Weekly China Trademark News Updates

February 1, 2024

1. “Château Lafite in Chinese” took a free ride on the “LAFITE” mark’s fame and the China Supreme Court applied punitive damages and sentenced RMB 79.17 million in damages

Recently, the China Supreme Court (“SPC”) concluded a trademark infringement and unfair competition dispute between the appellants Nanjing Golden Hope Wine Co., Ltd. (“Golden Hope”), Nanjing Manor Lafei Wine Co., Ltd. (“Manor Lafei”), Nanjing Huaxia Grape Winery Co., Ltd. (Huaxia), Shenzhen Junteng Wine Co., Ltd. (“Junteng”) and the respondent Chateau Lafite Rothschild (“Rothchild”). The SPC held that the appellants should stop their trademark infringement and unfair competition, and that Rothschild should receive a total of RMB 79.17 million (USD 17.97 million) in economic losses and reasonable expenses to stop the infringement.

Issue I – Whether the appellants’ use of the accused marks constitutes trademark infringements

1. The Disputed Mark is “Manor Lafei in Chinese,” in which “Manor in Chinese” indicates a location or an organizational format and lacks distinctive features when used on wine and other goods. Thus, “Lafei in Chinese” is the main identifying part of the mark. The Cited Marks in this case are “LAFITE” and “CHATEAU LAFITEROTHSCHILD,” with “LAFITE” being the distinctive identifying part. Regarding whether “Lafei in Chinese” can form a stable corresponding relationship with “LAFITE,” this court’s previous judgment on April 1, 2005, found that before the application date of the “Manor Lafei in Chinese” mark, Rothschild had already used the name “Lafei in Chinese” on relevant sales flyers in mainland China. “Lafei in Chinese” refers to “LAFITE,” and “Lafite in Chinese” also appears in publicity reports related to “LAFITE.” Rothschild has objectively established a solid connection between “Lafei in Chinese” and “LAFITE” through many years of business operations. Therefore, the distinctive part of the accused infringing mark “Manor Lafei in Chinese” is the same as the Chinese translation of the Cited marks or identical to the distinctive part of the Cited Marks. The two marks constitute similar marks.

Appellants used the “Manor Lafei in Chinese” logo that was similar to the Cited Marks in the allegedly infringing products and transaction documents produced or sold, which constituted trademark use. Manor Lafei and others also published articles on their websites to introduce Bordeaux wineries represented by “Lafite in Chinese.” In their advertisements, they introduced that their wines are produced in Bordeaux and have historical heritage in an attempt to increase the popularity of “LAFTTE” wines. Considering the fact that the Cited Marks have a high degree of popularity due to continuous use when the alleged infringement occurred, as well as the actual use by Manor Lafei and other appellants, it can be determined that the alleged infringement could easily cause confusion and misunderstanding among the relevant public.

2. The “MANOR” in the accused infringing mark “LAFEIMANOR” is a French word, and its Chinese meaning is “manor.” It lacks distinctive feature when used on wine and other goods. Therefore, “LAFEI” is the distinctive feature of the mark. Comparing the distinctive part of the Disputed Mark “LAFEI” with “LAFITE,” they have the same initial letters and are similar in letter composition, arrangement order, pronunciation, etc. Therefore, the Disputed Mark “LAFEIMANOR” and “LAFITE” constitute similar marks with the Cited Marks “LAFITE” and “CHATEAU LAFITE ROTHSCHILD.” Golden Hope and other appellants used “LAFEI MANOR” on wine goods, which constitute as a similar mark on identical or similar goods with the Cited Marks owned by Rothschild, which could easily cause confusion and misunderstanding among the relevant public.

Issue II – Whether Manor Lafei’s use of “Lafei Mano in Chinese” as its trade name constitutes trademark infringement

Manor Lafei was registered on August 11, 2006, using “Manor Lafei in Chinese” as its corporate name. Since then, Manor Lafei’s official website and its “Specialty Store Investment Manual” have separately used “Manor Lafei” to refer to Chateau Lafite. Manor Lafei prominently used its “Manor Lafei” brand name in its business activities. As mentioned, “Manor Lafei” is similar to “LAFITE,” and “LAFITE” wine had already entered China before the establishment of Manor Lafei and was known to the relevant public. Therefore, Manor Lafei’s registration of “Manor Lafei in Chinese” as a trade name and prominent use of it on goods that are identical or similar to the goods approved for use of the “LAFITE” mark could easily cause confusion and misunderstanding among the relevant public.

Issue III – Whether Manor Lafei’s promotional activities constituted unfair competition

Manor Lafei uses slogans such as “Manor Lafei – the focus of the world’s attention, God’s favorite wine has finally come to China” in its “Specialty Store Investment Manual” to promote and introduce its “Manor Lafei” wine. The semantics of the said advertising slogan are vague and exaggerate the historical heritage and popularity of the Chateau Lafite wine. Based on the popularity of Rothschild and “LAFITE” wines, as well as the corresponding relationship formed between the “Lafei in Chinese” and “LAFITE” marks, such advertising slogan may easily cause the relevant public to mistakenly believe that the wine of “Manor Lafei in Chinese” is the wine of a world-renowned winery, thereby misunderstanding the quality and reputation of the product, which constituted misleading false promotion, and damaging the interest of Rothschild.

