20 December 2017

1st Civil Case Recognizing Well-known Trademark on Similar Goods

This article was written by Dang Zhe(Partner),He Shijia(Legal Assistant).

Recently, the KWM IP litigation team, on behalf of Deere & Company, won the final trial of a lawsuit involving trademark infringement and unfair competition. The defendants were John Deere (Beijing) Agricultural Machinery Co., Ltd and other two.

The Beijing High People's Court (“Beijing High Court”), the court of second instance, held that if there is a conflict between a registered well-known trademark and an ordinary registered trademark on identical or similar goods, Article 13 (3) of the PRC Trademark Law applies. This is the first civil case with a final judgment where the above application rules of Article 13(3) was confirmed and well-known trademarks were protected accordingly.

Case brief

Deere & Company owns the registered trademarks “JOHN DEERE” and “约翰.迪尔” (John Deere in Chinese characters). For a long time, they have used such trademarks on multiple products such as agricultural machinery and tractors. Without permission, three defendants used trademarks and company names such as “约翰迪尔” and “佳联迪尔” (“Jialian Deere”) on products like lubricating oils. As the defendants have completed the registration of the trademark “佳联迪尔” and registered “佳联迪尔” and “约翰迪尔” as their company names, common administrative and judicial measures could not effectively prevent the defendants from using such marks and company names. The defendants continued to commit trademark infringement and unfair competition, severely violating the rights and interests of Deere & Company.

Therefore, Deere & Company and its subsidiary in China initiated proceedings in the Beijing IP Court against the three defendants for trademark infringement and unfair competition. In late December 2016, the Beijing IP Court held that Deere & Company’s three trademarks, “约翰.迪尔” in Class 7 and “JOHN DEERE” in Classes 7 and 12 were well-known trademarks. And the court ordered the three defendants to cease the infringement and make a public statement to eliminate adverse effects, and awarded the plaintiffs RMB 5 million in punitive damages and over RMB 360,000 in reasonable expenses. The defendants appealed to the Beijing High Court. In December 2017, the Beijing High Court issued the final judgment: the decisions made by the first instance court were upheld, and the details in the first instance judgment were refined and the claims made by Deere & Company were supported.

Highlights of the Case

1. Makes it clear that if there is conflict between a registered well-known trademark and an ordinary registered trademark on identical or similar goods, Article 13(3) of the Trademark Law applies.

In China, the legal protection for well-known trademarks is mainly under Article 13 of the Trademark Law. The common understanding of this Article is that it protects an unregistered well-known trademark as if it were an ordinary registered trademark, and that it protects a registered well-known trademark across different classes.

But, is the protection of registered well-known trademarks limited to “cross-class protection”?

Does Article 13(3) still apply when a trademark copies, imitates or translates a registered well-known trademark on identical or similar goods?

The Supreme People’s Court and Beijing High Court have answered “yes” in multiple trademark-related administrative disputes[1]. But in civil disputes, precedent is almost non-existent. The second instance judgment of this case indicates that if the alleged infringing trademarks are similar to the registered well-known trademarks on identical or similar goods, the protection for well-known trademarks also applies. However, to avoid abuse of the system of well-known trademark, according to the “on-demand recognition” principle, where the alleged infringing trademark is unregistered and used on the goods identical or similar to the designated goods of prior registered trademark, the prior registered trademark can be protected under other articles of the Trademark Law, as such it is not necessary for the court to determine whether the prior registered trademark is “well-known”. In disputes over registered trademarks, courts cannot directly accept the case[2], therefore it is necessary to determine whether the prior registered trademark is a well-known trademark, and if it is, the court may decide the case under Article 13[3]. Determination of whether a trademark is “well-known” at this point is both justified and necessary. Therefore, the second instance judgment held that in disputes between registered trademarks on identical or similar goods, it is necessary to determine whether the prior registered trademark is “well-known” and the court can hear the case under Article 13(3). In addition, the second instance judgment also provides a precedent for the view that disputes between registered company names and registered trademarks are within the scope of the case types where the well-known trademark recognition is necessary, provided by the Supreme People’s Court Interpretation.

2. Clarifying the conditions when punitive damages are applicable under Article 63 the Trademark Law

The second instance judgment lists two necessary elements for punitive damages:

  • “Malicious intent” – knowingly violating trademark rights. Trademarks become public through the public announcement of registration, so honest market players have the obligation to avoid violation against others’ registered trademarks. But such kind of subjective fault of the alleged infringers when violating trademark rights does not always constitute the “malicious intent”;
  • “Severe circumstances” – the infringing acts have caused great damage and negative consequences to the plaintiff. The scope and impact of the violations will be considered.

