China: WHD-Peksungip Express No. 38–April2017issue

INVALIDATION ACTION AGAINST A COPYCAT OF FRENCH GI

The Trademark Review and Adjudication Board and the Beijing Intellectual Property Court invalidated a copycat of an unregistered French GI in China by invoking the Article 10.2 (foreign geographical name known to the public is prohibiting from being registered as a trademark) and Article 10.1.8 (unhealthy influence) of the 2001 Trademark Law.

Case Brief

The INSTITUT NATIONAL DE L'ORIGINE ET DE LA QUALITE (previously known as Institut National des Appellations d'Origine - INAO) is the French government bureau regulating agricultural products with Protected Designations of Origin (PDOs). INAO forms part of the French Ministry of Agriculture.

Margaux is a wine growing region and appellation d'origine contrôlée (controlled designation of origin) within Haut-Médoc in Bordeaux, the world's wine capital. Margaux is the name of the village situated in the middle of this production area, and its leading "château" is also called "Chateau Margaux".

On April 26, 2012, a local winery in China called Yantai Médoc Châteaux Wine Ltd. (烟台梅多克庄园葡萄酒有限公司) applied for the registration of "玛歌"鹰贵" trademark (Margaux Yinggui in Chinese) in class 33, covering goods of aperitif, wine, liqueur, alcoholic beverage (excluding beer), sparkling wine, brandy, etcetera. The mark was registered on July 28, 2013.

On December 30, 2014, INAO brought before the Trademark Review and Adjudication Board (TRAB) an invalidation action against such trademark, on the ground that Margaux is a French geographic indication (Article 16) and a foreign geographical name known to the public (Article 10.2) that the registration of the disputed mark has "other unhealthy influence" (Article 10.1.8).

The TRAB partially dismissed INAO's arguments by finding that Margaux was not registered as a geographic indication in China and that INAO failed to adduce sufficient evidence to prove that Margaux fulfilled the substantial requirements of a GI as outlined in Article 16.2 of the 2001 Trademark Law (since the disputed trademark had been registered in 2013, before the entry into effect of the third revision of the law). However, the TRAB held INAO's remaining ground (unhealthy influence and foreign geographical name) was tenable and ruled to invalidate the disputed mark on November 19, 2015.

The TRAB invalidation decision was upheld by the Beijing Intellectual Property Court on July 27, 2016.

The court echoed the TRAB reasoning that:

  1. "Margaux" is a well-known wine-producing region in France and a foreign geographical name known to the public;
  2. the first part "玛歌" of the litigious mark is the Chinese transliteration of "Margaux";
  3. the litigious mark contains the Chinese transliteration of Margaux and has not attained a distinctive meaning other than the meaning of its geographical name component;
  4. the use of the litigious mark in respect of wine is likely to mislead the relevant public to misconstrue that the wine comes from the French place called "Margaux" which is likely to cause "unhealthy influence".

The court invoked Article 10.2 (foreign geographical name known to the public is prohibiting from being registered as a trademark) and Article 10.1.8 (unhealthy influence) of the 2001 Trademark Law to invalidate the mark.

Comments:

The case is interesting because the court gave some explanation in its judgment:

1. Article 10.1.8 of the 2001 Trademark Law is customarily used as a fall back provision if there is no other absolute ground for brand owners to rely on. The 2001 Trademark Law also contains an Article 10.1.7 about trademarks that are deceptive because they "have the nature of exaggeration and fraud in the advertising of the goods". But for trademark considered as deceptive but without the "exaggerated advertising" situation, Article 10.1.8 was indeed the convenient fall back. This legislative gap has been filled in the third amendment of the Law with deletion, in Article 10.1.7, the exaggerative prerequisite and only refers to "deceptive" trademarks.

2. With respect to Yantai Médoc's counterargument citing the exception clause at the end of Article 10.2 ("Where a trademark using any of the above-mentioned geographical names has been approved and registered, it shall continue to be valid"), the Court states that such clause was firstly introduced in the 1993 Trademark Law which means that it was only applicable to those geographical name trademarks that had been registered before the implementation of the 1993 Trademark Law. Therefore, this exception could not apply to the disputed trademark which had been registered in 2013.

