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Court: Attaching Itself to Competitor’s Business Reputation with Obvious Malice Violated Good-faith Principle and Constituted Unfair Competition
In order to attach itself to the well-known brand BRITA, Shanghai Kangdian Industrial Co., Ltd. (hereinafter referred to as “Kangdian”) registered 21 similar trademarks in bad faith and repeatedly interfered with the normal operation of BRITA through trademark opposition, invalidation and other procedures in recent ten years. Recently, the Minhang District People’s Court of Shanghai (hereinafter referred to as the “Shanghai Minhang Court”), by citing the principle provisions of the Anti-Unfair Competition Law of the People’s Republic of China, affirmed that the company’s relevant acts constituted unfair competition.
[Case Review]
BRITA is an internationally renowned drinking water filter brand
selling water filters across more than 60 countries and regions. Since 1992,
the company has been continuously applying for and has been approved to
register a series of trademarks including “碧然德” and “BRITA” in China. Brita Water Filtration System (Shanghai)
Co., Ltd. (hereinafter referred to as “BRITA Shanghai”) is its wholly-owned
subsidiary incorporated in Shanghai in 2013, and has obtained the general
license to use the above trademarks. Through the long-term use and publicity by
the two companies, the series of trademarks and the brand of BRITA have gained
certain popularity in China.
Kangdian was established in 2010. Since then, it had been selling “BRITA”
filter kettles, filter elements and other products in its online store,
claiming “Original and authentic German BRITA filter kettles for wholesale and
business attraction” “long-term cooperation with brands including Roche,
Bayer...BRITA”, etc. On WeChat platform, it operated and sold in the name of “BRITA”
and “BRITA Filter Kettle”, and published text descriptions such as “BRITA
Official Flagship Store on WeChat” and “BRITA Brand Story”. Following the
cancellation of its two WeChat official accounts through complaints, the
company changed its name and registered again to continue the sales business.
In the meanwhile, Kangdian also applied for registering 21 trademarks
including “碧然德”, “德碧然德” and “BRITA” on multiple goods and service classes, which were
denied for registration or declared invalid after examination by the national
trademark administration.
Among these cases, the request filed by BRITA and its Shanghai
branch against Kangdian for declaring the trademark “德碧然德” invalid eventually obtained
support through administrative and judicial procedures. Meanwhile, by taking “德碧然德” as the cited trademark,
Kangdian requested for declaring the registered trademark “碧然德” held by the above-mentioned
two companies invalid, and brought oppositions against the other six trademarks
of which the two companies were applying for registration. None of them were
supported after examinations.
BRITA and BRITA Shanghai held that the aforementioned acts of
Kangdian infringed on their right to exclusively use their registered
trademarks and constituted unfair competition. So, they sued to the Shanghai
Minhang Court, requesting Kangdian to compensate RMB 3 million yuan for their
economic losses and reasonable expenses.
Kangdian defended that the WeChat official account involved was
not owned and operated by it; that it never cooperated with the above two
companies in its operation; and that the goods sold by it were all sourced from
foreign purchasing agents, and thus requested to dismiss all the claims of the
two plaintiffs.
[Case Study]
Through hearing, the Shanghai Minhang Court held that, according
to the information published by the State Enterprise Information System, the business
registration number used by Kangdian from 2013 to 2016 was consistent with the
industrial & commercial registration number of the WeChat official account
and the online store involved. The inspection report, product packaging,
trademark opposition application and other evidence submitted by Kangdian also
indicated that the company produced “德碧然德” branded filter kettles and filter elements.
Kangdian’s use of a mark identical with or similar to the
plaintiffs’ registered trademark on commodities of the same class infringed the
Plaintiffs’ right to exclusively use the registered trademark. Kangdian claimed
its WeChat official account to be “BRITA Official Flagship Store on WeChat”,
and made lots of publicity on the plaintiffs’ brand story and advertising
materials. It publicized on the online platform that it had long-term
cooperation with such brands as BRITA. Despite its explicit expression in the
defense that it never cooperated with the plaintiffs, it failed to give other
good reasons for making such publicity. Therefore, the Court determined that it
intended to convey the false information of specific connection between the
company and BRITA, and that its acts sufficed to cause or facilitate the
occurrence of confusion and misidentification, thus constituting false
publicity and unfair competition.
