New trend of trademark litigation in China

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Astring of significant trademark lawsuits in the past couple of years in China, such as the “New Balance/Xin Bai Lun”, “Jordan”, “Wang Lao Ji” and “Qualcomm” cases, and the most recent “Red Bull” case, have sparked heated discussion in both the legal sector and the wider public community. While the general public are discovering the tremendous value in famous trademarks and brand names, legal professionals should go further to figure out the new trends of trademark litigation in China.

居晓林 JASON JU 段和段律师事务所合伙人、副主任 Partner and Deputy Director Duan & Duan
居晓林
JASON JU
段和段律师事务所合伙人、副主任
Partner and Deputy Director
Duan & Duan

First and foremost, we can see a growing social impact from trademark lawsuits, especially those relating to famous trademarks and brand names that capture long-lasting attention from the public and media. The “Wang Lao Ji” dispute is a case in point. The “Wang Lao Ji” trademark was licensed to Jia Duo Bao Group (JDB Group) for a period, during which the herbal tea brand that was originally known in certain areas of south China rose quickly to national prominence owing to the non-conventional marketing approaches of JDB Group. As a result, “Wang Lao Ji herbal tea in a red can” became a well-known product of tremendous economic value. These facts aroused a great deal of public interest. Cases with similar social impact include the “Jordan” and “New Balance/Xin Bai Lun” trademark disputes.

Second, the Supreme People’s Court (SPC), as the highest judicial authority in mainland China, is increasingly involved in hearing significant trademark dispute cases. For example, in its final verdict issued in August this year in relation to the “Wang Lao Ji” dispute, the SPC ruled that as a solution, Guangzhou Baiyunshan Pharmaceutical Holdings (Baiyunshan, formerly known as Guangzhou Chinese Medicine Corporation) and JDB Group may share the title to the packaging design uniquely used for the famous product concerned, provided that the joint ownership is held in good faith, with respect for customer awareness and without infringement upon lawful rights or interests of any third parties.

According to the SPC, in view of the history of “Wang Lao Ji herbal tea in a red can”, the background of co-operation between the two parties, and the consumer awareness and fairness principles, and given the fact that both Baiyunshan (and its predecessor) and JDB Group (and its affiliates) played a positive role in the formation, development and goodwill building of the packaging design, awarding 100% of the title to any party would result in a grossly unfair situation and potentially in detriment of the public interest. This verdict virtually overturned the first instance judgment of the Higher People’s Court of Guangdong province, which ordered JDB Group to compensate Baiyunshan for a loss of RMB150 million (US$22.6 million).

Coincidentally, in its ruling for the “Jordan” dispute issued four months later, the SPC overturned judgments for the first and second instances and ordered the Trademark Review and Adjudication Committee to reconsider the case on the ground that registration of the disputed “Jordan” trademark by Jordan Sports had infringed upon prior right of name of Michael Jeffrey Jordan, and constituted a violation of the Trademark Law. But it also held that the trademarks “QIAODAN” and “qiaodan”, comprising Chinese Pinyin, did not infringe upon the sports star’s right of name.

These two cases have one point in common, i.e., neither party to the dispute entirely wins or loses the case. The final verdicts for both cases reflect balanced interests of the parties. We can see that the SPC is trying to get its hands on trademark cases with profound social impact by utilizing proceedings such as appeal and retrial. The purpose is to identify a basic legal principle that can be generally followed by courts of lower levels in the future hearing of similar cases. Given the inherent flaws of statutes, the SPC’s actions will have significant implications on judicial practice.

Third, the amount of damages awarded to trademark holders is increasing. The 2013 amendment of article 63 of the Trademark Law, which raises the amount of damages to be determined by courts at their discretion substantially, from RMB500,000 to RMB3 million, highlights that “damages of 100% or more but less than 300% of the amount determined according to the aforesaid method can be imposed against any malicious infringement of exclusive trademark right with serious circumstances”.

The amendment shows legislators’ resolution to strengthen protection of trademark rights and create a sharp rise in the cost of infringement. It is reflected in the ruling of Suzhou Intermediate People’s Court in connection with a recent trademark infringement case, where the defendant, Zhejiang Life Home Baroque Timber, was ordered to stop trademark infringement and unfair competition, and the damages of RMB10 million claimed by the claimant, Baroque Timber Industries (Zhongshan), were fully supported.

In the high-profile “New Balance/Xin Bai Lun” trademark case, Guangzhou Intermediate People’s Court awarded damages of RMB98 million in its judgment in the first instance, although the amount was subsequently decreased to RMB5 million by the Higher People’s Court of Guangdong province in the second instance. Still, RMB5 million is not a small sum.

The new trend of trademark litigation in China reflects not only remarkable improvement in trademark holders’ access to protection compared with a decade ago, but also the rising number of trademark holders that are willing to safeguard their rights and interests by bringing the disputes to courts, taking into account the considerable economic benefits that may be awarded and the level of public attention that cannot be otherwise achieved, even with advertisements. The “Wang Lao Ji” case is a very good example.

Jason Ju is a partner and deputy director of Duan & Duan, and head of its Hong Kong office. He can be contacted on +852 2973 0668 / 6877 7828 (HK), +86 21 6219 1103 / 139 1603 5751 (mainland China), or by email at jasonju@duanduan.com