Seeking better protection through litigation

Rouse
Yushen Liu
[email protected]

Three litigation cases launched by Mars Incorporated and its Chinese subsidiary have been ruled on by Chinese courts. The highlights from the judgments clearly indicate that the judicial system in China is providing better IP protection to rights owners. This reflects an increasing improvement and growing confidence in the expertise of the IP court system as an effective alternative to combating infringement.

The infringing products involved in each of the three cases were as follows:

- Case 1 Mars Foods (China) v WEI XIN

- Case 2 Mars Incorporated v HENG LI

- Case 3 Mars Incorporated v YA KE

Clear findings and progress

In Case 1 (DOVE), Mars relied on unfair competition rights. In relation to the adoption of similar trade dress, the court drew a clear line between borrowing and over-borrowing constituting unfair competition. The judge held that different business operators could learn and borrow from each other when designing for packaging and get-up. However, this must not cause likelihood of confusion and, in this case, the defendant's use of the packaging amounted to unfair competition. This clear clarification between borrowing and infringing will be a good reference for future cases.

In Case 3 (MALTESERS), Mars relied on its registered mark MALTESERS in relation to a product that bore 'Maitesers' on the front, but that had a distinct primary brand. At first instance, the court held that 'Maitesers' was similar to Mars' registered trade mark of MALTESERS. It also held that 'Maitesers' was being used as the product name despite Ya Ke's claim that it was being used only as a product descriptor. Under Chinese law, the use of a mark as a product name is not permitted and therefore a finding of infringement followed. But the court did not find that the use was trade mark use per se, narrowing the significance of the decision.

Given the highly distinctive nature of the MALTESERS mark Mars appealed this point, notwithstanding its first instance victory. On appeal, the court reconsidered the issues and overturned the first instance court – holding that the defendant's use was, in fact, trade mark use. This finding represents a development of the court's understanding of trade mark use and a broadening of rights owners' ways of claiming trade mark infringement in future cases.

Compared to previous litigation cases, these cases have made progress. As these decisions show, more courts are now looking in more detail before finding infringement. The clarification in both cases is likely to be of value to other rights holders in future cases.

Evidential preparedness

Evidential preparedness is extremely important for litigation and proactively setting up an 'evidence bank' is a good way to prepare, especially as there is no discovery process in China. As a victim of IP infringement in China, Mars has been investing significant resources to gather key evidence on issues such as use and distinctiveness on an ongoing basis rather than simply in reaction to demands of specific cases. This has brought huge benefit to its litigation cases. In addition, within specific disputes, Mars has been using the legal tools available to it.

In Case 1 (DOVE), Mars applied for evidence and asset preservation, which was granted by the court. During evidence preservation, the court witnessed in the defendant's workshop both infringing packaging and Mars' packaging for the infringed product. Therefore, the court had the direct impression that the infringer was unlawfully trying to copy Mars' packaging. Mars also submitted notarised evidence indicating the infringing product was sold in bulk. This effectively helped prove that the two parties had the same sales channels, increasing the likelihood of confusion among consumers. The court eventually found infringement and granted injunctive relief and damages.

In Case 2 (M&M's), Mars supplemented its evidence during the course of appeal to show the infringer's continuing sales, and therefore that there was continuing infringement. The court accepted that evidence and used it as a base to award even more damages than the first instance decision. Hence this new evidence was very critical. The increased damages award was RMB300,000. This was a very high figure compared to typical awards for trade mark infringement in China, particularly food and beverage related cases. This case was listed as one of the top 10 IP cases in 2009 by the Guangdong Higher People's Court.

Appropriate litigation strategy

Infringement in China is becoming more sophisticated: moving away from counterfeiting towards look-alikes. This makes administrative remedies harder to predict and more uncertain. Rights owners are well advised to consider seeking judicial remedies as court proceedings are becoming more predictable and transparent and offer the opportunity to run much more sophisticated arguments. For many brand owners, now is the time to place litigation at the forefront of an enforcement strategy.