Weekly China Trademark News Updates

December 13, 2022

1. The CNIPA issued the “Guidelines on Application for Registration and Use of Class 35 Trademarks” and “Guidelines on How to Avoid Conflicts with Prior Rights in Application for Registration and Use of Trademarks“

“Guidelines on Application for Registration and Use of Class 35 Trademarks” states that services in class 35 mainly include business management, operations, organization, and administration of commercial or industrial companies, as well as advertising, marketing, and promotional services. Sales of goods is not considered as a service. The main purpose of services in class 35 is to assist others in their business operations or management, in the management of others’ business activities or business functions, and to provide others with advertising services to the public through various means of communication. The most important feature of services in class 35 is that the relevant services are provided for others, rather than for the registrant’s own business needs. For example, advertising related services means providing advertisement, production and dissemination for other’s products or services, not including those for the trademark registrant itself.

“Guidelines on How to Avoid Conflicts with Prior Rights in Application for Registration and Use of Trademarks” points out that “prior rights” refer to the rights or interests that have been enjoyed and legally existed before the date of application for registration of a trademark, including rights to trademarks, copyrights, design patent rights, name rights, portrait rights, geographical indications, influential goods or service names, packaging, decoration, and other legal prior rights and interests that should be protected. The protection of prior trademark rights has been reflected in other provisions of the Trademark Law, so “prior rights” in this guideline do not include prior trademark rights.

2. Unauthorized use of the “Michelin in Chinese” Guide reputation for publicity constitutes unfair competition, Michelin was awarded RMB 1.02 million in compensation

In a recent trademark infringement and unfair competition dispute case between the appellant Zhejiang Shisanwei Catering Management Co., Ltd., (“Shisanwei”), Sanbu Beef Brisket Restaurant (“Sanbu Beef Brisket”), second defendant in the original case, and the appellee Michelin Group Corporation (“Michelin”), the Jiangsu High Court rejected Shisanwei’s appeal.

Regarding whether Shisanwei and Sanbu Beef Brisket infringed on Michelin’s right to exclusive use of the registered trademark involved in the case, the first instance court determined that Shisanwei and Sanbu Beef Brisket used the “an affordable Michelin beef brisket”, “a small brand insists on big ideals, aspires to be Michelin beef brisket” in the process of operation and publicity and other promotional terms, which is descriptive rather than identification of source of goods or services. Therefore, this method of use does not fall within the scope of protection of Michelin’s right to exclusive use of the “Michelin” trademark involved in the case, and Michelin’s allegation of trademark infringement was not supported. Michelin appealed. The focus of the second instance disputes are: 1. Whether the actions of Shisanwei constituted unfair competition; 2. Whether the amount of compensation determined in the first instance judgment was appropriate.

Regarding the first disputed issue: The Jiangsu High Court found that, first, the Anti-Unfair Competition Law’s maintenance of market competition order includes not only prohibiting operators with direct competitive relationships from gaining competitive advantages in improper ways or destroying the competitive advantages of others, but also prohibiting operators from obtaining competitive advantages through unfair means. Unfair means such as fighting for consumers and strive for more trading opportunities than other legitimate operators. Therefore, when determining whether the plaintiff has the right to sue, whether it constitutes a competitive relationship, and whether there is unfair competition, it should not be limited to whether the business scope is the same. Although the businesses are different among the parties in this case, their behaviors violated the Anti-Unfair Competition Law. Competitive rules can also be determined to have a competitive relationship. In this case, Michelin claimed that Shisanwei used improper means to gain a competitive advantage for itself by publicizing “an affordable Michelin beef brisket” in its business operations, and harmed the legitimate rights and interests of other operators. It affects consumers’ consumption decisions, and ultimately affects the evaluation criteria of “Michelin” stars, making Michelin face the danger of being belittled and causing damage to the rights and interests of Michelin. Therefore, Michelin can sue Shisanwei under unfair competition claim, which is not improper, and the first instance court supported it.

Second, when using advertisements or other methods to promote their products or services, business operators shall follow the principle of good faith and conform to generally recognized business ethics, and shall not use false or misleading publicity methods to gain unfair competitive advantages, damage the legitimate rights and interests of other operators and consumers, and disrupt social and economic order. For this reason, Article 8, Paragraph 1 of the Anti-Unfair Competition Law stipulates that operators shall not make false or misleading commercial publicity, defraud, and mislead consumers. In this case, the evidence provided by Michelin can prove that the “Michelin Guide” published and issued by it and the recommendations and ratings of “Michelin” star restaurants have a very high market popularity and influence in the catering industry. Industry operators are well aware of its authority and reputation represented by the “Michelin Guide” and Michelin food ratings. Shisanwei, however, still improperly borrow the reputation of the “Michelin Guide” and use “an affordable Michelin beef brisket” and “a small brand insists on big ideals, aspires to be Michelin beef brisket” on their official website and store signs, which can easily led consumers to have an inaccurate or incomplete misunderstanding of the beef brisket products they provide, and misunderstand that the product has the “Michelin” star quality that it did not have, or mistakenly believe that Shisanwei has been recognized by Michelin or has a cooperative relationship with Michelin. Shisanwei had also obtained corresponding benefits or competitive advantages. This behavior damages other operators and consumers, the lawful rights and interests of the public, disrupting the social and economic order of fair competition, which constitue misleading promotions, and should be determined as an act of unfair competition.

Regarding the second disputed issue: The Jiangsu High Court found that since Michelin did not provide evidence to prove the actual losses it suffered due to the infringement and the benefits that Shisanwei obtained from the infringement, the following factors should comprehensively considered: the number of franchise stores and the geographical distribution Shisanwei’s self-promotion, operating duration, nature of infringement, technology transfer fee, ancillary equipment fee of RMB78,800 (USD11,287) and annual management fee of RMB6,800 (USD975) as agreed between Shisanwei and Sanbu Beef Brisket in the “Single Store Cooperative Operation Contract” fee standards. Shisanwei did not stop the infringement after receiving the warning letter from Michelin and considered that Michelin hired lawyers to provide notarial preservation, court appearance and other legal services in order to stop the infringement in this case. It also provided relevant evidence such as lawyer service bills and notarization fee invoices that recorded the lawyer’s work content, time and expenses in detail. The first instance court did not err in ruling that Shisanwei should compensate Michelin for economic losses and reasonable rights protection expenses of RMB 1 million (USD143,239). This court affirmed. Although Shisanwei claimed that it had sent letters to all franchisees during the first instance requesting them to stop using the promotional terms with the word “Michelin”, as of March 2020, franchisees across the country have completed rectification, but Michelin provided evidence shown that some franchisees of Shisanwei were still using promotional slogans such as “a small brand insists on big ideals, aspires to be Michelin beef brisket” in their stores, so the above proposition of Shisanwei Company is not supported.

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