04 August 2014

Common issues of trademark infringement in e-commerce and enforcement

Statistics of China e-Commerce Research Center shown that, the trading volume of e-commerce market in China had reached 7.85 trillion RMB in 2012 and 10.5 trillion RMB in 2013, and it is expected to reach 13.4 trillion RMB in 2014. The current most active e-commerce websites focus on the following ten industry sectors: apparel, textile, agriculture and horticulture, digital household appliances, machinery and equipment, chemicals and plastics, food and wine, construction materials, hardware and tools, healthcare and pharmaceuticals. Along with this phenomenon, the protection of intellectual property rights in the online sphere is facing a whole new series of challenges. This article will focus on the discussion of issues of trademark infringement in e-commerce.

The Key Differences between e-Commerce and Traditional Economy

The critical feature of e-commerce distinguishing it from traditional economic model is a hub for "information" and "transaction", i.e. the network. Thus, the whole transaction process, such as information transfer, payment, as well as delivery of physical commodities which are usually taken place and completed simultaneously in traditional transactions, is separated in e-commerce and completed with the participation of various service providers. 

China Bulletin

The above key differences result in the following two characteristics of trademark infringement issues in e-commerce.

First, most of the issues occur in the sectors relating to transaction data. Under the traditional economic mode, transactions are often associated with physical goods, including display or circulation. The definition in the Trademark Law of traditional infringement is based on such feature that transactions are directly linked to physical products. For example, the infringing acts listed by the Trademark Law include: "using a trademark on goods", "selling counterfeit products", "manufacturing the labels of a trademark", etc. In e-commerce mode with massive information online, selecting, identifying and determining trading partners have become crucial prerequisites to the completion of a transaction, which is even no less important than the product itself. Therefore, the issue whether new types of trademark use, related to transaction information, shall constitute trademark infringement among frequent academic and judicial discussions.

Second, joint infringement became very common and it is difficult to determine the joint liability in trademark infringement. Due to the inseparable supports from third party service providers in every transaction sector, joint infringement has become another focused topic in e-commerce infringement. However, there is no essential difference in the positions between online payment service providers and the third-parties in traditional payment mode. Also, the role of logistics service providers who assist the completion of goods delivery in e-commerce is no different from that in traditional economy. Therefore, a lot of problems remain focused on service providers in the area of transaction information, i.e. determining the liability of joint infringement of Internet Service Providers ("ISP").

I. Common Trademark Issues in e-Commerce andPractice in Enforcement

A. Trademark Infringement Relating to Physical Goods

a. Selling counterfeit goods through e-commerce mode

To identify infringers

It is a brand new problem to identify infringers in e-commerce environment. In practice, several ways can solve this problem:

  • To obtain information through internet real name authentication
  • To obtain indirect information from internet such as the operators of relevant websites, domain name owners or information of ICP recordation
  • To obtain the seller information through sample purchase
  • To obtained information from the ISP

To determine jurisdictions

The basic principle to determine jurisdictions in trademark infringement is that the people's court at the place of domicile of the defendant or at the place where the infringement occurs has the jurisdiction over the case.

As to the place of domicile of the defendant, if the identity of the defendant could be determined, the jurisdiction can be determined by acquiring the domicile information according to the identity of the defendant. In practice, a plaintiff often lists the ISP as co-defendant in order to establish jurisdiction at the location of the ISP.

For the place where the infringement occurs, we should distinguish trademark infringements related to physical goods and those related to transaction information. If it is the former, the principle of establishing jurisdiction at the place where the infringing act is committed, where the infringing goods are stored or seized/detained in traditional economy is still applicable. It is worth to mention that, in the process of notarized purchase, plaintiff can establish jurisdiction at a specified location where is designated as the shipping address and therefore is deemed as the place of selling the goods. In current practice, it is difficult to get the affirmation from the majority of courts to establish jurisdiction merely by the shipping address. However, in some cases, if the parties specified in the contract that a particular place is selected as the place of performing the contract, it is possible that such place may be deemed as the place where the sales act is taken place and the local court may have jurisdiction. If the unauthorized use of trademark relates to transaction information, a plaintiff may also consider using the location of the server of the website to establish jurisdiction.

b. Selling parallel imported goods on e-commerce platforms

Another problem that the right owners frequently encounter in trademark enforcement is the sale of parallel imported goods in e-commerce. These goods are usually "genuine", but are supposed to be sold in other countries.

