General News

  • Weekly China Trademark News Updates – January 25, 2022

    Weekly China Trademark News Updates

    January 25, 2022

    1. The Guangdong High Court released its first typical cases of intellectual property punitive damages – Part II

    Recently, the Guangdong High Court released 6 typical cases of intellectual property punitive damages for the first time, involving disputes in many fields such as well-known marks, financial products, and e-commerce. These 6 cases include the determination of infringement, the judgment criteria of subjective malice and serious circumstances in the application of punitive damages, the determination of the base and multiple in the amount of compensation, the relationship between criminal fines and punitive damages, and the application of punitive damages in criminal-civilian cases. Following last week’s post, we will share the rest 3 cases today.

    1. Ulthera v. Ke Pai – enforcement of criminal fines cannot be cited to reduce punitive damages for trademark infringement
      Ulthera has registered the trademark “ULTHERA.” In October 2016, Ke Pai Company (“Ke Pai”) was administratively punished by the Administration for Market Regulation (“AMR”) for selling an ultrasonic imaging therapy device that violated Ulthera’s trademark right of “ULTHERA.” In August 2017, Ulthera and Ke Pai settled on Ke Pai’s trademark infringement. However, Ke Pai continued to produce and sell the said ultrasound therapeutic device labeled with “ULTHERA” trademark. Ke Pai was sentenced and fined for the crime of counterfeiting registered trademark in September 2019. Ulthera sued Ke Pai for trademark infringement based on Ke Pai’s unauthorized use of the “ULTHERA” trademark on the said ultrasound therapeutic device. Ulthera claimed that Ke Pai had subjective malice and requested the Guangzhou IP Court to order Ke Pai to stop the infringement and compensate Ulthera economic losses and reasonable expenses of RMB 1 million (USD158,000).The Guangzhou IP Court found that after receiving administrative punishment and reaching a settlement with Ulthera, Ke Pai continued to infringe on Ulthera’s trademark. Ke Pai’s sales amount was enormous, the infringement was done in bad faith, and the circumstances were serious, thus punitive damages should be applied in accordance with the law. Ke Pai raised its defense based on the execution of said criminal fines but the court held that such defense cannot be used to reduce its punitive damages and would not be supported. Considering Ke Pai’s subjective bad faith, severe infringements, the court access a doubled punitive damage based, which had exceeded Ulthera’s damage claims, thus the court fully supported Ulthera’s damage claim of RMB 1 million (USD158,000).
    2. Lanyan Company v. Bai Fen Bai Company and Ke Wei Company – The defendant’s continued use of the mark after it had been invalidated should be deemed as intentional infringement

      Cited Mark Disputed Mark 1 Disputed Mark 2

      Lanyan Company (“Lanyan”) owned the Cited Mark in Class 3 for cosmetics and facial cleansers, which obtained certain fame after Lanyan’s promotions and uses. Bai Fen Bai Company (“Bai Fen Bai”) entrusted Ke Wei Company (“Ke Wei”) to process and produce cosmetics and skin care products labeled with the Disputed Marks, and sold them through the “Lanyan Mei” app. The accused products’ sales amount reached RMB12.69 million (USD2 million). Bai Fen Bai later acquired the Disputed Mark 1 in Class 3 for cosmetics. Lanyan subsequently filed an invalidation against the Disputed Mark 1 and succeeded. However, during the invalidation proceeding, Bai Fen Bai refiled the Disputed Mark 1 and continued to use it after it was invalidated. Lanyan then sued Bai Fen Bai and requested the court to order Bai Fen Bai and Ke Wei to immediately stop their infringements and compensate Lanyan’s economic loss and reasonable legal costs of RMB 1 million (USD158,000).

      The Shenzhen Qianhai Cooperation Zone Court found that Bai Fen Bai knew the existence of Lanyan Company’s Cited Mark but still deliberately applied for registration and used the Cited Mark 1 that was similar to Lanyan’s Cited Mark, which showed obvious subjective bad faith. Bai Fen Bai’s infringement lasted for a long time, the sales amount was huge, and it was the source of the infringement. Bai Fen Bai’s infringement should be considered as serious and punitive damages should be applied. The sales amount of the alleged infringing goods was RMB 12.69 million (USD 2 million) and when the said amount factored in average profit margin of the four listed companies in the same industry submitted by Lanyan, Bai Fen Bai’s profit can be calculated to RMB 450,000 (USD71,120). According to the degree of subjective fault of Bai Fen Bai and the seriousness of the infringement, the court determined that the compensation should be trippled. The amount of compensation determined on this basis had far exceeded Lanyan’s claim of RMB 1 million (USD158,000), the court fully supported it. Regarding Ke Wei, the existing evidence was not sufficient to prove Ke Wei’s subjective bad faith and punitive damages were not applicable. The court, however, held that Ke Wei should be jointly liable for RMB 100,000 (USD15,800) of Bai Fen Bai’s damages.

