Weekly China Trademark News Updates

April 20, 2021

1. Alibaba fined for RMB 18.22 billion for abuse of market dominance

On April 10, 2021, the State Administration of Market Regulation (“SAMR”) rendered a decision finding Alibaba Group Holding Limited (“Alibaba”) abused its market dominance, imposed a fine of RMB 18.22 billion (USD 2.79 billion), and requested Alibaba to conduct full rectification and operate in compliance with laws and regulations.

In its decision, the SAMR found that Alibaba’s operations have “occupied a relatively high market share for a long-term, which enjoys a very high market recognition and consumer awareness, and there is high cost for operators to move away from Alibaba’s platforms.” Alibaba had a dominant position in the online retail service market in China.

Since 2015, in order to restrict other competitions, maintaining and strengthening its market position, Alibaba abused its market dominance by not allowing business operators on its platform to operate or participate sales events on other competing platforms. Further, Alibaba imposed various awards and punishments in order to carry out its “choice between the two” (business operators can only choose either Alibaba or other competing platforms but not both) implementation.

Alibaba’s actions not only maintained and strengthened its market position, but also deviated from the development concept of economic openness, tolerance, and sharing. Such actions excluded and restricted relevant market competition, harmed the interests of business operators and consumers on the platform, and weakened innovation and development vitality. Alibaba’s actions also hindered the healthy development of platform economy in a standardized, orderly, and innovative manner.

Click here for SAMR’s official press release and its administrative decision and guidance in Chinese.

2. Taobao successfully invalidated the “Lian Tao” trademark

Guangdong Lian Tao Electronic Commerce Co., Ltd. (“Lian Tao”) applied for the “Lian Tao in Chinese” mark in Class 9 for computer, electronic recorder, etc. with application number 19802423 on April 28, 2016. The “Lian Tao in Chinese” mark was approved for registration on November 21, 2018 after an opposition proceeding.

On October 10, 2019, Alibaba filed an invalidation action against the “Lian Tao in Chinese” mark claiming that such mark constituted as a similar mark on identical or similar goods with its “Tao in Chinese,” “Tao Bao in Chinese,” “Tao Bao in Chinese and TAOBAO,” and 6 other marks. Alibaba also requested for well-known mark recognition and protection.

The CNIPA ruled in favor of Alibaba and invalidated the “Lian Tao in Chinese” mark. The CNIPA found that the “Lian Tao in Chinese” mark and Alibaba’s Tao Bao in Chinese” series marks all consisted of the “Tao in Chinese” character, which constituted as similar marks in terms of composition and pronunciation. The CNIPA invalidated the goods of computer, neon lamp, television, and other goods, and only maintained on chip (integrated circuit) approved for the “Lian Tao in Chinese” mark.

Lian Tao filed an administrative appeal with the Beijing IP Court and we will continue to update news regarding this dispute.

3. “Nestlé” recognized as a well-known mark and granted cross-class protection against infringing use on furniture related goods

Nestlé S.A. (“Nestlé”) sued Yabo International Home Trading Center Co., Ltd. (“Yabo”) for infringing use of its “Que Chao in Chinese” and “Nestlé” trademarks before the Guangzhou IP Court.

The court found that Nestlé submitted sufficient evidence to prove that its “Que Chao in Chinese” and “Nestlé” trademarks have obtained high fame and were generally known by the relevant public through long-term and extensive use and promotion on coffee related goods. Nestlé’s marks had in fact achieved well-known status. Yabo’s disputed marks completely included Nestlé’s well-known marks and the Chinese characters and English letters were in identical order, which constituted as a copy of Nestlé’s well-known marks. Yabo’s use of the disputed marks on wholesale and retail of furniture goods damaged the corresponding relationship between Nestlé’s well-known marks and its approved goods for coffee related goods, weakened Nestlé’s well-known marks’ inherent distinctiveness, which constituted as trademark infringement because such act misled the relevant public and was likely to damage Nestlé’s interests as an owner of its well-known trademarks.

Considering it was difficult to determine Nestlé’s loss and Yabo’s unjustified profit from infringement and there lacked trademark licensing fee for reference in determining Nestlé’s compensation, the court considered Yabo’s overall operation scale, infringing regions and duration, Nestlé’s trademarks fame, Yabo’s failure to provide operation profit upon court order, and Nestlé’s legal and other reasonable enforcement costs and ordered Yabo to pay RMB 1 million (USD 153,600) in damages including reasonable enforcement costs to Nestlé.

Yabo appealed the unfavorable decision to the second instance court but the appeal was rejected.

4. The CNIPA said “NO” to malicious trademark hoarding and squatting

The CNIPA launched the “Special Action Plan to Combat Malicious Trademark Squatting” at the end of March emphasizing that trademark squatting not only seriously damaged the legitimate rights and interests of market entities and the public, but also seriously endangered the order of trademark registration. Therefore, starting from March 2021, the CNIPA has launched a special campaign to combat malicious trademark squatting, and severely cracked down on seven types of malicious squatting that attempted improper interests, disrupted the order of trademark registration management, and caused significant adverse social impact.

Prior to this, the CNIPA had issued a separate document to rectify the situation of malicious hoarding of trademark applications not for use. Judging from the recent publication and news release from the CNIPA, the crack down has been very intense. For example, a company submitted more than 380 trademark applications within 3 months, but all of them were rejected. An individual submitted 15 applications on May 14, 2020 and August 20, 2020, totaling 30 applications. In its decision to reject these applications, the CNIPA found that such number of trademarks “obviously exceeding regular business needs” and “should be considered as malicious trademark applications not for the purpose of use.”

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