.

At the same time, the procuratorate recommended that the Jiangsu Provincial Consumer Protection Committee file a consumer civil public interest lawsuit. The public-interest litigation announced this month is an additional penalty, according to the suit.

Shuangshan infringed IP “under the premise of knowing that the purchased products were counterfeit” and proceeded to forge “customs declaration documents and false authorisation documents, and sold the products through salesperson sales and logistics delivery methods,” the suit claimed.

The company went on to distribute the coffee to more than 50 merchants in 18 provinces across the country, generating sales of more than RMB 7 million, it added. “The fake act constituted a “fraud’ and claimed a “punitive” compensation of three times the amount involved,” said the suit.

The question of how to distribute any funds gained from the lawsuit has yet to be decided. “After the indemnity public interest litigation is initiated, how to implement and handle the compensation fund supported by the judgment, and the establishment of supporting public welfare fund accounts are issues that need to be resolved,” the suit added.

Last year, China  amended two of its IP laws in a bid to enhance trademark and trade secret protection in the country. At the time,  China’s state-run press agency Xinhua said the country revised the trademark law so that “improper behaviour” involving trademark registration would be tackled and stronger penalties would be issued.

“Trademark registration that is not for the purpose of use for business operations will be rejected,” the amendment read.

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