    3. Huawei v. Liu – Application of punitive damages in criminal-civilian cases

      Cited Mark 1 Cited Mark 2

      Huawei owned the Cited Marks which obtained relatively high fame through promotions and uses. An individual Liu who, without Huawei’s authorization, purchased materials such as liquid crystal displays and glass outer screens labeled with the Cited Marks to assemble and process them into monitors for sale since May 2018. In May 2020, the Shenzhen Municipal Public Security Bureau arrested Liu and seized the monitors labeled with the Cited Marks. In October 2020, the procuratorate instituted a public prosecution and the court found out that Liu sold 14,139 counterfeits labeled with the Cited Marks and the total sales amount of RMB 2.16 million (USD341,400). The court found Liu liable for the crime of counterfeiting registered trademarks and sentenced Liu to three years and six months in prison and a fine of 1.2 million (USD190,000). Huawei subsequently filed a civil lawsuit which requested Liu to be ordered to stop the infringement and compensate Huawei for economic losses of RMB 500,000 (USD79, 000).

      The Longhua District Court of Shenzhen found that Liu had been infringing Huawei’s Cited Marks by manufacturing and selling counterfeit screen assemblies since May 2018. Liu’s subjective intention was obvious and the circumstances were serious, which met the factors for applying punitive damages. Liu’s gross profit from infringement should be used as the basis of the punitive damages. The court used the said basis with the annual report of the listed company in the same industry to calculate that Liu’s actual profit is RMB 283,000 (USD 44,730). After considering factors such as the nature of Liu’s infringement, circumstances, and obvious subjective intention, the court doubled the compensation amount to RMB 565,560 (USD 90,000), which exceeds Huawei’s damages claim, so the court fully supported it.

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  • Quarterly China Trademark News Updates – Oct. to Dec. 2021

    Quarterly China Trademark News Updates

    October – December 2021

    1. Notable trademark and anti-unfair competition cases

    a. Ralph Lauren prevailed in the second instance unfair competition dispute regarding the “POLO” logo and was awarded RMB 3 million in damages

    The Beijing IP Court concluded a copyright infringement and unfair competition dispute between appellants Ralph Lauren Corporation (“RLC”), Polo/Lauren Company, LP. (“PLC”) and appellees Guangzhou Gangpai Garment Co., Ltd. (“Gangpai”), Guangzhou Huaren Garment Industry Co., Ltd. (“Huaren”), Beijing Dahongmen Fuhai International Trading Co., Ltd. (“Fuhai”), which revoked the first-instance decision and ordered Gangpai and Huaren to stop using PLC’s corporate name and compensate PLC RMB 3 million in damages and RMB 100,000 in reasonable litigation expenses.

    The Beijing IP Court found the following facts in its judgment:

    Regarding the issue of whether the appellees use the appellants’ trade names without authorization amounted to unfair competition. First, the appellants continued to promote and use the “POLO” logo on clothing products in China through media reports and the establishment of retail stores. The “POLO” logo enjoyed high reputation among the relevant public in China. “POLO” was the main part of the trade name that the appellants have been using since their establishment. According to the relevant public’s long-term exposure of the term “POLO,” the relevant public was accustomed to using the “POLO” logo to refer to the appellants, which constituted as the abbreviation of the appellants’ trade name. Therefore, “POLO,” as the appellants’ name and abbreviation, should be protected under the Anti-Unfair Competition Law of China (“AUCL”). Second, the appellants accused Gangpai and Huaren of unauthorized use of the marks “LEYUDN POLOPOS,” “POLO SIMON, “POLO SIMON,” and “Paul Simon in Chinese & POLO SIMON.” Gangpai and Huaren argued that these were legally registered trademarks, however, these marks were invalidated by the courts. According to Article 47 of the Chinese Trademark Law 2019 and Article 30 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Trial of Administrative Cases for the Authorization and Confirmation of Trademarks (Amended in 2020), the above-mentioned trademarks were not protected by the exclusive right to use from the beginning. Therefore, the appellees’ arguments were untenable. Third, the accused clothing products such as T-shirts, casual pants, belts, etc. were identical or similar to the appellants’ famous clothing products; the alleged infringing luggage had strong relevance to clothing goods in terms of function, use, sales channels, target consumer, etc., especially in this case, where these products were all placed and sold in the same retail store, which had caused consumers to be confused. Thus, the alleged infringing goods constituted as similar goods to the appellants’. The use of “LEYUDN POLOPOS,” “POLO SIMON,” “POLO SIMON,” “Paul Simon POLO SIMON,” and other marks containing the words “POLO” on the above-mentioned accused infringing goods constituted as similar to the appellants’ trade name “POLO” in terms of overall visual appearances, which was likely to cause the relevant public to misidentify the sources of goods. Gangpai and Huaren were ordered to stop using the infringing logo, to publish news to eliminate negative impacts, and to compensate for losses.