Although till present, Chinese legislation is silent on whether selling goods through parallel import and breach of contract constitute trademark infringement, the majority of courts or enforcement authorities take a reserved attitude toward this issue, i.e. courts or enforcement authorities are careful to determine these acts constitute infringement. Such attitude is reflected in a typical case, Victoria's Secret v. Shanghai Jin Tian, trialed by the Shanghai Second Intermediate People's Court.

But in some cases, courts may consider more factors. For example, in the case Michelin v. Tan Guoqiang etc., the Changsha Intermediate People's Court made the following statement: "from the security point of view, the tire quality is directly related to personal and property safety of drivers and passengers, so the tire manufacturers will produce and sell the tires which meet different speed requirements, geographic and climate features and compulsory standards in the countries of sale. These tires did not achieve the compulsory 3C certification. There may be safety concerns and violate the mandatory provisions of China. No matter who has manufactured these products, it is illegal to sell these products and should be forbidden according to the law. Therefore, the key to this case is not that who manufactured the products, but that such unauthorized sale may damage the interests of the trademark owner."

c. Selling default goods through e-commerce (breaching the trademark license agreement or other agreements)

The typical acts of such infringement include: selling products on e-commerce platforms which, according to the agreement, could only be sold directly; selling products on e-commerce platforms which, according to the agreement, could only be sold in a certain regional territory; and selling products (such as products of luxury brand) on e-commerce platforms which should be sold in certain circumstances selected and restricted strictly by the trademark owners.

The new Trademark Law does not stipulate whether these acts are legitimate or not. At present, trademark owners still face tough problems in their trademark protection on the Internet. Due to lacking of legal basis, ISPs usually will not deal with these goods.

Some cases in Europe expressly support the trademark owners, such as Copad SA v. Christian Dior couture SA. But no favorable precedent follows in China. It is advised that trademark owners find proper opportunities and bring lawsuits to the court to solve these problems.

B. Trademark Infringement Relating to Transaction Information

a. Using others' trademarks as searching keywords or web page keywords: for example, associating others' trademarks with ones' websites by using others' trademarks as web page keywords or taking advantage of paid listing services provided by search engines.

This kind of acts has been determined as infringement in most precedents. The right owners may enforce their rights by suing ISPs.

b. Using others' trademarks as the name, signage, decoration or advertisement of the online shop.

The kind of acts includes various specific situations and courts have different attitudes.

In the lawsuits brought by Nippon Company in Shanghai and Jiangsu province, the courts in both regions held that the defendants did not commit infringement on the ground that these uses were indicative fair use of Nippon trademarks and would not cause confusion. However, in American Zippo v. Wang Lei, the court determined the defendant's act constituted trademark infringement.

In general, regarding the use of others' trademarks in the decoration of online shops, courts focus on whether such use is fair and proper; whether such use will cause confusion to the public, and whether such use will cause damages to the trademark owners. Currently, some ISPs will respond by taking actions to complaints regarding these kinds of act.

c. Using others' trademarks in product descriptions

The typical case is to use others' trademarks in product descriptions for promotion, such as using the wordings "Cartier style". Although the infringer use its own trademarks at the same time and the use will not cause confusion, the act may still be deemed an infringement based on trademark dilution or unfair competition. Early this year, the Shanghai Pudong New Area People's Court made a bold exploration in a trademark infringement and unfair competition case Cartier v. Yihaodian and Mkela Company, and made a verdict favoring the trademark owner.

d. Using others' trademarks as domain names and conduct e-commerce for relevant goods

According to relevant judicial interpretations, registering the words identical to or similar with others' registered trademarks as domain names and using the domain names to conduct e-commerce for relevant goods, which is likely to cause confusion among relevant public, belongs to the "acts causing other harm to others' exclusive rights to use a registered trademark" pursuant to Article 52.5 of the Trademark Law.

e. The issue of ISP's joint liability in trademark infringement

ISP's joint liability in trademark infringement has been a heated issue, upon which the judicial system has also conducted a lot of in-depth studies and explorations. At present, the safe harbor doctrine and the red flag standard are still commonly-used. The controversial issue is how to apply them, and it is always closely related to the facts of individual cases. Animportant recent case is Eland Company v. DuGuofa and Taobao, in which the Shanghai First Intermediate People's Court made a verdict favoring the trademark owner.

C. Conclusion

To summarize, the issues relating to trademark infringement on internet have their special features which develop and change rapidly with the continuous innovations of e-commerce from forms to contents. Although the nature of e-commerce under the Trademark Law is the same as traditional economy, it is an area worth of long-term attention as to how to properly apply the law in internet environment to build a healthy legal environment for e-commerce.

(This article was originally written in Chinese, and the English version is a translation.)

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