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Weekly China Trademark News Updates
June 14, 2022
1. Haier was awarded RMB 3 million: the applicable limitations of trademark rights exhaustion system
Haier Group is a well-known Chinese home appliance corporation. Since 1984, its “Haier in Chinese” and “Haier” brands have gained a high reputation worldwide. Qingdao Haishang Intellectual Property Management Consulting Co., Ltd. (“Haier Group”), as the intellectual property management company of “Haier in Chinese” and “Haier” brands, sued Wuxi Smile IOT Technology Co. Ltd. (“Smile”) on the grounds of trademark infringement and unfair competition. Haier Group claimed that Smile refitted “Haier” products without authorization, and affixed its “Si Mai Er in Chinese,” “smile and design” logos for sales. At the same time, Smile used large and bold fonts in prominent positions to promote its products as a “Smile-Haier cooperative product” on its official website, Taobao, and other sales channels claiming to have reached a strategic cooperation with Haier Group and other false statements. In addition, Smile also defamed the functionality of Haier’s Beaver App for its commercial washing machines.
The court found that 1) regarding whether there is a competitive relationship between the two parties: the legislative purpose of the Anti-Unfair Competition Law is to encourage and protect fair competition, maintain market competition order, and protect the legitimate rights and interests of operators and consumers. Competitive relationships were not only limited to substitute relationship between identical or similar goods and services, but also existed as a relationship between damaging and being damaged to the interests of market competition. In this case, although Haier Group was not a manufacturer of shared washing machines and other products, as a trademark owner, it had the right to authorize others to mark its trademarks on products and enjoy legal rights and interests in the products marked with its trademarks. Smile was a retailer and service provider of shared washing machine. Although the business activities of the two parties are neither identical nor similar and there was no substitute relationship, Smile’s modification, sale, and publicity of the shared washing machines and other products marked with Haier Group’s trademark without authorization would impact Haier Group’s trading opportunities, competitive advantages, and other market competition interests, so there was a competitive relationship between the two parties.
2) Regarding trademark infringement and unfair competition: First, Smile modified the washing machines, dryers, and shoe washing machines marked with the trademark of Haier Group, and posted “Si Mai Er in Chinese,” “smile and design” logos and QR codes, and subsequently put these modified products for retail or for operation purposes, which had affected Haier Group’s trademark recognition function, quality assurance, and reputation-bearing functions, resulting in damages to the Haier Group’s trademark rights. Regarding the exhaustion of rights claimed by Smile, the court found that the premise of the application of the principle of exhaustion of trademark rights was that the re-sale or use is a marketing behavior that conforms to market laws and consensus and will not damage the legitimate trademark rights of the trademark owner. Smile’s behavior of selling and operating modified products had damaged the relationship between trademark owners, its goods, and trademarks, damaged the source identification and quality assurance functions of Haier Group’s trademarks, which may damage the reputation of the Haier Group’s trademarks. Thus, principle of exhaustion of trademark rights should not be applied.
Second, Smile promoted that it had “reached a strategic cooperation with Haier” and had “joint cooperation with Haier” on its website, Taobao, TikTok , and WeChat public accounts, and published the Haier Group’s trademark products on its website marked “Simile-Haier cooperation products.” Although Smile rebutted by showing it was the Haier Group’s retailer, it did not prove its modifications were approved by the Haier Group. Thus, Smile’s promotions were not true and would likely to cause confusion to the relevant public to believe that the two parties had special connections. Smile’s acts constituted as false advertisements. Meanwhile, Smile has repeatedly emphasized “Haier washing machine” in its publicity, which would easily make the relevant public into believing that its modifications were approved by the Haier Group or has a specific connection with the Haier Group, causing confusion and misunderstanding to the relevant public. Smile’s acts constituted as confusion actions as stipulated in Article 6(4) of the Anti-Unfair Competition Law. Finally, Smile’s description of the “Mr. Beaver APP” was false and inconsistent with the facts, and had the subjective intention of slandering and derogating the Haier Group’s business reputation and product reputation, which was enough to cause relevant consumers to have a wrong understanding of the “Mr. Beaver APP,” and damaged the business reputation and goods reputation of the Haier Group, which constituted as commercial slander.
Accordingly, the court ordered Smile to immediately stop its trademark infringement and unfair competition and compensate Haier Group for a total of RMB3 million (USD445,000).
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