    Regarding the issue of compensation for losses, since PLC did not provide direct evidence of the actual losses suffered due to the infringement and the infringer’s gains due to the infringement, the court referred to the duration of the infringement involved, scope of implementation of the infringing actions, sales price of infringing goods, and other subjective infringing factors to ascertain an economic compensation within the scope of statutory compensation. Especially considering the fact that the official website of Gangpai introduced that “the brand “POLOSIMON” has been created since 2010, and there are nearly a hundred stores across the country,” it can prove that its infringement duration was long and the profits were huge; Gangpai has never applied for the registration of a separate “POLO” word mark, but clothing displayed in its business premises has a separate “POLO” logo, and its official website emphasized that its products “incorporate American style,” which proved that Gangpai had obvious bad faith in taking advantage of other’s goodwill. Although the appellants filed a separate lawsuit against Huaren and Gangpai’s infringement of its trademark rights and claimed financial compensation, the above facts were sufficient to prove that Huaren and Gangpai have made huge profits from the infringement and its gains obviously exceeded the amount of economic compensation claimed by the appellants. Therefore, the Beijing IP Court fully supported PLC’s economic compensation.

    b. Mary Kay lost in a trademark infringement and unfair competition dispute

    Recently, the Zhejiang High Court rendered a second instance judgement against Mary Kay Inc. (“Mary Kay”) in a trademark infringement and unfair competition dispute. The court found that even if barcodes were scratched, such action cannot be seen as a trademark infringement because Mary Kay’s trademark right was exhausted on first sale.

    Mary Kay registered the trademarks “Mary Kay in Chinese” and “MARY KAY” in Class 3 for “cosmetics” related goods. Since Mary Kay entered China in 1995, it has continued to use and extensively publicize the said trademarks. The “Mary Kay in Chinese” trademark had relatively high fame. The defendant, Ma Shunxian, was the operator of the Taobao shop “Pink Shop Authentic Beauty Mall.” Various pictures of beauty and skin care products marks with the “Mary Kay” logo were found in the shop’s page. The shop’s front page indicated that all products sold were authentic and had explanations regarding reasons for scratched barcodes. Mary Kay sued Ma’s shop for trademark infringement and unfair competition based on the scratched barcodes to the Zhejiang Intermediate Court and requested relief to immediately stop infringement actions and pay compensation for economic loss of RMB 500,000 (USD 77,971). The Zhejiang Intermediate Court found for Mary Kay and Ma appealed to the Zhejiang High Court.

    The Zhejiang High Court reasoned that in a trademark infringement case, if the alleged infringing product was a genuine product, it would be an objective fact that the product originated from the right holder, although some of the barcodes and production batch numbers of the alleged infringing product that can be traced back to the dealer’s partial information were scratched, but if the seller had fully notified the code scratching, it would not harm Mary Kay’s trademark function as to identify the source of the goods, nor would it cause confusion or misunderstanding to the relevant public. It would certain not affect consumers’ perception of Mary Kay’s product and Mary Kay’s reputation. Therefore, the trademark exhaustion principle could be applied in this case and the defendant did not infringe upon Mary Kay’s trademark.

    c. Theory was awarded RMB 3.2 million in a trademark infringement and unfair competition lawsuit

    The Shanghai IP Court recently rendered the final decision for a trademark infringement and unfair competition lawsuit for Theory LLC (“Theory”) against  defendants Xierrui (Shanghai) Apparel Co., Ltd. (“Xierrui”), Shaanxi Wangfujing Outlets Commercial Co., Ltd. (“Shaanxi Outlets”), Xi’an Xien Hot Spring Outlets Cultural Tourism Co., Ltd. (“Xi’an Outlets”), Shandong Bailian Haina Commercial Co., Ltd. (“Shandong Bailian”), Beijing Saite Outlets Trading Co., Ltd. (“Beijing Outlets”), Wuxi Bailian Outlets Commercial Co., Ltd. (“Wuxi Outlets”), and Nanjing Tangshan Bailian Outlet Commercial Co., Ltd. (“Nanjing Outlets”). The court revoked the first instance’s decision, ordered the defendants to immediately stop infringements, and compensate Theory for RMB 3.2 million (USD 501,500).

    The Shanghai IP Court held that although the alleged infringing mark was a graphic and word mark, its distinguishing part was the word “TheoryLuxe,” and “TheoryLuxe” completely includes the word “THEORY,” which was similar to “Theory” in terms of text composition, pronunciation, and meaning. And the said mark was used on apparel products, packaging, and related commercial activities. Therefore, Xierrui’s use of the alleged infringing logo may easily cause the relevant public to confuse the source of the goods or misunderstand that there was an association between the two, and infringe upon Theory’s trademark right. Xierrui claimed that it had obtained the exclusive right to use the “TheoryLuxe” mark in Class 35 as a service mark on shop signboard, apparel product packaging, hangers, store decorations, etc. The court found that although Xierrui had the right to use “TheoryLuxe” in Class 35 as a service mark, the approved services, promotion of apparel, shoes, hats, etc. (for others), etc., the promotion services (for others) were services to provide assistive services to other’s sales but not for the mark owner itself. In this case, however, Xierrui promoted its own apparel products but not the service approved. Given that Xierrui’s use of the “TheoryLuxe” logo was able to allow its apparel products to be recognized, Xierrui had infringed upon Theory’s rights. Moreover, Xierrui’s domain name theoryluxe.com completely included Theory’s registered trademark. Xierrui used its website to introduce and promote its apparel products to the public. Xierrui used the “theory” logo on its packaging. These uses can easily cause relevant consumers to be confused regarding the source of the goods and infringe upon Theory’s rights. Likewise, Shaanxi Outlets, and Xi’an Outlets, Shandong Bailian, Beijing Outlets, Wuxi Outlets, and Nanjing Outlets all used the marks “TheoryLuxe,” “TheoryLuxe Xierrui in Chinese,” “THEORY and Xierrui in Chinese,” and “THEORY” in its respective shop’s directory and guides. Among them, Beijing Outlets also used “TheoryLuxe” and “Theory” on its Weibo. These uses infringed upon Theory’s trademark rights.

