Top trademark cases of 2014 explained

In April 2015, the Supreme People's Court (SPC) published its Annual Report on Intellectual Property Cases (Annual Report) for 2014. The excerpt provides a summary of significant intellectual property cases handled by the SPC throughout the year.

Although the SPC's judgments in these cases are not binding precedents, they do nevertheless have a degree of influence on lower courts.

The most significant rulings from the Annual Report cover issues ranging from non-trademark use, Chinese and English marks and 3D designs to the discrepancies in principal/agent relationships and interested parties.

Shaanxi Maozhi Entertainment v DreamWorks Animation (2014 Minshenzi No. 1033)

This case related to a reliance on non-trademark use as a defense against alleged trademark infringement.

Shaanxi Maozhi claimed that it held a registration for a “功夫熊猫 [Gongfu Xiongmao] & panda device” mark covering a number of services in Class 41 including “production of films”, and that it intended to use this mark as the title of an animated film. The word element in the mark translates directly as “Kung Fu Panda”.

Shaanxi Maozhi claimed that DreamWorks' extensive use of the Chinese mark “功夫熊猫” [Gongfu Xiongmao] constituted an infringement of its exclusive rights in its registered mark, and that the use of the said mark by DreamWorks as the title for its films constituted trademark use. Its claims were rejected in the first and second instance, and Shaanxi Maozhi filed a petition for re-trial with the SPC.

The SPC noted that, for trademark infringement to occur, the mark in question must serve the purpose of identifying the origin of the relevant goods or services. In holding that DreamWorks' use of “功夫熊猫” [Gongfu Xiongmao] as the title of a film did not constitute trademark infringement, the SPC noted the following:

(a) The term “功夫熊猫” [Gongfu Xiongmao] has been used continuously by DreamWorks as the title of its films, with the original “Kung Fu Panda” movie having been released in China in 2008 and heavily promoted as a film title since 2005, prior to Shaanxi Maozhi's application to register the trademark in question.
(b) The "DreamWorks" mark was used prominently on promotional materials for the films, and this is the mark used to indicate the origin of the film.

The SPC agreed with the finding of the lower courts that the use of “功夫熊猫” [Gongfu Xiongmao] as the title of DreamWorks' film series did not constitute trademark use and therefore could not be an infringement.

Zhejiang Xiyingmen Beer v Anheuser-Busch InBev China Sales (2014 Minshenzi No. 1182)

In this case, the SPC had to consider whether the use of a brewery's registered trademark on recycled glass bottles previously used by another brewery was sufficient to dispel consumer confusion and trademark infringement.

Aheuser-Busch InBev China Sales (AB InBev) uses the “百威英博” [Bai Wei Ying Bo] under license from the trademark owner on beer products. The mark is embossed on the beer bottles.

Zhejiang Xiyingmen, a Chinese brewery, was recycling bottles bearing the “百威英博” [Bai Wei Ying Bo] mark and refilling them with its own beer. In addition, it was also using a get-up for its beer products that closely resembled that of AB InBev's HARBIN beer.

AB InBev brought a lawsuit alleging that Zhejiang Xiyingmen's production and sale of beer in the recycled bottles would lead to consumer confusion and constituted an infringement of the licensed trademark as well as of its trade name rights. In defense, Xiyingmen argued that it is government policy to encourage the recycling of glass bottles, and that the appearance of its own HEIMEN trademark and its trade name on the bottle was the only “use” of a trademark on the bottles. The courts at both first and second instance both upheld AB InBev's claims, and Xiyingmen requested re-trial by the SPC.

In its decision, the SPC confirmed that the use of recycled beer bottles per se would not constitute trademark infringement, so long as the user only made use of the bottle as a container, and applied its own clearly distinctive trademark to the bottle. In this case, however, the get-up of the beer bottle resembled AB InBev's get-up for its HARBIN beer. This increased the likelihood of consumer confusion as the public would still view the “百威英博” [Bai Wei Ying Bo] characters embossed on the bottles as having the function of trademarks. The SPC also held that, in spite of Zhejiang Xiyingmen's use of its HEIMEN mark on the bottles, and given AB InBev's fame as a large-scale brewing company with multiple brands and product lines (including HARBIN beer), customers would be very likely to view HEIMEN as just another one of AB InBev's brands.

In the Annual Report, the SPC stated that Zhejiang Xiyingmen's recycling and re-labeling of beer bottles was not sufficient to dispel consumer confusion and constituted a trademark infringement despite its concurrent use of one of its own trademarks.

Gao Wenxin v De Beers Centenary AG (2014 Zhixingzi No. 49)

This case revolved around the factors to be considered in determining similarity between Chinese-language and English-language marks.

Gao Wenxin registered “永恒印记” [Yongheng Yinji] in relation to jewelry goods. A plausible English translation of the trademark is “eternal marking”. De Beers sought to invalidate the mark on the basis of various prior registrations for its “FOREVERMARK” trademark.

Initially, the Trademark Review and Adjudication Board (TRAB) rejected the invalidation action of De Beers, holding that “永恒印记” [Yongheng Yinji] and “FOREVERMARK” were dissimilar marks. De Beers filed an administrative lawsuit, and argued that “永恒印记” was deceptively similar to “FOREVERMARK”. De Beers was successful in both the Beijing No 1 Intermediate People's Court and the Beijing Higher People's Court. Gao subsequently applied to the SPC for a re-trial.

