Grundfos, the world leader in water solutions, is one of the most famous brands for pumps. Both its English and Chinese trademarks, i.e. Grundfos and 格兰富 (Gelanfu) are recognized as well-known trademarks by Beijing Intellectual Property Court recently, in a civil judgement of trademark infringement and unfair competition against local companies and infringers, Gelanfu Water Supply Device (Shenzhen) Co., Ltd. (hereafter referred to as Gelanfu Shenzhen), Shenzhen Weige Trade Co., Ltd. (hereafter referred to as Shenzhen Weige), Shenzhen Yihefeng Sci & Tech Co., Ltd. (hereafter referred as Shenzhen Yihefeng) and Beijing Jingdong Sanbailushidu Electronic Commerce Co., Ltd.(hereafter referred to as Jingdong)i. Grundfos is awarded RMB3 Million for damages. Although the case has been appealed by the defendants to the Beijing High Court, this case is of great significance to Grundfos and is an important milestone, which will help Grundfos' trademarks and other intellectual property rights to be more strongly protected in China.
This is a typical case of malicious infringement of well-known trademark rights. In the judgment, the court recognize the well-known trademarks of the plaintiffs (Grundfos), and take the bad faith of the defendants as an important factor when deciding the amount of compensation for infringement damage, which fully reflects the judicial trends that well-known trademarks should enjoy a higher, stronger and wider protection scope, while at the same time, the bad faith registration of trademarks for the purpose of infringing others' legitimate rights should be curbed. This case was handled by the trademark team of CCPIT Patent and Trademark Law Office headed by Gang Hu and Ling Zhao.
Headquartered in Denmark, the purpose of the Grundfos group is to pioneer solutions for the world's water and climate challenges and improve the quality of life for people. Since 1995, Grundfos Group have been producing and selling pumps in Chinese market and achieved tremendous success.
By the end of 2016, Grundfos initiated a lawsuit against Gelanfu Shenzhen, Shenzhen Weige, Shenzhen Yihefeng and Jingdong for trademark infringement and unfair competition at Beijing Intellectual Property Court, claiming for well-known trademark protection. The defendants were accused of using the identical GRUNDFOS trademark on so-called "hot water circulation system" and sold the infringing products via online "Grundfos flagship store" on the Jingdong e-commerce platform. Gelanfu Shenzhen registered and used the identical Chinese mark "格兰富" (Gelanfu) as its enterprise name, and registered the website www.glfgssb.com to promote and sell the infringing goods, using such slogan like "Danish technology serves China", "Danish quality", "Grundfos produced and assembled in China" to mislead the public.
Findings of the court
i. Similarity of goods
The defendants claimed that the infringing goods hot water circulation system was a new product in the industry, and should be classified as water supply equipment in Class 11, while the goods of the plaintiffs belonged to Class 7, so that they should be considered dissimilar goods, and there was no likelihood of confusion. The court found that pumps are the major component of said hot water circulation system, and the main function of said hot water circulation system was actually performed by an installed pump, and no doubt they were closely relevant in terms of function, use, sales channels and consumers and constituted similar goods. So although the defendants claimed the hot water circulation system to be a kind of water supply device, which belonged to Class 11, such goods were considered similar to pumps in Class 7.
ii. Fair use claim denied
The defendants argued that the trademarks "Grundfos" and "格兰富" (Gelanfu) used on the infringing products were merely to describe the source of the product component. The court held that in the process of selling and advertising the infringing products, the defendants didn't make any distinction or special explanation to distinguish the source of the components from that of the infringing products. Instead, with full knowledge of the trademark "Grundfos" and "格兰富" (Gelanfu), the defendants used Grundfos as the name of the flagship stores as well as the enterprise name, on the products as well as on the trading documents. The court held that such use was clearly beyond the scope of fair use, infringing upon the trademark rights of the plaintiffs and causing confusions of the source of the goods.
iii. Conflicts of registered trademark rights
The defendants claimed that the infringing trademark was a registered one by Lianyungang Weile Electric Appliance Co., Ltd., namely Reg. No. 3133907 "Grundfos" in Class 11, and they were merely licensed users. In 2014, the plaintiffs filed an invalidation action against the infringing trademark registration No. 3133907 based upon its prior registration for GRUNDFOS in Class 7. By verdict of Beijing High Court (2019) Jing Xing Zhong No. 808 issued in November 2019, this trademark is decided to be declared invalid, for constituting a similar trademark to the cited one used on similar goods and there is the likelihood of confusion, in accordance with Article 28 of 2001 China Trademark Law.