    d. Beijing Chaoyang District Court issued an injunction for the first direct one-sided price comparison case in China

    In October 2021, the Beijing Chaoyang District Court rendered a favorable decision for Markor International Home Furnishings Co., Ltd. (“Markor”) against the defendants Baichuan Times (Beijing) Trading Co., Ltd. (“Baichuan Times”), Beijing Baichuan United Technology Development Co., Ltd. (“Baichuan United”), and Baichuan Wujie (Beijing) Technology Co., Ltd. (“Baichuan Wujie”) for behavior preservation in a trademark infringement and unfair competition dispute. The court ordered the defendants to immediately stop one-sided price comparison of the Markor brand and stop using the slogans “remove the undue price bubble,” “restore the original price,” and “the product price is the lowest in the industry.”

    Markor and the three defendants are owners of American styled furniture companies. Markor owns the trademarks “Meike Meijia in Chinese and MarkorFurnishings,” “Palaluoli in Chinese.” The three defendants are affiliated companies who promoted as a whole through brick and mortars, websites, WeChat public accounts, Weibo, and exhibitions. In its promotions, the defendants did not fully disclose its products’ quality, size, raw materials, production technology, and after sale services but excessively focusing on price comparison against Markor’s products while claiming its “products have the lowest price in the industry” because it has “removed the undue price bubble” and “restore the original price” of the products. Such promotions would easily cause confusion to the public that Markor’s prices were marked up. The defendants’ actions amounted to false advertisement and commercial slander of unfair competition.

    The defendants promote online and offline within a broad peripheral, if the said actions were left untreated, the relevant public was likely to continue to be mistaken and falsely believe that Markor’s products prices were marked up, which would increase the popularity of the defendants’ products on the market and harm Markor’s goodwill and market share. If such actions were not stopped, the potential harm to Markor would be irreparable. Accordingly, the court supported Markor’s request to have the defendants remove the said slogans and order Baichun Times to stop using “Palaluooli in Chinese” as a slogan in selling its furniture.

    e. Hyatt won well-known mark recognition in court appeals

    Recently, the Beijing High Court rendered a second instance judgment, affirming “Hyatt in Chinese” in respect of hotel services has constituted a well-known mark and accordingly invalidated the registration of “HyattSen in Chinese (凯悦森) and HyattSen” on clothing and other goods in class 25.

    Zhi-Peng Corporation applied the mark “HyattSen in Chinese and HyattSen” (presented as HyattSen in Chinese stacked on HyattSen)(“Disputed Mark”) in 2014 on clothing, belts, gloves, swimming suits, tops, pants, shoes, hats, hosiery, and ties. Hyatt cited its registrations of “Hyatt in Chinese” and “HYATT” in class 43 in an opposition and later an invalidation against the Disputed Mark, but received unfavorable decision on both proceedings.

    Hyatt brought the invalidation case to the Beijing IP Court and obtained a favorable judgment based on the well-known mark clause.

    The court found that: Hyatt submitted publicity reports on many newspapers, magazines, and websites from 2000 to 2013, award rankings, hotel introductions, protected records, and other evidence, which can prove that through continuous use and extensive promotion, the cited mark “Hyatt in Chinese” has gained high reputation in hotel services and is widely known by the relevant public. Therefore, the evidence in the case can prove that the cited mark “Hyatt in Chinese” has constituted a well-known trademark on hotel services. The Disputed Mark contains the cited mark “Hyatt in Chinese” in its entirety, the two marks are similar in terms of composition, pronunciation, and overall appearance. So the Disputed Mark has constituted a copy and imitation of the cited mark. Although clothing and other goods designated under the Disputed Mark fall into a different class from the hotels services under the cited mark “Hyatt in Chinese,” those goods and services all belong to the field of daily consumables and the target consumers are also related in a certain extent. In the case that the Disputed Mark has constituted a copy and imitation of the cited mark, the relevant public could easily deem the registrant of the Disputed Mark is closely related to the registrant of the cited mark, thereby weakening the distinctiveness of the cited mark or improperly taking free ride of the goodwill of the cited mark. Such misleading is likely to damage Hyatt’s rights based on its well-known mark. Accordingly, the application for registration of the Disputed Mark has violated Article 13 of the Chinese Trademark Law and should not be approved for registration.