The SPC supported the reasoning of the lower courts, holding that the average person would read “FOREVERMARK” as “forever mark”, and that both “forever” and “mark” are common English words that even appear in standard English–Chinese dictionaries used by primary school students. Chinese people could easily associate "永恒印记” with “FOREVERMARK”, and thus the two marks were considered similar.

The SPC effectively reaffirmed the following factors that need to be considered in determining similarity between a Chinese and English mark:

1. the level of awareness and recognition among the relevant public in relation to the English-language trademark;
2. the conceptual correlation between the Chinese-language mark and the English language mark;
3. the level of fame and distinctiveness of the cited mark; and
4. the actual use of the target mark.

The SPC found that (a) the constituent English words of the cited mark are known widely among and easily understood by the Chinese public; (b) the cited English mark was conceptually identical to the Chinese mark; (c) the cited mark enjoyed a certain degree of fame as a result of promotional activities before the date of application of the target mark; and (d) Gao was not able to support his claim of extensive use of his mark with valid evidence. The SPC's decision was therefore in De Beers' favor. This decision may be useful in countering applications or registrations of Chinese-language trademarks on the basis of prior registrations of English-language marks.

Nestlé Products v TRAB and Kaiping Master Seasoning (2014 Zhixingzi No. 21)

Nestlé has been using a square-based bottle for its soy sauce for many years. The original design dated back to 1886. Nestlé applied to register the bottle as a 3D trademark in China via the International Registration route. The extension to China was rejected by the PRC Trademark Office and the applicant appealed. In 2007, the TRAB ruled that although the bottle would normally be perceived by the consumer as a container, Nestlé had submitted sufficient evidence to prove that the bottle had acquired the necessary distinctiveness as a trademark, and therefore granted its registration.

Kaiping had been using a similar bottle since 1983 – a full 12 years before Nestlé applied to register the 3D mark. After receiving a cease and desist letter from Nestlé claiming trademark infringement, Kaiping sought, as a defensive measure, to invalidate the registration, claiming that the mark lacked distinctiveness.

The TRAB ruled to maintain the registration of the mark, and Kaiping filed for judicial review by the Beijing No 1 Intermediate People's Court. The court overturned the TRAB's decision, and Nestlé appealed to the Beijing Higher People's Court. There again, Nestlé lost and subsequently filed an application for re-trial by the SPC.

The SPC started with the observation that given the 3D bottle's primary function as a container, a unique design does not in and of itself merit a finding of inherent distinctiveness sufficient for the container's shape to be registered as a trademark. Rather, and to determine whether the design can act as a mark and distinguish the source of the goods, an evaluation must be made based on relevant public perception.

The SPC's decision centered on the following points:

1. Where 3D marks comprising product packaging are concerned, the originality of the design does not translate, as a matter of course, into a sufficient level of distinctiveness needed for registration as a trademark.
2. The standard for determining the inherent distinctiveness of a design should be based on whether or not it serves to indicate the origin of the goods.
3. Use by others in the same industry has a bearing on the determination of distinctiveness acquired through use.
4. Where the available evidence is not sufficient to overcome public perception of the 3D design as product packaging, there should not be a determination that the relevant design has acquired distinctiveness through use.

This case will likely have a bearing on future cases involving 3D trademarks comprising product packaging. It provides lessons to owners of such marks with respect to the timing of an application and explores the need to gather evidence of acquired distinctiveness before venturing a 3D trademark application. Trademark owners should also consider protecting their 3D designs via design patents.

LehmanBrown Limited vs TRAB and Home & Garden (2014 Xingtizi No. 3)

In August 2001, Russell Brown and Edward Lehman were preparing to establish an accountancy firm under the name "LehmanBrown". In November that year, prior to the incorporation of the company, Lehman filed a trademark application for "LehmanBrown" in his own name. LehmanBrown Limited, represented by Russell Brown, subsequently filed a cancellation action against the mark with the TRAB. In March 2010, the TRAB issued a decision maintaining the registration.

LehmanBrown Limited subsequently brought an administrative lawsuit to the Beijing No 1 Intermediate People's Court, and the court upheld the TRAB's decision. LehmanBrown Limited then appealed to the Beijing Higher People's Court, but lost again. The appellate court held that LehmanBrown Limited had failed to prove that it had any prior rights in the disputed trademark.

LehmanBrown Limited pursued a re-trial by the SPC and prevailed. The SPC held that although, prior to the trademark's application date, LehmanBrown Limited was still in the process of incorporation and the mark had not been used, Brown and Lehman, the founders, had already agreed in principle to adopt “LehmanBrown” as the trademark and trade name of their new business. The trademark effectively belonged to LehmanBrown Limited even before the date of application.

The SPC applied Article 15.1 of the latest version of the PRC Trademark Law, as amended in 2014, to this case. This provision had expanded the scope of the principal/agent relationship to contracting parties, persons with prior business dealings or to other relationships where the trademark applicant was well aware of the existence of a third party's trademark. On that basis, the SPC held that Lehman, as a co-founder of the company, bore a duty of loyalty to LehmanBrown Limited and therefore his pre-emptive application of the trademark violated Article 15.1 of the Trademark Law.

The significant points of this case emphasized in the Annual Report were: