Weekly China Trademark News Updates

November 8, 2023

1. Henkel awarded RMB15 million in damages in a lawsuit for trademark infringement upon its “Schwarzkopf in Chinese” mark

Recently, the Zhejiang High Court concluded a trademark infringement lawsuit between Henkel Co., Ltd. (“Henkel”) and Fuzhou Yiqian Beauty and Hairdressing Co., Ltd. (“Yiqian”) , Nanchang Magic Styling Co., Ltd. (company is deregistered, abbreviated as “Magic”), etc.. The appeal was dismissed, and the lower court’s judgment was affirmed. Both courts ordered Yiqian and others to immediately stop infringing Henkel’s registered trademark rights; Yiqian and others jointly compensated Henkel for economic losses and reasonable expenses incurred to stop the infringement, totaling RMB15 million (USD2.06 million).

Henkel claimed that Magic’s infringement was manifested in promoting the “Schwarzkopf in Chinese” hair salon chain franchise business on its official website www.olysrdzjm.com, and using the accused infringing logo “Schwarzkopf in Chinese Hairdressing Chain Schwarzkopf & Design (the accused infringing logo).” Magic also used the accused infringement logo and “Schwarzkopf in Chinese National Chain Schwarzkopf” on WeChat to promote recruitment and franchising, and used the accused infringement logo on Weibo to promote recruitment and franchising; Yiqian’s infringement includes the acts of using the accused infringing logo in the “Schwarzkopf in Chinese Hairdressing Chain” stores on Dianping and Meituan platforms under its unified operation and management, and guiding franchisees to use the accused infringing logo.

The court found that: First, Magic used and guided franchise stores to use the accused infringing logo in publicity, promotion and recruitment of franchisees on its official website, associated WeChat and Weibo. Yiqian was the management entity of “Schwarzkopf in Chinese Hairdressing Company” on Meituan and Dianpin and used the accused infringement logo in the group buying coupon sales promotion of Meituan.com. The above was sufficient to prove that Magic and Yiqian used and guided franchise stores to use the accused infringing marks in commercial promotion and solicitation of franchisees. Second, without the permission of the trademark registrant involved, Magic and Yiqian used identical or similar accused infringement logos as the trademarks involved in the case in barbering, beauty, hairdressing, and other service categories similar to the goods approved for use of the trademarks involved. Combined with the strong distinctiveness and high popularity of the registered trademarks involved, the use of the accused infringing logos may easily cause the relevant public to misunderstand the source of the service, or associate the services with Henkel’s registered trademarks. In summary, the alleged acts of Magic and Yiqian infringed on the exclusive rights of the trademarks involved.

Regarding the amount of damages, Henkel did not provide evidence to prove the actual losses it suffered due to the infringement. The exact amount of the defendant’s benefits due to the infringement cannot be accurately calculated based on the existing evidence, and there was no reasonable royalties for reference. According to Magic’s official website, WeChat public account and Meituan’s “Schwarzkopf in Chinese Hairdressing Chain,” there are thousands of franchise stores, and the franchise fee for each store ranges from RMB8,000 to 10,000 or 13,000, and a separate management fee is to be paid monthly. It can be seen that the profits from infringement by Magic and Yiqian clearly exceeded the maximum statutory compensation of RMB5 million. Therefore, the discretionary compensation can be applied to determine the amount of compensation in this case, and the following factors should be considered: 1. the registered trademarks of Henkel have very high popularity and reputation in the field of beauty and hairdressing; 2. Magic and Yiqian knew clearly the popularity and influence of the trademarks involved in the case, but still assigned and used the accused infringing marks that are similar to the trademarks involved in the case irregularly and try to take advantage of the goodwill of the trademarks involved in the case. The infringement was obviously subjective and malicious. The defendants live off infringements.  The scope of infringement was all over the country. 3. The notarized certificate involved in the case showed that the infringement activities of Magic and others started as early as in June 2017 and has not ended as of February 2021. 4. In order to stop the infringement in this case, Henkel conducted evidence preservation and notarization, entrusted a lawyer to litigate on its behalf, and spent notarization fees, attorney fees and other fees. At the same time, the first instance court asked the defendants to provide relevant account books, but the defendants failed to provide account books or information related to their infringement, nor did they provide substantive evidence or defense reasons. Therefore, the first instance court referred to Henkel’s claims and evidence provided, and comprehensively considered the above factors, and determined the compensation amount in this case to be RMB15 million (USD2.06 million), which was not inappropriate.

2. The bright yellow walls and other elements used in KKV stores decorations constitute “service decoration with a certain impact”

The Jinhua Intermediate Court of Zhejiang Province concluded an unfair competition lawsuit between Guangdong Kuai Ke E-Commerce Co., Ltd. (“KK”) and Yiwu Sanwei Brand Management Co., Ltd. (“Yiwu Sanwei”) and Yongkang Sanwei Household Products Store (“Yongkang Sanwei”) and other three defendants. The court ordered the five defendants to immediately stop the unfair competition acts that infringed on the service decoration of KK. The five defendants shall compensate KK for its economic losses and reasonable expenses incurred to stop the infringement in a total of RMB1.1 million (USD151,000). Recently, the Zhejiang High Court made a final judgment that dismissed the appeal and affirmed the lower court’s judgment.

The first instance court reasoned that the decoration of goods under the Anti-Unfair Competition Law also applies to the decoration of services. In this case, the evidence provided by KK proved that the bright yellow walls, rainbow walls and other decoration elements used in the store decoration design and the advertising slogan “Exquisite Life Collection” are significantly different from existing similar stores. Through the store decoration design in Beijing, Guangzhou, and Shanghai, it was widely used in stores across the country such as, Chongqing, Chengdu, Wuhan, Changsha, and other places. It has great influence and can enable the relevant public to form a fixed connection with KK. Taking into account factors such as the degree of awareness of the relevant public, the time, area, amount and target of sales, the duration, extent and geographical scope of publicity, the status of trademark protection, etc., it should be determined that the decoration design of the KKV store opened by KK has constituted service decoration with certain influence.

Yiwu Sanwei used identical or similar logo as KK, which has a certain influence on the Internet and physical investment promotion. In addition to online investment promotion and use, the unified decoration design was also authorized offline to a number of franchisees including the four defendants such as Yongkang Sanwei, which caused the relevant public to misunderstand the decoration value of the V.V.V brand and the store opening status, mistaken that there was a specific association with KK, and constituted unfair competition. Yongkang Sanwei used design elements including a bright yellow iconic exterior wall, a container-shaped main wall, white and yellow product shelves, yellow and white employee clothing, and yellow and black billboards. Judging from the overall visual effect, the similarity between the two may easily cause the relevant public to misunderstand the source of the service and mistakenly believe that the retail services provided by it have a specific connection with KK, which constituted unfair competition.

Regarding the appellant’s appeal, the bright yellow color used in KKV’s store is a popular color and does not form a unique combination of patterns or design, so it is not original. The second instance court held that the service decoration protected by law does not necessarily have originality, but is often reflected in the overall business image composed of the operator’s unique style and decoration of the business premises, catering utensils and sales staff clothing. This overall image is significantly different from existing stores with similar services and can enable the relevant public to closely and stably associate the store decoration with the service provider.

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