    The CNIPA disagreed and further appealed the case to the Beijing High Court. The second instance court affirmed the first instance judgment, holding that:

    According to the evidence, it can be determined that before the application date of the Disputed Mark, the cited mark “Hyatt in Chinese” had been widely known by the relevant Chinese public in hotel and other services and had constituted a well-known mark. The Disputed Mark is composed of the Chinese characters “HyattSen in Chinese” and the English letters “HyattSen,” of which “Hyatt in Chinese” is the distinctive and recognizable part for the mark; the two marks are similar in terms of composition and pronunciation. Given the fame of the cited mark and the recognition sensitivity of the public, the Disputed Mark has constituted a copy or imitation of the cited mark. Although the clothing goods under the Disputed Mark and the hotel services fall into different classes in the Similar Goods and Services Classification, these goods and services are closely related in terms of target consumers. As the mark “Hyatt in Chinese” has been widely known to the public, upon seeing the Disputed Mark being used on the above-mentioned goods, the public is likely to associate it to the well-known mark of Hyatt. Based on such association, the relevant public may mistakenly believe that the Disputed Mark has a certain connection with the well-known mark of Hyatt, thereby misleading the public and splitting the inherent connection between the cited mark and Hyatt’s services in hotels, which would further lead to the detrimental consequences of weakening the distinctiveness of the Hyatt’s well-known mark and harming the legitimate rights and interests of Hyatt.

    f. MUJI prevailed against Wuyinliangpin in a trademark infringement lawsuit

    Based on its “Wuyinliangpin (MUJI in Chinese)” registered trademark in Class 20 for “pillow” related goods (“Cited Mark”), MUJI sued Beijing Wuyinliangpin Investment Co. Ltd. (“Wuyinliangpin”) for using the Disputed Mark on its u-shaped pillow product without authorization and infringed upon MUJI’s trademark rights. Wuyinliangpin defended by citing its licensed trademark “Wuyinliangpin” in Class 24 for “fabrics; pillowcase, duvet.”

    The court found that the said goods in Class 20 and Class 24 largely overlapped in function, use, and target consumer. Given that both parties have its registered or licensed trademarks, both parties should use its trademarks within the scope of its approved goods. The alleged infringing products in this case were labeled as “u-shaped pillowcase” or “neck pillowcase,” but the products photo showed “u-shaped pillow with filler.” The invoice showed the product name as “textile product neck cushion.” Thus, the alleged infringing product was in fact a neck pillow product, which falls into the same product category as the Cited Mark’s approved goods “pillow.” Meanwhile, Wuyinliangpin prominently used its licensed mark “Wuyinliangpin” on the alleged infringing product’s hangtag, packaging, washing labels. Wuyinliangpin’s licensed mark and MUJI’s registered trademark had identical composition, pronunciation, and meaning, and the only differences were the use of simplified and traditional Chinese. The two marks were similar marks. Accordingly, the first instance’s decision against Wuyinliangpin was affirmed.

    g. New Balance prevailed again in the second instance court winning RMB18 million in damages

    New Balance Athletics, Inc and New Balance Trading (China) Co., Ltd. (together as “New Balance”) sued Putian Shengfengsheng Shoes Co., Ltd. (“Shengfengsheng”), Putian Wobaili Trading Co., Ltd. (Wobaili”), Wang Jinbiao, Gusu District Meibailu Shoe Store (“Meibailu”) for infringing its registered trademark the “N” logo on Class 25 for “sneakers” (“Cited Mark”) in Suzhou Intermediate Court. The defendants cited its registered trademark “N & design” (“Disputed Mark”).

    Disputed Mark Cited Mark
                     

    The court found that New Balance is the registrant of the Cited Mark and New Balance is the authorized party in China, which gave New Balance the exclusive right to use the trademark and its rights should be protected under the law. The alleged infringing product are sneakers, which prominently used the N logo on two sides of the shoe and significantly weakened the arrow design appeared at the lower portion of the Disputed Mark. When paying ordinary attention, consumers could recognize the Disputed Mark as used appeared as an “N” logo in bold font, which was highly similar to the Cited Mark. Considering New Balance have been selling sneakers with the N logo for many years through continuous promotion and publicity, its N logo has obtained relatively high fame. Thus, the Disputed Mark was likely to cause confusion and mistake the public regarding the source of the goods of the two marks. The evidence also proves that there were actual confusions on the market. Therefore, the Disputed Mark constituted as an infringement on the Cited Mark. Meanwhile, the New Balance sneakers have been using the N logo on two sides of the shoes as its decoration for a fairly long time. With extensive publications, the N logo can be seen as a special decoration of New Balance’s sneakers. Wobaili and Shengfengsheng, as competitors in the industry, knowing the popularity of New Balance sneakers and the distinctiveness of using the N logo on both sides of the shoes, they still used the unique decoration of well-known goods without authorization. Their actions showed subjectively malicious to free-riding others fame, and objectively crouching a large number of New Balance sneakers market share, which violated the good faith principle and amounted to unfair competition. Comprehensively considering the circumstances of the case, the first instance court ruled that the three defendants should compensate New Balance for economic losses and reasonable expenses of RMB18 million. The second instance court upheld the judgment of the first instance court.

