Weekly China Brand Protection News

December 7, 2024

Copying “CHARLES & KEITH” Bag Logos and Designs Constitutes Trademark Infringement and Unfair Competition

Basic Facts of the Case

Charles & Keith International Pte. Ltd. (“Charles & Keith Singapore”) entered the Chinese market in 2010. Charles & Keith Singapore owns trademarks reg. no. 3216114, reg. no. 18842791, and reg. no. G1070666 (“Cited Marks”), authorized for use in Class 18 for goods such as handbags. Shanghai Charles & Keith Trading Co., Ltd. (“Shanghai Charles & Keith”) was authorized by Charles & Keith Singapore to use the Cited Marks, manage and maintain the “CHARLES & KEITH” brand, and independently handle infringement actions, including litigation and claims for compensation.

Shanghai Charles & Keith discovered that Charles Clay Brand Operation Management (Guangzhou) Co., Ltd. (“Charles Clay”) used a mark similar to the Cited Marks, “CHERMAS & KAETH” (“Disputed Mark”), to produce and sell handbags and other products. Charles Clay also allowed franchisees to use the accused mark and extensively imitated the bag designs of Shanghai Charles & Keith. Chengdu Ruichiyang Trading Co., Ltd. (“Ruichiyang”) was a retailer of the accused infringing products, which were displayed and sold through online and offline channels. Shanghai Charles & Keith filed a lawsuit with the Chengdu Intermediate Court, accusing Charles Clay, its financial staff Huang, Ruichiyang, and Ruichiyang’s sole shareholder Liu of trademark infringement and unfair competition. They requested that the four defendants cease the infringement, eliminate its effects, and jointly compensate CNY 5 million (USD 686,500) for economic losses and reasonable expenses.

The court tried the case and made the following determinations on the key issues:

1. Whether Charles Clay and Ruichiyang’s actions constituted trademark infringement

In this case, Charles Clay argued that its use of the Disputed Mark on the alleged infringing products was authorized by a legitimate third party and that it was permitted to use the registered trademark “CHERMAS & KAETH” reg. no. 31256011 for Class 18 products, without malicious intent. Charles Clay further claimed that the dispute over trademark rights with Shanghai Charles & Keith belong to a dispute between registered trademarks and should not be subject to judicial review. However, the court found that the trademark “CHERMAS & KAETH” reg. no. 31256011 had been declared invalid, and its exclusive rights as a registered trademark no longer existed. Therefore, Charles Clay did not have the corresponding rights to use a valid registered trademark. The court held that the disputed matter fell within the scope of judicial review for trademark infringement. It found Charles Clay’s claims invalid.

The court further ruled that Charles Clay and Ruichiyang had used the Disputed Mark “CHERMAS & KAETH” in their business activities in a manner that served to identify the source of goods, constituting trademark use. The accused products and the goods covered by the Cited Marks were of the same type. Although the Disputed Mark differed in certain letters from the Cited Marks, their letter count, overall structure, font design, and use of the “&” symbol in the same position were similar. Considering that the Disputed Mark had no fixed meaning and that the Cited Marks were distinctive and well-known, the use of the Disputed Mark on the alleged infringing products was likely to confuse or mislead the public about the origin of the goods. The court found that the Disputed Mark “CHERMAS & KAETH” was similar to the Cited Marks. Additionally, Charles Clay, as an industry competitor, was unlikely to be unaware of the Cited Marks. Its extensive use of similar marks while selling similar products demonstrated a clear intent to exploit the goodwill of the Cited Marks. Therefore, the court concluded that Charles Clay’s production and sale of the alleged infringing products and its use of the Disputed Mark without authorization from Shanghai Charles & Keith constituted an infringement of the exclusive rights to the Cited Marks. Ruichiyang’s use and sale of products bearing the accused mark also constituted infringement.

2. Whether Charles Clay’s actions constituted unfair competition

The court noted that while Shanghai Charles & Keith did not provide evidence proving that a specific bag design was original or protected by exclusive rights, the overall series of bag designs created through design and marketing efforts conferred a competitive advantage. Such designs could qualify as competitive interests protected under the Anti-Unfair Competition Law. Charles Clay, as an industry competitor, objectively imitated the overall designs of Shanghai Charles & Keith’s bags. Subjectively, it aimed to leverage the image and characteristics of the “CHARLES & KEITH” brand, as presented through its bag designs, to attract consumer attention and promote the alleged infringing products. Given Charles Clay’s deliberate attempts to confuse its products with the “CHARLES & KEITH” brand, the court determined that its actions were unfair. Charles Clay’s imitation of 54 bag designs violated principles of good faith and commercial ethics, disrupted market order, and harmed the legitimate rights and interests of Shanghai Charles & Keith and consumers.

3. Whether Huang’s actions constituted aiding infringement

As a financial staff member, Huang was responsible for ensuring that corporate transactions were conducted through corporate accounts. However, Huang allowed the use of her personal account to receive funds for Charles Clay’s operations, which exceeded the scope of her legitimate financial duties. The court found that Huang was aware of her role in facilitating Charles Clay’s infringing activities by allowing her account to be used, demonstrating subjective fault. Her actions provided significant assistance to Charles Clay, enabling the concealment of illicit profits derived from infringement. Thus, Huang was held liable for aiding infringement.

4. Whether Ruichiyang’s defense of “legitimate source” was valid

Based on Ruichiyang’s statements, the parties’ knowledge, and evidence, the court confirmed that Ruichiyang was a distributor for Charles Clay and sourced the accused products from Charles Clay. Furthermore, Charles Clay’s deliberate attempts to confuse its products with the “CHARLES & KEITH” brand were evident during negotiations with distributors. While distributors can claim exemption from economic compensation under “legitimate source” defenses, they remain responsible for reasonable expenses. Additionally, Ruichiyang was found to have used the Disputed Mark in its online and offline sales, necessitating liability for ceasing infringement and compensating losses.

5. Civil liability

The court supported Shanghai Charles & Keith’s request to cease infringement and issue public statements to eliminate adverse effects. For damages, the court considered factors such as the reputation of the Cited marks, product pricing, franchisee numbers, infringement duration and scale, subjective intent, and the expenses incurred by Shanghai Charles & Keith to stop the infringement. The court ordered the following: Charles Clay and Huang were jointly liable to compensate Shanghai Charles & Keith CNY 2 million (USD 274,500) for economic losses and reasonable expenses. Ruichiyang was liable to pay CNY 15,000 (USD2,000) for its trademark infringement. Liu was jointly liable for Ruichiyang’s compensation.

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