Weekly China Trademark News Updates

September 5, 2023

1. The China Supreme Court fully supports Siemens’ trademark infringement and unfair competition claims of RMB 100 million

Recently, the China Supreme Court (“SPC”) concluded a trademark infringement and unfair competition lawsuit between the appellant Ningbo Qishui Electric Co., Ltd. (“Qishuai”) and the appellees Siemens AG (“Siemens”) and Siemens (China) Co., Ltd. (“Siemens China”). The appeal petition was rejected and the first instance’s decision that Qishuai shall immediately cease infringement and unfair competition acts, and that Qishuai shall compensate Siemens and Siemens China for RMB100 million (USD13.72 million) in economic loss and RMB163,000 (USD22,356) in reasonable expenses was affirmed.

One of the issues in this case was Qishuai’s use of the “Shanghai Siemens Electronics Co., Ltd. in Chinese” logo on a laundry machine’s body. The SPC found that first, Qishuai used the label in a prominent position on the laundry machine. The relevant public was likely to use it to distinguish the source of goods, which shall constitute trademark use. Although Qishuai argued that such logo is the business name of a third party, and it was legally authorized to use such business name, generally, it isn’t common for companies using another company’s name on its product’s prominent position. Second, the product that Qishuai used the logo was the same type of product as those approved for use in class 7 for laundry machine related goods under Siemens’ Cited Mark “Siemens in Chinese.” Third, the “Siemens” consisted in the “Shanghai Siemens Electronics Co., Ltd. in Chinese” logo was the distinctive part of the logo and identical with the Cited Mark. It shall constitute similar mark with the Cited Mark. Accordingly, Qishuai used the “Shanghai Siemens Electronics Co., Ltd. in Chinese” logo on its laundry machine as a trademark, which constituted similar to the Cited Mark “Siemens in Chinese” and was likely to cause confusion among the relevant public. Such use also infringed upon Siemens and Siemens China’s trademark right. Another issue in this case was regarding Qishuai’s use of the business name of “Shanghai Siemens Electronics Co., Ltd. in Chinese” on the package of the infringing product and promotional activities. The “Siemens in Chinese” in said business name was identical with the trade name and registered trademark of Siemens and Siemens China, which was likely to cause relevant public to believe that such product was from Siemens and Siemens China, or mistakenly believe that there were associations with Siemens and Siemens China. Qishuai’s use of other’s business name that has certain influence and other’s registered trademark as trade name constituted unfair competition.

Regarding the amount of compensation, the SPC found that 1) part of the promotional documents submitted by Siemens and Siemens China showed that Qishuai’s scale of production and sales was enormous. Numerous news reported that its annual sales towards RMB1.5 billion. 2) Investigations from various Administration for Market Regulations showed that Qishuai used the “Shanghai Siemens Electronics Co., Ltd. in Chinese” logo in a wide range of laundry machine models for sale that reached most municipalities and provinces nationwide. Meanwhile, Qishuai claimed that it operates more than 1,500 national distributors and has more than 58,000 retailers, which proved the wide range of its products sales. 3) From the numbers of models shown on Qishuai’s 3C certification certificates, it can be assumed that there were numerous infringing products models, and the productions scale was large. Combined with the said fact findings and the profit percentage in the laundry machine industry, it can be found that Qishuai’s production and sale of the infringing products far exceeded the maximum statutory damages in the Anti-unfair Competition Law. Comprehensively consider the relatively high fame of Siemens and Siemens China, objective bad faith of Qishuai, a large scale of infringement, and a long duration, the compensation amount shall be above the maximum statutory number. Given that Qishuai failed to produce its financial data as evidence, the first instance court did not err when it calculated the compensation amount based the total sales found in the submitted new reports evidence, using 1/15 of the percentage of the infringing products’ sales in reaching its decision.

2. The Jiangsu High Court cited the Anti-unfair Competition Law to protect foreign geographical indications across industries

The Suzhou Intermediate Court concluded a first instance unfair competition dispute between the plaintiff, the French National Cognac Industry Office (“Cognac Industry Office”), and the defendants Ford Motor (China) Co., Ltd. (“Ford China”), Changan Ford Motor Co., Ltd. (“Changan Ford”), and Suzhou Tianchi Xinjia Automobile Sales & Service Co., Ltd. (“Tianchi”).  The Suzhou Intermediate Court found that Ford China, Changan Ford shall immediately stop using “Cognac in Chinese” and “COGNAC,” geographical indications, as the name of color of its cars. Changan Ford shall immediately stop sales said cars. The defendants shall compensate the plaintiff for RMB2 million (USD 274,145) in economic loss and reasonable expenses. The Jiangsu High Court recently concluded the second instance trial that rejected the appeal and affirmed the Suzhou Intermediate Court’s decision.

The Court found that Ford China, Changan Ford named four models of its cars in three styles as “Special COGNAC version” that used “CONGAC” prominently and has cognac brown interiors. Moreover, large amount of promotional materials used various explanations and comparisons to highlight the differences in these special version cars compared to regular version in order to enhance the style and taste of the cars involved in the case.

In China’s color regulations, “COGNAC” is not included and cognac brown is also not a generic name that’s commonly used. Under the circumstances that Cognac, as a geographical indicator, is highly famous, Ford China and Changan Ford, as a worldwide car manufacturer, could not possibly be unaware of its fame. Multinational companies like Ford China and Changan Ford shall bear higher intellectual property awareness than other regular businesses. It shall apply stringent considerations when naming its car models and avoid infringing other’s legal interests. However, instead of fulfilling its reasonable duty of care, Ford China and Changan Ford established a specific relationship with the Cognac geographical indication through various improper methods, which caused confusion and misunderstanding among the relevant public.

The relevant public of Cognac includes high-end consumers, which has certain overlap with car consumers of Ford China and Changan Ford. Their actions were enough to mislead the relevant public and make the relevant public mistakenly believe that the four models of cars in three styles have some specific connection with the Cognac Industry Office and were launched in cooperation with the Cognac Industry Office. Although Cognac as a geographical indication mainly refers to a type of wine, under the trend of diversified development of modern industries, cross-border cooperation and mixed operations are becoming more and more common, Ford China and Changan Ford’s use of “Cognac in Chinese” and “COGNAC” can easily cause confusion among the relevant public. Their behavior was clearly an act of improper use of the goodwill of “Cognac” that was confusing enough to cause people to mistake it for Cognac related goods or has a specific connection with Cognac, the location, and constituted unfair competition.

In particular, it should be pointed out that the reason why Ford China and Changan Ford’s involvement in the case constituted unfair competition is that there is another important interest balance to prevent the risk of generalization of the “Cognac” geographical indication. Even if the acts of Ford China and Changan Ford would not cause confusion and misunderstanding among the relevant public, since Ford China and Changan Ford are part of a worldwide automobile manufacturer that has a large number of consumer groups. Their use of the “Cognac” geographical indication in the naming of automobile products and interior colors would cause the relevant public include additional meanings to the original understanding of “Cognac” as the geographical indication of the special origin of a type of brandy wine. Such use by Ford China and Changan Ford will definitely weaken its original meaning as the special origin of a type of brandy wine, and exposed “Cognac” to become a generic name. Ford China and Changan Ford’s acts enhanced the possibility of revocation of Cognac as a geographic indicator, which undoubtedly damage the long term promotion, marketing, and operating of “Cognac” as a geographic indicator by the Cognac Industry Office. Consider the above, the court made a negative evaluation of the behaviors of Ford China and Changan Ford in order to provide legal guidance to the behavior of other market players.

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