This case had both the necessary elements for punitive damages. The infringements continued after an administrative penalty, meaning that the defendants knowingly violated the rights of the plaintiff. On the other hand, the defendants committed infringements in various ways:

  • use infringing trademarks, company names and domain names
  • engaged in unfair competition by false advertising and defamation
  • filed a malicious action against the plaintiff for infringement of their “design patent” which was obtained by imitating Deere & Company’s IP!

These multiple infringements caused material damage and bad influence to the plaintiff, and were considered “severe circumstances”. Therefore, the court of the second instance upheld the first instance decisions and awarded the plaintiffs RMB 5 million in punitive damages.

3. Clarifying several procedural issues in trademark infringement cases

(1) Is it necessary to stay the infringement case while there is an ongoing invalidation proceeding against the plaintiff’s trademark filed by the defendant?

In a trademark infringement case, the defendant usually files an application for invalidation against the plaintiff’s registered trademark, and requests the court to stay the infringement case. The defendants in this case adopted such strategy. The court of second instance held that the courts have discretion to decide whether to stay the infringement case according to the possibility of the subject trademark being announced as invalid. If there is no evidence to prove that the trademark is very likely to be invalidated, the court can decide not to stay the infringement case. According to such principles, the second instance court held that the court of first instance’s decision not to suspend trial proceedings was compliant with procedural rules.

(2) Non-exclusive licensee can bring a lawsuit together with trademark owner

Article 4(2) of the Interpretation of the Supreme People’s Court Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks (“Interpretations”) states that: “the licensee of non-exclusive license can file an action upon the explicit authorization of the trademark owner.” As the provision does not expressly state that the non-exclusive licensee may bring a lawsuit together with the trademark owner, there are different interpretations in practice.

In this case, Deere & Company’s subsidiary in China sued together with Deere & Company as a non-exclusive licensee, and the defendants raised an objection on this point. The second instance judgment held that the license agreement submitted by the plaintiff proved that Deere & Company’s subsidiary in China had already obtained authorization from Deere & Company to file a lawsuit together with Deere & Company. Therefore, the Chinese subsidiary was a qualified plaintiff. We can see from the judgment that the court responded to the issues arising from the linguistic ambiguity of the said article of the Interpretations and made it clear that a non-exclusive licensee can bring a lawsuit together with the trademark owner.

(3) Judgement ordering the defendant to change company name should be more specific and direct so that it is enforceable

The court of first instance held that the company names used by the defendants constituted trademark infringement and unfair competition, but did not directly order the defendants to change their company names at the plaintiff’s request, and instead the court simply ordered the defendants to cease infringement. This could make it difficult for the plaintiff to get the defendants to change their company names during the enforcement. To address this, the plaintiff required the court of second instance to make more specific orders in terms of changing company names. To ensure the enforceability of the judgment, the court of second instance supported the plaintiff’s request. The final judgment upheld the previous decision of unfair competition and made it clear by ordering that “the defendants must immediately stop using the infringing company names”. This cleared the way for enforcement and made the remedy more effective.

[1]For examples, (2016) Zui Gao Fa Xing Zai No.12 and 13, and (2008) Goa Xing Zhong Zi No.266 and 269-275

[2]Article 1 Para2 of the “Supreme People's Court Provisions on Several Issues in the Handling of Civil Disputes over Registered Trademarks, Business Names and Prior Rights” provides that “if a plaintiff in a lawsuit claims that a registered trademark used on an approved product is identical with or similar to his prior registered trademark, the people’s court should notify the plaintiff to seek resolution at the competent administrative authority under Article 111 (3) of the Civil Procedure Law. However, if the plaintiff claims that a registered trademark used beyond the approved scope of product, or by changing its distinctive characteristics, or by division or combination, and the trademark is thus identical with or similar to his registered trademark, the people’s court should accept the case.” This Interpretation became effective on March 1, 2008.

[3Article 11 of the “Supreme People's Court Interpretation on Several Law Application Issues in the Handling of Civil Disputes Involving the Protection of Well-known Trademarks” provides that “ if the defendant’s registered trademark violates Article 13 of PRC Trademark Law by copying, imitating or translating the plaintiff’s well-known trademark, and constitutes trademark infringement, the people’s court should prohibit the defendant from using such trademark as requested by the plaintiff, provided that the people’s court will not support the plaintiff’s claim against the defendant’s registered trademark if: (1) the period for applying for cancellation of a registered trademark under Article 41 Para. 2 of PRC Trademark Law has expired; (2) the plaintiff’s trademark is not well known when the defendant applies for registration.” This Interpretation became effective on May 1, 2009.

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