Issu IV –The amount of damages

First, according to the evidence submitted by Golden Hope, there were a total of 757 dealers and agents of “Manor Lafei in Chinese” wine across the country, and “Manor Lafei in Chinese” wine has been stationed in nearly 2,000 supermarket systems. The cost ranges from RMB 4 – 5 to more than RMB 10, but the sales price ranges from more than RMB 60s to over 1000. The illegal profits are as high as ten times or even hundreds of times. This shows that the illegal profits obtained by the seven appellants including Golden Hope as a result of the infringement far exceeded RMB 100 million. Second, the court rechecked and counted the sales data and payment letters of each appellant to calculate the sales volume and single bottle sales price of the accused infringing goods. The cost price of a single bottle is calculated based on the purchase situation of each appellant. Finally, the court adopted the calculation method of (single bottle sales price – single bottle cost price)/single bottle sales price to calculate the profit margins of each appellant. According to the recalculated sales price and cost price data, the profit margin of Manor Lafei is 67%, the profit margin of Huaxia is 68%, and the profit margin of Junteng and Perun is both 31%.

On this basis, the court comprehensively considered the nature of each appellant’s infringement, degree of subjective fault, duration of infringement, profits from infringement and other factors, and awarded Rothchild a damage of RMB 79.17 million (USD 17.97 million) for its economic losses and reasonable expenses paid to stop the infringement.

2. “Huawei” trademark infringement case – four times punitive damages – RMB 10 million

Recently, the Shanghai Jinshan District Court concluded a first-instance trademark infringement lawsuit between the plaintiff Huawei Technologies Co., Ltd. (“Huawei”) and an anonymous cosmetic company, Jishe Clothing (Shanghai) Co., Ltd. (“Jishe”), an individual Li. The court ordered the defendants to immediately stop the trademark infringement and jointly compensate Huawei for economic losses of RMB 10 million (USD 2.27 million).

The court found that Huawei legally obtained the right to register the “Huawei in Chinese” mark. The creative titles of 27 products in the Tmall store “Kubaluo Flagship Store” prominently use the words “Huawei in Chinese,” “Huawei Genuine Product in Chinese,” “Suitable for Huawei mobile phone in Chinese,” “Suitable for Huawei genuine mobile phone in Chinese” and other words in prominent positions. It did not display its own product brand and the operating entity of the Tmall store “Kubaluo Flagship Store” infringes Huawei’s trademark right. The operating entities of the Tmall store “Kubaluo Flagship Store” are the two defendants. Jishe and the anonymous cosmetic company have the same controlling shareholder or the same actual controller, and the control relationship lasts for 6 months or more. Therefore, Jishe and the anonymous cosmetic company jointly committed infringing acts.

Defendant Li’s personal bank account is mixed with defendant Jishe. Li’s personal Alipay account is related to Jishe and the anonymous cosmetic company, and the anonymous cosmetic company’s invoice is defendant Li. Taking the above circumstances into consideration, Li is the actual controller of Jishe and the anonymous cosmetic company. Although the infringement in this case was ostensibly carried out by the business entities of the Tmall store “Kubaluo Flagship Store,” namely the defendants Jishe and the anonymous cosmetic company. The defendant Li, as the actual controller, had complete control over Jishe and the anonymous cosmetic company. Li was aware of the infringements carried out by the two entities from the beginning and participated in it using personal bank accounts and personal Alipay accounts. Therefore, Li is a joint infringer and should bear joint and several liability.

Regarding the benefits gained by the Tmall store “Kubaluo Flagship Store” due to infringement, according to the identified facts, the sales volume of 27 infringing products was RMB 19.99 million. Regarding the profit rate, the Huawei claimed that the profit rate of the 27 infringing products can be calculated based on the facts found in the administrative penalty decision, which was 39.15%. This court believes that the data did not include warehousing, transportation, and other costs, but the data is verified by the market supervision and management department in accordance with the law. Therefore, this court refers to the said data and determines the profit rate to be 30%. In summary, the benefits obtained by the anonymous cosmetic company and Jishe due to infringement were RMB 5.99 million. The court held that the defendants, the two entities intentionally infringed upon Huawei’s trademark right with deep subjective malice, long infringement time, and large scale of infringement, which was a serious situation. The base number should be RMB 5.99 million and four times punitive damages should be applied to the defendants, which resulted in RMB 23.98 million. Huawei claims a total economic loss and punitive damages of RMB 10 million, which did not exceed the scope that the court can support according to law, therefore the court will fully support its claim.

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