Case introduction
A recent court ruling between the historical German auto manufacturer Audi and Chinese electric automaker Nio has stirred up some discussions.
In June 2022, Audi filed a lawsuit before the District Court of Munich, accusing that Nio's vehicle model names "ES6" and "ES8" are too similar to its "S6" and "S8" model designations and violate its trademark rights. While the styles of the two companies' cars are very different - Nio's models are SUVs and Audi's models are sedans, the similarities in model names is the main issue of the dispute.
Official photos of NIO ES8 and AUDI S8
In early 2023, the court made the favorable verdict to Audi, ruling that Nio's ES6 and ES8 are too close to Audi's S6 and S8 names, which could cause consumers to mistakenly consider the former as the electric variants of the latter and therefore assume that the vehicles are from the same manufacturer, so there is the risk of confusion, and Nio infringes the trademark rights of Audi.
As a result, Nio is prohibited from using and promoting "ES6" and "ES8" as model names in Germany and posed a fine of 250,000 Euros or 6 months in prison for its German leader.
The decision isn't final. According to the media reports, Nio is looking into appealing the verdict.
When it comes to making automobile purchase decisions, it is safe to say that most consumers would consider the manufacturer, i.e. the main trademark, as the key element, so the trademarks of car models, which are usually composed of "letters + numbers" attract much less attention and have lower visibility during the decision-making.
In most cases, consumers would consider the model trademarks as car names rather than an indication of origin of goods, so the likelihood of confusion should be limited. In this case, though the court agreed that Nio's model names are factually different from Audi's, it deemed that the additional "E" isn't enough to sufficiently differentiate the names of the two competitors' cars and there is still the risk of confusing the consumers.
This isn't the first time that a traditional European manufacture tackles a newcomer (see our article of the case Polestar vs. Citroën) in the auto industry.
In recent years, Chinese electric automakers continue to expand their business in Europe with ambitious growth plans, and there're more and more IP disputes where European manufactures taking legal actions to protect themselves from the Chinese competition and possibly slow down the expansion of new brands in the local markets.
With the acceleration of the internationalization of Chinese electric automakers, the protection of overseas IP rights has become increasingly important. Challenges caused by IP issues including trademarks, patents, trade secrets, etc., have become inevitable in the overseas expansion efforts of Chinese enterprises.
Key take-aways
- The case highlights the importance of conducting comprehensive trademark searches and due diligence on the branding and naming of products before entering a new country/region. It is imperative to undertake thorough preparation related to trademarks prior to entering into a new oversea market.
- While protecting their own IP rights, Chinese enterprises will also need to be vigilant to prevent infringement upon the IP rights of existing market players. It is necessary to consult and engage experts who have deep understanding of both European and Chinese laws to navigate potential complex IP issues.
- Large traditional manufacturers often possess a strong sense of trademark protection and, when IP rights are believed to have been infringed upon, they'd launch aggressive attacks against the competitors. It is therefore crucial that Chinese enterprises proactively engage in overseas trademark layout, conduct systematic risk assessment of trademark registrations and usages, and get prepared with contingency plan for potential trademark disputes that may arise.
We asked an opinion on this case to Dr. Tobias Malte Müller, lawyer admitted in Germany and partner at TALIENS, and avv. Simone Verducci Galletti, trademark attorney at Bugnion S.p.A.
For Tobias Müller, the Munich Regional Court's decision seems to be consistent with German law. The public is used to recognizing and distinguishing between individual vehicle models and their manufacturers on the basis of the model designation.
The letter "E" is also understood in the automotive sector as a common abbreviation for "electro / electronic". Therefore, the addition of the letter "E" for electric cars is descriptive.
The likelihood of confusion can therefore be based on the fact that the public will understand the model designation as "Electronic S6". It will then associate it with the manufacturer AUDI on the basis of the points set out above.
The fact that the cars are an SUV and a sedan, which have a different design, is irrelevant in the assessment insofar as both products are automobiles.
German car manufacturers try aggressively to protect their models in various ways. You might be aware of the 2009 dispute regarding BMW X5 and the SCEO.
In that case the Munich Regional Court at first instance and the Munich Higher Regional Court at second instance ruled that the SUV model SCEO of the Chinese car manufacturer Shijiazhuang Shuanghuan Automobile Co, Ltd infringed the design of BMW's X5. This decision not only ordered the Chinese manufacturer to cease and desist and pay damages, but also ordered the destruction of the infringing vehicles.
As such lengthy legal proceedings can be very costly and most of all block the access to the German or even European Market. Therefore, it is highly advisable to proceed to a clearance search carried out by a specialist of the relevant market before launching a vehicle on the European market.
Through such preventive advice, potential trade mark or design infringements can be identified at an early stage and lengthy and costly court proceedings and marketing disasters can be avoided.
Simone Verducci thinks that the decision is unexceptionable from a technical point of view. The reasoning followed by the German judges is in line with the position of the European Court of Justice.
Trade marks consisting of two or more digits are considered registrable (to be fair, also trademarks of one letter at certain conditions). The prefix e- has long been considered non-distinctive in the field of electric/electronic products.
This decision is a warning to all practitioners who are convinced that trademarks consisting of few digits are weak and destined to coexist with similar trademarks. Whether and how a consumer could get confused at the time of purchase between two expensive cars remain probably unclear.
Certainly, this decision makes it clear that the likelihood of confusion is a concept and designed to protect interests that go beyond actual confusion. It is a good idea to take this into due consideration when conducting searches on trademarks we often assess as 'weak'.
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.