When the present litigation was initiated, the infringing trademark was still a valid registration. The court pointed out that since 2014, the infringing trademark had been involved in dispute with the well-known trademarks of the plaintiffs, though it was not declared invalid until recently, the defendants, manufacturers and sellers of relevant goods, should be obliged to avoid causing any likelihood of confusion that would damage the legitimate interests of the right holders of the well-known trademarks in question, in accordance with the good faith principle, especially when the legal status of the disputed trademark right was not stable.
Significance of the case
i. Well-known trademark protection
Based on the evidence on file, the court held that the plaintiffs' trademarks "Grundfos" and "格兰富" (Gelanfu) had been widely known to the related public through long-term and extensive use and publicity, and had become well-known trademarks used on pump goods. Beijing Intellectual Property Court recognized both the Chinese and the English trademarks of Grundfos as well-known trademarks used on pumps. The court ruled that the infringing products, namely hot water circulation system are closely related to pumps in terms of function, use, sales channels and consumers, and thus should be considered as similar goods. However, it is necessary to recognize the well-known status of the cited marks in the present case and extend the well-known trademark protection scope to the infringing products. Though the cross-class protection of a registered well-known trademark is usually only necessary in case where dissimilar goods are involved, the court hold that equivalent level of protection should also be extended to the similar goods.ii In this case, the judges apply paragraph 3 of Article 13 of China Trademark Law to protect a registered well-known trademark on similar goods, which is understood as reasonable expansion of the legal context of the law, also known as the principle of "applying the penalty of a heavy crime to a light one"iii in the criminal law theory. If a registered well-known trademark can be protected on dissimilar goods, it should also be protected on the similar goods, since the protection scope of the former is wider than the latter.
The judgment reflects the current judicial tendency of strengthening the protection of intellectual property rights, while cracking down malicious infringement.
ii. Damages of RMB3 million awarded
The court decided to award RMB3 million for compensation for damages of trademark infringement and unfair competition based upon the following reasoning: (1) The three defendants from Shenzhen, as the manufacturers and sellers of water supply equipment and hot water circulation system products, clearly knowing the high reputation and good will embodied with the brand name GRUNDFOS, registered and used the same marks "Grundfos" and "格兰富" (Gelanfu) as their trade name, and the name of their online stores, and used misleading advertising slogans to associate the infringing goods to Grundfos. (2) The defendants registered online stores on multiple e-commerce platforms to sell and publicize infringing products, so that the infringement was conducted in multi channels and in a large scale, and the circumstances were serious. (3) The defendants advertised online that the infringing products were popular, and the sales number and income were high. And there were actual confusions caused to the relevant consumers, which seriously damaged the well-known trademark rights and the interests of the plaintiffs. (4) Although the comments and evaluation of purchasers of the infringing products via the Jingdong and Suning e-commerce platforms might not be enough to prove the exact sales number and profit of infringement, they could show that the sales of infringing products were remarkable. And the information provided by the plaintiff could also prove, to some extent, that the average profit margin of the infringing products is high. (5) The infringing goods are for household use by ordinary consumers. The confusion caused by the infringement to the consumers will not only harm the legitimate interests of the plaintiffs, but also cause potential health risk to the consumers that could even endanger lives and bring about negative social influence.
In sum, based on the reputation of the trademarks of the plaintiffs, the bad faith of the defendants, the length and wide scale of infringement, the actual confusion, the high quality and safety performance requirements of the products per se, and the negative impact of potential safety threat to consumers, the court determine RMB3 million for damages of the infringement and unfair competition acts of the defendants Gelanfu Shenzhen, Shenzhen Weige and Shenzhen Yihefeng to be jointly borne thereby. Since the decision as mentioned has been appealed by the defendants to the Beijing High Court, the final outcome of the case has not been decided.
iii. Positive social influence
John Markmann, chief financial officer of Grundfos China, mentioned this case in an interview with China Economic Weekly. "This case is of particular significance to Grundfos and is an important milestone, which will help Grundfos trademark and other intellectual property to be more strongly protected in the future.", so says John Markmann. "And we would like to thank the Chinese government for its efforts in the protection of intellectual property rights. The Chinese government has taken many measures to improve market access, expand imports, strengthen intellectual property protection and create a more attractive investment environment. Grundfos is confident in an open and innovative Chinese market."
The efforts of authorities to improve intellectual property protection from every level of administrative body as well as the judicial system are highly praised by the foreign investors. In 2019, China revised its Trademark Law for the fourth time and the China National Intellectual Property Administration announced the corresponding new rules to implement the new Law, aiming to curb bad faith filings and registration, and strengthening the protection of well-known trademark as well as other legitimate rights of brand owners.
Originally published by CCPIT, July 2020
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