Light at the end of tunnel in New Balance copyright case

New Balance, founded in 1906, is an American corporation based in Boston and one of the world’s major sport footwear manufacturers, known mostly for its high–quality and high-performance sneakers with the iconic “N” logo.

In 1983, New Balance registered with the China Trademark Office the trademark 3 in class 25. Another representation of the logo, trademark 4, was registered in 2014, also in class 25 (all referred to as cited marks).

In the years following its first registration, New Balance began to encounter many imitators using the N letter on the side of their sneakers. The defendants challenged the similarity between the use of the letter on their shoes and New Balance’s trademark, registered in 1983. New Balance replied by citing article 5 of the Anti-Unfair Competition Law (1993 version), which protects “trade dress” (unique decoration of a well-known product).

The Hangzhou Intermediate Court, the Court of Huangpu District, Shanghai and the Second Intermediate Court of Shanghai recognized that the N logo used on both sides of the New Balance sneakers constitutes “the peculiar trade dress” of “well-known goods”, and ruled in favour of New Balance in judgments dated 13 April 2006, 23 April 2012, and 28 December 2012.

In 2010, Hainan Qierte Investment filed applications for the registration of two trademarks, trademark 1 and trademark 2 in class 25, and obtained their registration in 2012. Both marks were later assigned to another company, Qierte Co Ltd, in 2013.

On 7 January 2014, New Balance brought before the Trademark Review and Adjudication Board (TRAB) an invalidation action against the two disputed marks, citing article 28 (similar marks on similar goods), article 31 (causing harm to other’s prior right), and article 13 (well-known trademark) of the 2001 Trademark Law. New Balance also referred to the Anti-Unfair Competition Law.

On 31 March 2015, the TRAB ruled against New Balance, finding that: (1) the disputed marks are not similar to the cited marks; (2) the N logo does not constitute the unique decoration of well-known goods (“trade dress”); and (3) the evidence adduced by New Balance is not sufficient to prove that the cited marks have become well known prior to the application date of the disputed marks.

New Balance appealed against the decision before the Beijing Intellectual Property Court, which, on 10 May 2016, ruled in favour of New Balance, finding that: (1) the use of the disputed marks is likely to cause confusion, taking into account the similarity between the signs and the reputation of the cited marks; (2) the evidence produced by Qierte failed to prove that the disputed marks, through use, have become distinguishable from the cited marks; and (3) since the court has found that the registration of the disputed marks is in violation of article 28 of the Trademark Law, there is no need to examine the plaintiff’s argument on trade dress.

Qierte and the TRAB filed an appeal with the Beijing High Court. On 25 October 2016, the Beijing High Court quashed the first instance judgment, based on: (1) there is a major difference between the disputed marks and the cited marks in terms of overall visual effect, composition and design style; and (2) the evidence on file is insufficient to prove that, prior to the filing date of the disputed marks, New Balance’s N logo constituted the peculiar trade dress of well-known goods.

On 21 April 2017, New Balance applied to the Supreme People’s Court (SPC) for retrial. In the retrial application, New Balance:

• cited the prior court judgments finding that the N used by New Balance on its sneakers constituted a“unique decoration of well-known goods”and claimed that the Beijing High Court was in contradiction with such established findings and, therefore, had erred in the application of the law, which is adverse to the creation of a stable jurisprudence;
• showcased the customary practice of how commercial signs are used on sports shoes;
• emphasized the bad faith of Qierte in its copy of New Balance and argued that, when assessing the likelihood of confusion between two marks, the courts should look at the“big picture”and take into account all facts of the case, including the bad faith of disputed trademark registrant; and
• produced evidence of actual confusion in the market.

In September 2017, the SPC formally accepted the application for retrial of New Balance on the ground of possible improper application of the law. The case is now pending for retrial.

The SPC did not say more than “improper application of law”, and it is therefore difficult to speculate on what exactly the judges had in mind. A possible explanation could be that the SPC considered that the TRAB and the Beijing High Court erred when they ignored the prior judgments affirming the protection of the trade dress.