The case is included as one of the exemplary cases released by the Beijing IP Court at the press conference for its two-year anniversary.

The case is still pending, as Yantai Médoc later appealed before the Beijing High Court.

WAN HUI DA - PEKSUNG represented INAO in the above procedure.

BEIJING HIGHER COURT BACKS WANCHAI FERRY IN THE FIGHT AGAINST BAD-FAITH APPLICATIONS

General Mills Asia, owner of the trademark "WANCHAI FERRY in Chinese characters" obtained a victory against a trademark squatter before the Beijing Higher Court. The court affirmed the well-known status of the Cited trademark on dumplings and adopted the "dilution" theory to reject the bad-faith applications of the opposed trademarks "WANCHAI FERRY in Chinese Character & Pinyin".

Case Brief

Wanchai Ferry is a leading brand of frozen food like dumplings and Tangyuan owned by General Mills Foods Asia Limited ("General Mills Asia"). On December 21, 1998, General Mills Asia applied to register the trademark "WANCHAI FERRY in Chinese & Device" ("Cited Mark") in respect of dumplings, meat pies, flour products, etc. in Class 30 in China and obtained the registration on August 7, 2002.

Cited Mark

On May 25, 2010, a Chinese company named Zhengzhou Tangming Trading Co., Ltd. ("Tangming") applied to register the trademarks "WANCHAI FERRY in Chinese + Wanzaimatou (pinyin equivalent to the Chinese name)" in respect of cleaning preparations, cosmetics, dentifrices, incense, etc. in Class 3, containers, not of precious metal, for household or kitchen use, glassware, toothpick holders, not of precious metal, thermally insulated containers for food, etc. in Class 21, and freighting, car transport, storage of goods, booking of seats, etc. in Class 39.

Opposed Marks

In May 2011, General Mills Asia raised oppositions but was dismissed by the China Trademark Office ("CTMO"). General Mills Asia appealed to the Trademark Review and Adjudication Board ("TRAB") in September 2012 but was dismissed again. CTMO and TRAB held the goods and services covered by the Opposed Marks were different from that covered by the Cited Mark in terms of functions, use purposes and target consumers, and the evidence was insufficient to prove that the Cited Mark was well-known before the filing date of the Opposed Marks.

General Mills Asia filed an appeal before the Beijing No.1 Intermediate Court, claiming that after extensive use and advertising, the Cited Mark had reached the well-known status before the filing date of the Opposed Marks, and that the Opposed Marks were a duplication of its trademark, which was in violation of Article 13.2 of the 2001 Trademark Law. Tangming replied that the name "Wanchai Ferry" is a geographic name and that the evidence produced is insufficient to prove the well-known status of the Cited Mark.

In May 2016, the Beijing No.1 Intermediate Court ruled in favor of General Mills Asia, ordering the TRAB to re-make the decisions based on the following reasons.

  1. The evidence submitted by General Mills Asia can prove that the Cited Mark has been used on dumplings in China since 1998, and the products bearing the Cited Mark enjoy a leading position in respect of sales amount, market share and ranking. Moreover, the products bearing the Cited Mark are extensively advertised on national scale, and have obtained several awards. Therefore, the Cited Mark was widely known by the relevant public before the application date of the Opposed Marks, and the Cited Mark shall be recognized as a well-known trademark on dumplings.
  2. The Opposed Marks contains the characters "WANCHAI FERRY in Chinese" of the Cited Mark, which is highly similar to the Cited Mark "Wanchai Ferry in Chinese" in terms of appearance, pronunciation and meaning. So the Opposed Marks constitute the copy and imitation of the Cited Mark.
  3. Although the goods and services covered by the Opposed Marks in Classes 3, 21 and 39 are dissimilar to the "dumplings" designated by the Cited Mark, there is an overlap of the relevant public of such good and services. The use of the Opposed Marks is likely to mislead the relevant public to associate the Opposed Marks with the Cited Mark and misconstrue the origin of goods and service. Therefore, the Opposed Marks would weaken the distinctiveness of the Cited Mark, take advantage of the market reputation of the Cited Mark, and harm the legal interest of General Mills Asia, which constitutes the circumstances as stipulated in the Article 13.2 of the 2001 Trademark Law.

