China's high Supreme Court has ruled in favor of Yamaha Motors in a landmark decision against trademark infringement. The court upheld a previous decision of the Jiangsu Higher People's Court. Domestic motorcycle manufacturer Zhejiang Huatian was ordered to pay the equivalent of $1.1 million in damages to Yamaha. 

In 2000, Zhejiang Huatian set up a company called Nippon Yamaha Co. in Japan. They went into a trade mark licensing agreement with Zhejiang Huatian. The Chinese company argued that this made it possible for them to manufacture motorcycles using the name Yamaha in China.

The decision is ground breaking not only because of the amount in damages, but also because the judge clearly took under consideration not just the size of such damages, but also the way they were premeditated.  An auditor's report was submitted and disregarded in which it was claimed that Zhejiang Huatian didn't make any profit from selling the infringing motorcycles and as a result, should only be accountable for statutory damages. The judge ignored this financial report.

Furthermore, the judge made two distributors, Taizhou Jiaji and Taizhou Huatian, equally responsible for paying the damages. The Court was in agreement with Yamaha that all three parties were aware that they infringed the Japanese company's trademark. An apology must be issued in a motorcycle magazine by the three companies as well.

An organization like Zhejiang Huatian's is often called a shadow company. Its registered name includes a trademark belonging to another party. This company is then used to license the manufacture of infringing goods, more often than not in China. IP owners say that shadow companies are a severe problem. Hong Kong is the most popular place for setting up these companies since it is quite easy for a company to fit in there.

The case awarded Yamaha Motors the highest reparations ever given to a foreign company for trademark infringement in China. Yamaha said in an official statement, "In our opinion, this judgment is a landmark decision. We hope our lawsuit serves as a useful reference somehow to other enterprises confronted with similar trademark infringements."