t is expanding at a rapid pace, but the risks that come with it are significantly large too. New Balance Athletic Shoe, the US sportswear and shoe giant, was recently ordered to pay $22 million in damages for infringing a trademark. This is the largest amount awarded in China’s Guangzhou court history for a trademark case. James & Wells head of Asia Division, Johnathan Chen, says that with e-commerce growing incredibly fast in China, it is a very tempting avenue for Kiwi companies wanting to increase sales, but care is in order. “The New Balance example shows that Chinese courts really mean business and will take action against ‘blatant infringers’. It gave the benefit of the doubt to the original IP rights owner, even over a huge international company,” he says. In 2006 New Balance set up a Chinese subsidiary and marketed its products under the Chinese brand Xinbailun (Xin means new and Bailun means balance). However, the brand Bailun had already been registered in 1996 by a private businessman for shoe, hat and clothing retail. He subsequently registered a series of related trademarks, which included Xinbailun, and was granted trademark rights in 2008. He then sued New Balance in 2011, which claimed it was innocent because it did not know of the other trademarks. New Balance also claimed that Xinbailun was merely a direct translation of New Balance. That defence was overruled as New Balance had actually unsuccessfully tried to have both of the trademark registrations removed by the China Trademark Office. Furthermore, Xinbailun was not deemed to be the only Chinese translation for New Balance as evidence was found that New Balance had numerous Chinese versions of its brand, including Niubailun and Xinpingheng. New Balance was deemed to have misled the general public into associating Xinbailun with itself, thereby taking away the opportunity to develop market share by the rightful owner. The huge award of damages was based on the profit New Balance had generated in this market, a large portion of which was through online sales. Chen says he sees Kiwi companies who have not scutinised their IP position in the Chinese market, which is cause for concern as Kiwi commerce is at risk of overstepping the law in this area. “The size of the damages awarded shows that  Chinese courts are now dealing with what they regard as blatant infringers very seriously, and are ready to make an example of them as a warning to others. It makes e-commerce platforms more accountable for IP infringement, and there are more agencies to enforce IP rights,” Chen points out. “While it is easy to feel sorry for New Balance and slam the opportunistic approach of the smaller player in this instance, it should be noted that New Balance should never have let its Chinese brand catch that much traction knowing that there were problematically similar trademarks in the market.” Many Kiwi companies do not know what their Chinese brand means. Some of them do not even know that they have a Chinese brand let alone that they have control over it as a local Mandarin brand can be given to a Kiwi product by distributors, retailers or even the public so that they have a name Chinese consumers can pronounce. “A lot of Kiwi companies which export to China do not understand the importance of the equivalent Chinese branding. It is even more worrying when they say ‘our Chinese distributors have that side of things sorted’. You are basically opening door to them holding you hostage by owning and controlling your Chinese brands in Chinese speaking markets,” concludes Chen.