The Guangdong High People's Court recently delivered a final, legally effective verdict in a trademark infringement and unfair competition lawsuit. Eight defendants were ordered to immediately cease all infringing and unfair competition activities, discontinue the use of enterprise names containing the words "Jierou," and destroy all remaining infringing inventory. Furthermore, they were jointly ordered to compensate Zhongshun Jierou Paper Co., Ltd. for economic losses and reasonable rights-protection expenses totaling 13 million RMB, and to publish a public statement in newspapers to eliminate the adverse impact.

The first-instance trial was held at the Zhongshan Intermediate People's Court in June 2025. The Guangdong High People's Court subsequently upheld the original verdict in the second-instance trial.

The defendants possessed registered trademark certificates, the alleged infringing goods crossed different product categories, and the eight corporate entities operated with a clear division of labor. The combination of these three factors made this case significantly more complex to litigate than typical counterfeiting disputes.

The plaintiff's "Jierou" trademark (No. 3423690) is registered under Class 16 for paper, toilet paper, and paper handkerchiefs. Having been used for over twenty years, it has been successively recognized as a Famous Trademark of Guangdong Province and a Well-Known Trademark (驰名商標). Conversely, a group of eight related entities centered around an investment industrial company (public information points to Zhongshan Baisheng Investment Industrial Co., Ltd. and its affiliates) turned "brand piggybacking" into an assembly-line operation.

First was the preemptive registration: Between 2016 and 2024, they intensively applied for dozens of similar trademarks in the daily chemical goods category, including "Jierou," "Jierouhuang," "Jierou Master," and "Jierou Jiebao." Many of these were subsequently declared invalid by the China National Intellectual Property Administration (CNIPA).

After obtaining the certificates, they proceeded to counterfeiting. Through trademark licensing, registering affiliated companies with "Jierou" in their corporate names, and outsourcing to third-party factories, they affixed these highly similar marks to over twenty types of daily chemical products, including laundry detergent, dishwashing liquid, shampoo, and toothpaste.

Finally, they executed full-channel distribution. They shipped goods in massive volumes across multiple e-commerce platforms, even opening several "Jierou Flagship Stores," while simultaneously expanding into offline retail channels. During this process, a batch of infringing products was publicly notified by market regulation authorities for substandard quality, ultimately damaging the reputation of the genuine brand.

During the trial, the defendants raised two main defenses, neither of which withstood judicial scrutiny.

First, they argued: "You sell paper; we sell daily chemicals. Since they are not in the same category, there can be no infringement." The court ruled that well-known trademarks are entitled to cross-category protection. By comprehensively evaluating the duration of use, market scale, advertising reach, and honors received, the court determined that "Jierou" was already widely known by the relevant public before the infringing acts occurred. Furthermore, the accused marks were highly similar in textual composition and phonetic pronunciation, making it impossible for ordinary consumers to distinguish them.

The second defense is more common and insidious: "We hold a registered trademark certificate; how can this constitute infringement?" Upon investigation, the court found that some of the trademarks used for defense had already been declared invalid, meaning their exclusive rights were deemed never to have existed. The remaining trademarks either bore obvious discrepancies between their actual use and registered design, or their approved categories failed to cover the goods actually sold. The court clarified that trademark registration rights only protect standardized and bona fide use; they cannot serve as a shield for altered use, out-of-scope use, or actions intended to free-ride on another's established goodwill.

A closer examination reveals how the 13 million RMB compensation was calculated. It was not an arbitrarily determined figure.

The court retrieved e-commerce platform data, revealing that a single online flagship store generated sales exceeding 35.94 million RMB in just over two years. Referencing the gross profit margins of listed companies in the same industry and factoring in brand cultivation, advertising, and operational costs, the court determined that the gross profit margin of the infringing goods was no less than 40%. Based on this calculation, the gross profit from this single online channel alone exceeded 13 million RMB, excluding other online and offline sales.

Two critical details warrant further attention.

First, the court determined that the core business of these defendants was registering, licensing, and selling infringing daily chemical products, constituting "making a business out of intellectual property infringement." Therefore, compensation was calculated based on gross profit rather than net profit. The defendants were not allowed to deduct any savings from brand-building investments from the compensation amount.

Second is the imposition of joint liability. The core two entities were ordered to pay 13 million RMB, while the other six were held jointly and severally liable for amounts ranging from 1 million to 3.5 million RMB. This verdict pierced the veil of a common tactic where multiple small companies register trademarks separately to fragment risk.

This type of operation is not unprecedented in the sanitary and personal care industry.

In the earlier "Wyeth" dispute, six defendants free-rode on brand reputation in maternal and infant categories such as diapers and wet wipes. The Hangzhou Intermediate People's Court applied punitive damages and fully supported the 30.55 million RMB claim. In another cross-border maternal and infant IP case, multiple affiliated entities engaged in full-chain counterfeiting of diapers, sanitary napkins, and wet wipes, resulting in a joint compensation order of 10 million RMB.

The evolution is concentrated in two areas: the calculation of damages and the scope of liability. Previously, compensation in such cases was largely discretionary, with judges determining a figure based on the overall circumstances; now, it is calculated meticulously based on platform sales data. Furthermore, instead of solely pursuing manufacturers, lawsuits now link and target the entire chain of preemptive registration, licensing, sales, and payment collection.

For contract manufacturers (OEMs), this verdict sends a clear message. In this infringement chain, "outsourcing production to third-party factories" was explicitly identified as a key link. When the trademarks held by the commissioning party bear obvious signs of free-riding, or when the registered categories do not match the actual products to be manufactured, pre-order compliance review is no longer an optional procedure.