According to Article 2 of the Anti-Unfair Competition Law of
the People’s Republic of China, a business operator shall, in his business
activities, follow the principles of voluntariness, equality, fairness, and
good faith, and observe the law and business ethics. The acts of unfair
competition mentioned in this Law refers to a business operator’s acts
violating the provisions of this Law, disrupting competition order on the
market, damaging the lawful rights and interests of other operators or
consumers.
The Court held Kangdian, which registered a total of 21 trademarks
that were identical with or similar to the plaintiffs’ registered trademarks on
relevant classes since 2012 and, on this basis,
interfered and hindered the plaintiffs’ normal exercise of trademark
rights by long-term utilization of procedures such as trademark opposition and
invalidation, essentially aimed to attach itself to the business reputation of
its competitors, i.e. the plaintiffs and their brand, set up obstacles along
with other infringement acts to interfere with the plaintiffs’ normal business
activities, destroy the plaintiffs’ competitive advantages, and establish its
own competitive advantages, showing obvious malice. These acts violated the
principle of good faith and recognized business ethics, and disrupted the order
of market competition. The legitimate rights and interests of the two
plaintiffs were actually harmed by these acts. Therefore, these acts
constituted unfair competition.
By giving overall consideration to the popularity of the BRITA
series trademarks, Kangdian’s production and sales scale, repeated infringement
and subjective malice, and reasonable right protection costs of the two
plaintiffs, the Court ruled that Kangdian pay to the two plaintiffs RMB 2.8
million yuan in compensation for their economic losses and reasonable expenses,
and eliminate the ill effects by publishing a statement on a newspaper. The
first-instance ruling has taken effect.
Applying for trademark registration, bringing oppositions against
or requesting for invalidation of trademarks applied by others for
registration, and requesting for invalidation of trademarks that have been
registered by others are procedural arrangements prescribed by the trademark
law system for business entities to acquire and safeguard their trademark
interests. Nevertheless, business entities must exercise their relevant rights
in a fair and lawful manner, and shall not use seemingly lawful means to
achieve essentially illegal purposes.
In this case, Kangdian, as a filter producer and sales company
established later, should respect prior rights and market labor achievements,
and compete on the market in compliance with laws and business ethics while
knowing the popularity and the great commercial value of the two plaintiffs’
trademark and brand. However, the defendant not only carried out the
aforementioned unfair competition acts of trademark infringement and false
publicity, but also damaged the plaintiffs’ prior rights through malicious
squatting and abuse of opposition procedures, which was improper and unfair.
The Anti-Unfair Competition Law of the People’s Republic of
China has no special provisions on the above-mentioned type of acts, but
for the general elements of the act of unfair competition, it has clear and
specific provisions in Article 2 that where there is any of the elements
stipulated in Article 2 in the absence of special provisions, it shall be
determined to constitute unfair competition by law. In this case, as mentioned
above, the defendant’s acts fully conform to the elements provided in the Anti-Unfair
Competition Law of the People’s Republic of China, so it is necessary to
find these acts illegal and order the defendant to bear corresponding civil
liabilities.
[Relevant Laws]
I. Tort Liability Law of the People’s Republic of China
Article 15 The methods of assuming tort liabilities shall include:
...
(6) compensation for losses;
...
(8) elimination of adverse effects and rehabilitation of
reputation.
The above methods of assuming the tort liability may be adopted
individually or jointly.
II. Trademark Law of the People’s Republic of China
(amended on August 30, 2013)
Article 56 The right to exclusively use a registered trademark
shall be limited to the trademark approved for registration and the goods on
which the trademark is approved to be used.
Article 57 Any of the following conduct shall be an infringement
upon the right to exclusively use a registered trademark:
...
(2) Using a trademark similar to a registered trademark on
identical goods or using a trademark identical with or similar to a registered
trademark on similar goods, without being licensed by the trademark registrant,
which may easily cause confusion.
(3) Selling goods which infringe upon the right to exclusively use
a registered trademark.
...