    h. Christian Louboutin prevailed in a trademark infringement against an online reseller

    Christian Louboutin is one of the world’s leading designer brands for men’s and women’s shoes, bags, and related accessories created in 1991 by Christian Louboutin himself. The Christian Louboutin brand has become a world-famous manufacturer of luxury shoes and opened retailers in more than 60 countries. Christian Louboutin registered the “CHRISTIAN LOUBOUTIN” mark, the “Louboutin” mark, and the “Louboutin and Design” mark in China. Lanli Co. opened a store named “Guangzhou Lanli International Trade Co., Ltd.” on the 1688 platform, used the said trademarks without Christian Louboutin’s authorization, and sold goods that infringed the said trademarks. Another company, Shiyu, posted a moment story on a WeChat account using the said trademarks without authorization and sold goods that infringed the said trademarks. The infringing activities of Shiyu can be traced back to 2015, which lasted for quite some time.

    Lanli Co. and Shiyu jointly sold infringing goods, but did not submit evidence to prove the source of purchase of the infringing goods at issue. In addition, Lanli Co. operated the shop involved in this case as a manufacturer and advertised in details that “the disputed shoes can be customized and all shoes can be made.” Combining with Shiyu’s statements, such as “we are manufacturer” “can start making shoes tomorrow,” etc. the court found both Lanli Co., and Shiyu were manufacturing the infringing goods.

    Lanli Co. and Shiyu produced and sold the infringing goods at issue, which infringed upon Christian Louboutin’s registered trademark rights, and the court ordered the defendants to pay the Christian Louboutin RMB150,000 (USD23,540) in damages.

    i. Kluber Lubrication won over RMB 2 million in damages in a trademark infringement lawsuit

    On November 29, 2021, the Shanghai IP Court made a final judgment in the case of Kluber Lubricant (Shanghai) Co., Ltd. (“Kluber Shanghai”) against Shanghai Xinyu Lubrication Technology Co., Ltd. (“Xinyu”), Zou Ming and Yuan Jianguo for trademark infringement disputes, and affirmed the first instance judgment. Xinyu and Zou Ming should jointly and severally compensate Kulber for economic losses of RMB2 million (USD313,819) and reasonable expenses of RMB150,000(USD23,536).

    There are two types of alleged infringements in this case. One was filling other brands of lubricants as “Kluber in Chinese” brand lubricants. The other was filling large bottles of “Kluber in Chinese” brand lubricants into small bottles of “Kluber in Chinese” brand lubricants.

    As Xinyu’s legal representative and actual controller, Zou Ming organized Xinyu’s employees, including Yuan Jianguo et al., to pack low-priced lubricants of other brands into customized containers, affix the self-printed Kluber trademark and sell the lubricant under the guise of Kluber. Under the Chinese Trademark Law, said action performed without Kluber’s authorization and used a mark identical to Kluber’s registered trademarks on identical goods, which violated Kluber’s trademark right.

    The issue in this case was whether the sub-packaging acts of the accused genuine lubricant involved in this case constituted trademark infringement may be analyzed from the following aspects:

    1. The alleged act of attaching a trademark to a small bottle for sub-packaging falls within the use as mentioned in the Chinese Trademark Law. In this case, Zou Ming instigated his employees to purchase 1kg of lubricant cans from the market, load the genuine large “Kluber” lubricant bottle into the aforesaid small bottle, and affix the forged registered trademark that were made. The attachment of such a trademark did not change the function of identifying the source of the trademark. Therefore, Zou Ming’s use of the trademark involved in this case was not within the reasonable scope of use, and thus he could not be deemed to have used the registered trademark of Kluber in good faith.
    2. The accused sub-packaging damaged the quality assurance function of the trademark. The act of sub-packaging of goods will involve the change of the original packaging or product itself, so that the sub-packaged goods are different from the original goods, and the owner has lost control of the quality of goods, such change may directly affect or even damage the owner’s reputation of goods. Especially for lubricant, which is a product that has strict storage conditions and refined internal material requirements, which make the quality assurance function of the trademark more prone to damage.
    3. The principle of exhaustion of trademark rights shall not apply to the accused act of sub-packaging. Xinyu, as a dealer of Kluber, purchased genuine Kluber lubricant, and its source of products was legal. However, when Xinyu resold the lubricant, it damaged the packaging of the lubricant for its own greater benefit, or labeled low-grade lubricant as high-grade ones, which damaged the quality of products and the fame of the trademark owners. Therefore, the sub-packaging involved in this case shall not be governed by the principle of exhaustion of trademark rights.