Both the TRAB and Tangming appealed to the Beijing Higher Court claiming that the evidence submitted by General Mills Asia does not suffice to prove the well-known status of the Cited Mark, and that the goods and services designated by the Opposed Marks are quite different from the goods of the Cited Mark, so the Opposed Marks would not damage the interests of General Mills Asia.

In October 2016, the Beijing Higher Court rejected the appeal and maintained the judgments of the first instance. The Beijing Higher Court affirmed that the evidence was sufficient to prove the well-known status of the Cited Mark and found that in light of the fact that Tangming used to be an authorized agent of Wanchai Ferry brand, it hardly acted in good faith when filing the application of the Opposed Marks.

WAN HUI DA – PEKSUNG represented General Mills Foods Asia Limited in these proceedings.

Comments:

Along with the constant increase of trademark applications in China, brand owners are facing increasing challenges from bad-faith applications, especially those applied in respect of dissimilar goods and services. In the past few years, when the goods covered by the conflicting trademarks could be considered as somewhat remotely related, the CTMO and TRAB were more flexible and active in rejecting bad-faith applications. They held that the goods were similar, even against the official Classification of Similar Goods and Services, and/or they used the general clause of "unhealthy consequences" as an "absolute ground". Nevertheless, when the goods and services of the involved trademarks are really dissimilar, the brand owner still has to obtain the recognition of well-known trademark.

This case showcases the application of the "dilution" concept, described by the Beijing High Court in its Several Legal Issues Needing Attention in Current IP Hearing issued in May 2016: "diluting" the unique connection between the mark and the goods.

IMPOSING GREATER PRESSURE UPON IP INFRINGERS THROUGH MULTIPLE LEGAL ACTIONS

After initiating a criminal action against an individual trademark counterfeiter, STIHL filed a follow-up civil lawsuit against the trademark counterfeiter and his company, on the ground of both trademark counterfeiting and trade dress infringement. By this civil lawsuit, STIHL solved the trade dress infringement problem and imposed greater pressure upon the counterfeiter.

Case Brief

In March 2014, ANDREAS STIHL AG & CO. KG (hereinafter "STIHL") requested the police of Baiyun District, Guangzhou City to raid a factory named "Guangzhou Rui Song Machinery Co., Ltd." (hereinafter "RUI SONG"). The police seized a lot of fake STIHL chain saws as well as some sales records. The chain saws displayed the STIHL registered trademark logo and the characteristic orange and grey color combination, which was the "special trade dress of a reputed product" as provided by the Anti-unfair Competition Law. HUANG Zhurong (hereinafter "HUANG") was the sole shareholder of RUI SONG. The police arrested HUANG and, after further investigation, the public prosecutor brought the case to Baiyun District Court for the crime of trademark counterfeiting. The court found that HUANG's production and sale of fake STIHL chain saws constituted the crime of counterfeiting registered trademark, sentenced HUANG to three years' imprisonment, imposed a fine of RMB 650,000, and confiscated the seized counterfeit products for destruction. HUANG appealed on ground that not all the chain saws already sold bore the STIHL trademark logo, as the business records did not specifically mention so, and there was no supporting evidence to prove that all the chain saws sold by him bore the STIHL trademark. In September 2015, the Guangzhou Intermediate People's Court lowered the criminal fine to RMB 100,000.