Article 63 The amount of damages for infringement upon the right
to exclusively use a registered trademark shall be determined according to the
actual losses suffered by the right holder from the infringement; where it is
difficult to determine the amount of actual losses, the amount of damages may
be determined according to the benefits acquired by the infringer from the
infringement; where it is difficult to determine the right holder’s losses or
the benefits acquired by the infringer, the amount of damages may be a
reasonable multiple of the royalties. If the infringement is committed in bad
faith with serious circumstances, the amount of damages shall be more than the
amount, but less than three times the amount, determined in the aforesaid method.
The amount of damages shall include reasonable expenses of the right holder for
stopping the infringement.
...
Where it is difficult to determine the actual losses suffered by
the right holder from the infringement, the profits acquired by the infringer
from the infringement, or the royalties of the registered trademark, a people’s
court may award damages of not more than three million yuan according to the
circumstances of the infringement.
III. Anti-Unfair Competition Law of the People’s Republic of
China (entered into force on December 1, 1993)
Article 2 A business operator shall, in his market transactions,
follow the principles of voluntariness, equality, fairness, honesty and
credibility and observe the generally recognized business ethics.
Unfair competition mentioned in this Law refers to a business
operator’s acts violating the provisions of this Law, infringing upon the
lawful rights and interests of another business operator and disturbing the
socio-economic order.
A business operator mentioned in this Law refers to a legal person
or any other economic organization or individual engaged in commodities
marketing or profit-making services (“commodities” referred to hereinafter
include such services).
Article 9 A business operator may not, by advertisement or any
other means, make false or misleading publicity of their commodities as to
their quality, ingredients, functions, usage, producers, duration of validity
or origin.
...
Article 20 A business operator who violates the provisions of this
Law and thus causes damage to the infringed business operators, shall bear the
liability of compensation for the damage. If the losses of the infringed
business operator are difficult to estimate, the damages shall be the profits
derived from the infringement by the infringer during the period of
infringement. And the infringer shall also bear the reasonable expense paid by
the infringed business operator for investigating the infringer’s unfair
competition acts violating his lawful rights and interests.
A business operator whose lawful rights and interests are
infringed upon by unfair competition acts may bring a suit in a people’s court.
IV. Interpretation of the Supreme People’s Court Concerning the
Application of Laws in the Trial of Cases of Civil Disputes Arising from
Trademarks
Article 9 The term “identical trademarks” as provided in Article
52, Item 1 of the Trademark Law refers to the fact that there is basically no
difference in visual perception between the trademark that is charged of
infringement and the registered trademark of the plaintiff.
The term “similar trademarks” as provided in Article 52, Item 1 of
the Trademark Law refers to the fact that the trademark charged of infringement
and the registered trademark of the plaintiff are similar in the font style,
pronunciation, meaning of the words, or in the composition and color of the
pictures, or in the overall structure of all the elements combined, or in the
cubic form or combination of colors so that the relevant general public may be
confused about the origin of the commodity or believe that there exist certain
connections between the origin and the commodity which is represented by the
registered trademark of the plaintiff.
Article 11 The “similar commodities” as provided in Article 52,
Item 1 of the Trademark Law refers to those commodities that are identical in
respect of functions, purposes of use, producers, marketing channels, target
consumers, etc. or between which there exist certain connections so that
confusion may result, as is believed by the relevant public.
...
V. Interpretation of the Supreme People’s Court on Some Issues
Concerning the Application of Law in the Trial of Civil Cases Involving Unfair
Competition
Article 8 Any of the following conducts of a business operator, if
sufficing to mislead the relevant public, can be determined as a false and
misleading conduct under Paragraph 1, Article 9 of the Anti-Unfair Competition Law:
...
(3) advertising commodities in ambiguous language or in any other
misleading way.
...
A people’s court shall determine false and misleading publicity
based on the rule of everyday life, general attention of the relevant public,
the facts misunderstood, the actual situation of the publicity object, and etc.
VI. Civil Procedure Law of the People’s Republic of China
Article 64 It is the duty of a party to an action to provide
evidence in support of his allegations.
(Written by Chen Linqing, Shanghai
Minhang Court)