    Accordingly, the sub-packaging involved in this case fall within the trademark infringement act of “causing other damage to the exclusive right of others to use a registered trademark” as prescribed in Article 57(7) of the Chinese Trademark Law.

    j. Sale of Michael Kors parallel imports were found to infringed upon Michael Kors’ trademark rights

    The Dongguan Intermediate Court of Guangdong Province recently concluded a trademark infringement case between Michael Kors (Switzerland) International Co., Ltd. (“Michael Kors”), Shanghai Yiteng Brand Management Co., Ltd. (“Shanghai Yiteng”), Dongguan International Trade City Branch, Shanghai Yiteng Brand Management Co., Ltd. (Shanghai Yiteng), etc. The court upheld the first instance court’s judgment that Shanghai Yiteng’s sale of parallel imported “MK” handbags constituted infringement.

    In this case, the court found that the alleged infringing products were the same as the products approved for use in the registered trademark of Michael Kors. “MICHAELKORS” and “MICHAELMICHAELKORS” used on the alleged infringing products sold by Shanghai Yiteng were the same as the registered trademarks of Michael Kors. The use of “MKMICHAELKORS” on the packaging of the alleged infringing products sold by Shanghai Yiteng constituted trademark use in the meaning of the Chinese Trademark Law, which was similar to the registered trademark of Michael Kors, and was likely to cause confusion among the relevant public. As the owner of the exclusive right to use the registered trademark involved in this case, Michael Kors issued an appraisal report after appraising the alleged infringing handbag and confirmed in the first instance trial that the alleged infringing products were not authorized products produced by Michael Kors. Shanghai Yiteng claimed that the alleged infringing products were genuine products purchased from Yunnan Aishe Trading Co., Ltd. through parallel import, and the alleged infringing products sold by it had lawful sources. Since the registered trademark involved in this case has a relatively high popularity in China, Shanghai Yiteng, as a company specialized in selling alleged infringing products, shall have a higher duty of care when purchasing from lawful sources. The scanned copies of its sales contracts, bank transfer records, the power of attorney issued by Shenzhen Huarui Ri-Sun Watch Co., Ltd., and the Import Goods Declaration Form and other evidence submitted by Shanghai Yiteng could not prove the corresponding relationship between the alleged infringing products it sold and the goods indicated in the Import Goods Declaration Form. Shanghai Yiteng failed to prove that the entire procurement channel for the alleged infringing products it sold and the products it obtained were genuine products obtained through parallel imports. Therefore, the evidence submitted by Shanghai Yiteng could not negate the arguments of Michael Kors regarding the non-genuine products, and its claim that the infringing products were parallel imports lacked sufficient evidence. In accordance with Article 57(3) of the Chinese Trademark Law, the sale of the alleged infringing products by Shanghai Yiteng infringed upon Michael Kors’ exclusive right to use its trademark.

    k. The Beijing High Court cited claim preclusion in affirming the “Rejoice in Chinese” trademark invalidation case

    The “Rejoice in Chinese” trademark (“Disputed Mark”) was filed by an individual He Dun on September 19, 2002. Proctor & Gamble (“P&G”) filed an opposition against the Disputed Mark when the Chinese Trademark Law 2001 was still in force. The Disputed Mark was later approved for registration after an opposition appeal, first instance, and second instance appeals.

    While the Chinese Trademark Law 2013 was in force, P&G filed an invalidation against the Disputed Mark. After adjudication, the CNIPA invalidated the Disputed Mark because the Disputed Mark violated Article 13(2) of the Chinese Trademark Law 2013. He Dun was unsatisfied with the CNIPA’s decision and appealed to the Beijing IP Court.

    The Beijing IP Court found that the opposition filed by P&G in 2001 has clearly cited P&G’s prior registered trademark “Rejoice in Chinese” and claimed that the Disputed Mark violated Article 13(2) of the Chinese Trademark Law 2001, which was an identical claim to this case. Evidence submitted for this case were identical to those submitted for the opposition filed based on the Chinese Trademark Law 2001, the evidence cannot reflect whether the time of its formation was after the opposition decision was made, there were no evidence showing that there were circumstances that could not be previously obtained due to objective reasons, or the evidence would have substantially affected the application of Article 13(2) of the Chinese Trademark Law 2001 in the opposition. Thus, P&G’s invalidation constituted as claiming identical facts and reasons to a prior case, which violated the principle of claim preclusion. P&G’s new citation of its registered trademark “Rejoice & Rejoice in Chinese & Design” did not violate the principle of claim preclusion, but the registration date was later than the application date of the Disputed Mark. Even if such mark was recognized with well-known mark status, P&G would not be able to prove that such mark had obtained well-known status prior to the Disputed Mark’s application date, because well-known mark protection for non-similar or non-identical goods can only extend to the registration date of the well-known mark. Accordingly, the Beijing IP Court concluded that the P&G’s invalidation was claim precluded because the same issue was previously decided on merit citing Article 13(2) of the Chinese Trademark Law, and revoked the CNIPA’s invalidation decision. The Beijing IP Court’s decision was then appealed to the Beijing High Court.