After the criminal prosecution, STIHL filed a civil lawsuit with the Baiyun District Court against both HUANG and his company RUI SONG, on the ground of trademark counterfeiting and trade dress infringement. STIHL requested the court to affirm that the criminal fine (RMB 100,000) which was part of the criminal sentence, should be used in priority to pay for the damages awarded in the civil case, should the defendant's assets prove to be insufficient. The Baiyun District Court ruled in favor of STIHL on both accounts (trademark counterfeiting and trade dress infringement) and ordered the defendants to jointly pay RMB300,000 as damages, specifying that part of the criminal fine already paid by the defendants was to be affected to the payment of the civil damages. The defendants appealed. In November 2016, Guangzhou Intellectual Property Court maintained the decision of Baiyun District Court.

Comments:

This "follow-up civil lawsuit" provides guidance for similar cases in the following aspects:

1. The IP owner may have the court affirm that the damages to be paid to the plaintiff shall prevail over the criminal fine so as to facilitate enforcement of civil judgment.

In filing the lawsuit, STIHL requested the court to affirm that in case the property of the defendants was not enough to pay the civil compensation, the court should use the criminal fine already paid by the defendant to enforce the civil judgment. The court agreed.

This is expressly provided for in Article 4 of the Torts Law: "Where a tortfeasor bears administrative liability or criminal liability, it shall not prejudice the civil liability that the tortfeasor shall bear for the same conduct. Where the assets of a tortfeasor are not sufficient to cover the civil liability, administrative liability or criminal liability for the same conduct, the tortfeasor shall firstly bear the civil liability."

In China, the court normally will not permit the trademark owner to file a civil claim in the context of a criminal prosecution because only the victim suffering from loss of tangible property is entitled to file such a claim. But the trademark owner may file an independent civil lawsuit. In this civil lawsuit, it is advisable that the plaintiff specifically request the court to confirm the plaintiff's entitlement to the criminal fine in case the defendant's property is not sufficient to pay the damages, so that in the future enforcement procedure the judge may directly allot the criminal fine paid by the defendant for recovery of the damages.

2. The IP owner may use the relevant evidence obtained by the police and the facts affirmed by the court in the criminal action to solve infringement other than trademark counterfeiting (patent, trade dress).

In the subject case, according to the police investigation, HUANG's sales record of chain saws amounted to RMB 1.27 million. However, the Guangzhou Intermediate Court could not ascertain if all the chain saws sold by HUANG bore the STIHL trademark logo because many business records did not specifically mention the STIHL trademark. The court only found the value of the counterfeit STIHL chain saws and chain saw parts seized by the police as amounting to more than RMB 100,000, and the counterfeit STIHL chain saws sold by HUANG to be worth RMB 180,000. In the criminal judgment, apart from the criminal sentence, the Court only ordered HUANG to stop the trademark counterfeiting business.

Yet, according to the evidence collected by STIHL itself such as notarization of the counterfeiter's website, it was clear that all the chain saws produced and sold by HUANG bore the orange and grey colors. In the follow-up civil lawsuit, STIHL provided such evidence. STIHL proved that, through extensive use and advertisement, the relevant public was making a stable association between this color combination and STIHL's chain saws. The court supported STIHL's claim of unfair competition and calculated the damages based on the defendants' production and sale of all chain saws.

3. The IP owner may have the infringers bear joint liabilities by proving their "mixture of legal personalities".

In this case, the defendant HUANG argued that it was the company RUI SONG that should bear the liability for compensation because it was the company that was engaged in the illegal business. STIHL proved that, according to HUANG's bank account records obtained by the police, HUANG received the money directly for RUI SONG's sale of the fake chain saws, and paid the rent of RUI SONG from his personal bank account every month. HUANG's behavior was mixed with that of RUI SONG. Article 63 of the Company Law stipulates that, "if the shareholder of a single-person limited liability company is unable to prove that the property of the single-person limited liability company is independent from his own property, he shall bear joint liabilities for the debts of the company." Thus, the court ordered HUANG and RUI SONG to bear the joint liability, which means the court may seize both the personal property of HUANG and any property under the name of RUI SONG in enforcing the judgment on damages

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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