Innovation leads development and protection of intellectual property rights is just protection of innovation. In 2020, China was ranked number one in the world for nine consecutive years in the quantity of invention patent applications and it was ranked number 14 in the Global Innovation Index with its 27.414 million pieces of effective trademark registrations up to the end of June 2020. In 2020, China further intensified IP protection and introduced the punitive compensation system to deter intentional IP infringement by increasing the cost of infringement.

In judicial practice, however, there exist disputes about how protection of well-known trademarks matches their reputation and to what extent they should be protected across classes. Here I would like to share my thought on cross-class protection of well-known trademarks through a case I have handled.

In June 2018, market monitor showed that a company by the name of Yaboo International Furniture Trading Center Ltd. (“Yaboo”) in Shenzhen, a major city in South China’s Guangdong Province, was heavily using the logos  and  in their Wechat official platform, PC APP， and posters, and even in exhibitions. See figure below.

Nestle believed that Yaboo infringed their exclusive right to their well-known trademarks “Nestle in Chinese characters” and “Nestle” with respect to “coffee” products in Class 30. In July 2018, Nestle brought legal proceedings before Guangzhou Intellectual Property Court, requesting the court to determine the trademarks “Nestle in Chinese characters” and “Nestle” with respect to “coffee” products as well-known ones and order that Yaboo stop its infringing act, be prohibited from using the infringing logos at issue in any sense of trademark, issue a statement in China Intellectual Property News to eliminate ill effects, and pay CNY 3 million (USD 462,000) in damages and the costs of trademark protection.

This case has 3 centers of dispute.

Dispute 1: Whether it is necessary to determine the trademarks “Nestle in Chinese characters” and “Nestle” as well-known

The court held that in spite of the fact that the plaintiff’s trademarks are registered with respect to “coffee” and “infant foods” and the defendant used them for the service of sale of“household goods”and there is a real difference between goods and services, the defendant had express bad faith in that it used the logos at issue in the full knowledge of the reputation of the plaintiff’s trademarks.  It is thus necessary to take account of the reputation of the plaintiff’s trademarks in this case to stop the defendant’s infringing act.

The court further held that the ample evidence Nestle presented in the case for the use of their marks during 2015-2017 is sufficient to prove that at the time of infringement the marks “Nestle in Chinese characters” and “Nestle” , with a long time of use and publicity, have had a great reputation, are generally known to the relevant section of public, and have achieved the status of well-known trademarks so as to be determined as well-known.

Disputes 2: Whether the use of the alleged infringing logos constitutes an infringement of the plaintiff’s exclusive right to their registered trademarks involved

The court held the alleged infringing logos constituted an imitation of Nestle’s well-known trademarks. Meanwhile, considering the high reputation of Nestle’s marks, the use of the alleged infringing logos for the services of wholesale and retail of household goods would “mislead the public and harm the interests of the well-known trademarks’ owner”. Therefore, Yaboo’s use of the infringing logos is an act of “causing other harms” to Nestle’s exclusive right to their registered trademarks.

Dispute 3: How the defendant shall accept its legal liability in the event of infringement

The court ruled that Yaboo should stop infringing act forthwith when the judgment is effective and pay Nestle CNY one million (USD 150,000) in damages within 10 days from the date when the judgment is effective.

After Guangzhou Intellectual Property Court passed the judgment of first instance, Yaboo was dissatisfied with it and appealed to Guangdong Provincial Higher People’s Court. In January 2021, Guangdong Provincial Higher People’s Court gave the judgment of second instance, dismissing Yaboo’s appeal and upholding the judgment of first instance.

The court of second instance ruled that Yaboo’s heavy use of the logos “ ”, “ ”, “Nestle Life in Chinese characters” and “Nestle Life in Chinese characters + Nestle” in their Wechat official platform and publicity campaigns and on the signboards of their chain stores was liable to mislead the relevant section of public into thinking its act was authorized by Nestle or it was associated somehow with Nestle, leading to confusion over the origin of the infringing goods or services, “the use of the infringing logos at issue tarnished the distinctiveness and goodwill of Nestle’s two registered trademarks as well-known ones and harmed Nestle’s interests,” and Yaboo had express bad faith as it continued using the infringing logos even after its application for registration of the mark “Nestle Life in Chinese characters” was refused.

Article 14 of the Trademark Law of the PRC: A well-known trademark, at the parties’ request, should be determined as a fact that needs to be ascertained in the handling of a case involving the mark. Account shall be taken of the following factors in determination of a well-known mark: (l) reputation of the mark to the relevant public;(2) the duration in which the mark is used; (3) the duration, extent and geographical area in which the mark is promoted; (4) the record of protection of the mark as a well-known one; and (5) any other factors relevant to the well-known reputation of the mark.

In hearing cases of trademark infringement, the determination of well-known status of the mark(s) concerned is necessary when the general rules do not work. Only by determining the mark(s) as well-known can cross-class protection of well-known trademarks be provided under the trademark law. “Cross-class protection” means the scope of protection goes beyond elimination of “the likelihood of confusion”. From the angle of legislation, cross-class protection should be limited to a proper extent. It cannot cover all fields; instead, it should be applied on the grounds that confusion among consumers over the supplier and origin of goods or services is created or some association is formed. In trying cases of this kind, the court should consider the reputation and distinctiveness of the trademark(s) concerned and the misleading effect of infringing act. At the same time, in defending their right, the trademark owner should provide evidence for his/her trademark(s)’s reputation and well-known status. In the event of significantly different classes of goods or services, the trademark owner must convince the judge by sound, persuasive and logical arguments that the defendant has bad faith subjectively and the infringing act is liable to cause “confusion” over the origin of goods or services among the public objectively so much as that relation between the trademark(s) and its (their) owner are weakened or diluted and then the reputation and goodwill of the trademark(s) are damaged, thus enhancing the chances of winning the case and protecting his/her IP rights and interests.

Résumés

Mr. Zhenkun Fu

Senior Partner; Trademark & Litigation Attorney

Zhenkun is a leading intellectual property law practitioner with more than 20 years’ experience in prosecuting trademark and patent infringement, unfair competition, and anti-counterfeiting cases. His work with Fortune 500 companies has resulted in the recovery of millions of dollars in damages. As a leading IP litigator, having managed thousands of lawsuits, Zhenkun’s groundwork and strategic insight, coupled with his exceptional relationships with AIC, BQS and PSB at national and local levels, makes him a key leader in intellectual property enforcement in China.