    The Beijing High Court in its decision affirming the Beijing IP Court’s decision reasoned that “the scope of the administrative power of the court for trademark granting and verification shall generally be determined based on the plaintiff’s litigation claims and reasons. If the plaintiff did not raise a claim in its complaint but the relevant findings of the Trademark Review and Adjudication Board were obviously improper, the court may review the relevant matters and make judgments after the parties have stated their opinions.” The evidence in the case can prove that He Dun filed and obtained hundreds of trademarks identical or similar to other famous trademarks in Classes 3, 5, 16, 20, 24, 30, and 32, and failed to provide reasonable explanations on his intention and creative sources of the designs of his massive filings for distinctive and famous trademarks, which can be seen as He Dun has the subjective malice of plagiarizing and imitating others’ trademarks, and constituted as bad faith registrations that should not be limited by the five-year limitation for filing invalidation under the Chinese Trademark Law. Considered that the CNIPA’s invalidation decision was revoked and the CNIPA was ordered to issue a new decision for the Disputed Mark, the Beijing High Court ordered the CNIPA to reexamine the case based on Article 45(1) of the Chinese Trademark Law for He Dun’s bad faith.

    2. Notable trademark laws, regulations, and news updates

    a. Starting January 1, 2022, the CNIPA will no longer issue paper trademark certificates

    Recently, the CNIPA announced that starting from January 1, 2022, applicants who filed paper trademark applications will receive a “Notice of Issuing a Trademark Registration Certificate,” and the trademark registrant can use the web address and access code provided to retrieve electronic trademark registration certificate from the Trademark Office’s website. Applicants who filed trademark applications electronically can log into the Trademark Office’s online platform to view, download, and print electronic trademark registration certificate. The CNIPA will no longer issue paper trademark registration certificates.

    b. The CNIPA has cracked down on 376,000 malicious trademark registration applications in 2021

    Since this year, the CNIPA has launched a special campaign to severely crack down on abnormal patent applications and malicious trademark registration. The CNIPA has focused on high quality development of intellectual property rights, launched a crackdown on malicious trademarks, and cumulatively cracked down on 376,000 applications for malicious trademark registration.

    c. The CNIPA: Stop handling the trademark agency business of these two companies for 12 months / forever!

    On December 10, 2021, the CNIPA issued two administrative penalty decisions: Permanently stop accepting the trademark agency business of Jiangsu Bainian Trademark Agency Co., Ltd. (“Bainian”), and stop accepting the trademark agency business of Guangzhou Zhongchuang International Brand Management Co., Ltd. (“Zhongchuang”) for 12 months.

    In the process of engaging in trademark agency business, Bainian, in order to avoid the requirement that trademark agency companies cannot apply for registration of trademarks other than trademark agency services, it preemptively registered trademarks that were previously used by others and have certain influence in the names of three affiliated companies. A malicious trademark application for the purpose of use violates the principle of good faith and constitutes Article 19(3) of the Chinese Trademark Law, which states that trademark agency knows or should know that the trademark applied for by the client belongs to Article 4, Article 15, and Article 32 of this law shall not accept their entrustment.” Article 19(4) states that “trademark agencies shall not apply for the registration of other trademarks except for the registration of trademarks for their agency services.” Bainian implemented the above-mentioned illegal acts, which showed its subjective bad faith, and the duration of its operation was long, and there were a large number of malicious trademark applications, which seriously disrupted the order of trademark registration management, which should be considered as serious circumstances. In accordance with the provisions of Article 68(1)iii of the Chinese Trademark Law, Article 68(2) and Article 90 of the Regulations for the Implementation of the Trademark Law, the CNIPA decided to permanently stop accepting trademark agency business from Bainian, and announced this news on the CNIPA’s website.

    Entrusted by 58 overseas companies, Zhongchuang filed 224 trademark applications with the CNIPA that were identical or similar to the trademarks registered and used by others, which interfered with the normal trademark examination, and at the same time, its behavior had server impact against some of the other companies, which belonged to the situation of “disrupting the order of the trademark agency market by other improper means” and “serious circumstances” as stipulated in Article 68(1)ii of the Chinese Trademark law. According to Article 68(1)ii, Article 68(2), and Article 90(1) and (2) of the Regulations for the Implementation of the Trademark Law, the CNIPA decided to stop accepting the trademark agency business of Zhongchuang for twelve months and announce this news on the CNIPA’s website.

    d. The Standards for Judging General Trademark Violations was recently issued by the CNIPA with a view to further tightening trademark administration

    The CNIPA recently issued the Standards for Judging General Trademark Violations (“Standards”), which unify the standards for judging violations of the trademark administration order, with a view to strengthening trademark administration, unifying law enforcement standards, and improving law enforcement.

    The Standards include 35 articles and detail nine types of violations against the administrative order of trademarks, including the failure to use of a registered trademark as prescribed by the existing Trademark Law, regulations and departmental rules, the use of a mark that shall not be used as a trademark, the use of the word “well-known trademark in Chinese” in commercial activities, the failure of a trademark licensee to indicate its name and the place of origin of goods, the change of a registered trademark, the name, and address of a registrant by itself, falsely using of an unregistered trademark as a registered trademark, failure to perform the obligation of managing collective trademark and managing certification trademark, filing bad faith trademark application. The Standards shall come into force on January 1, 2022.

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