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January 2019
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Trademark Infringement Dispute between Xin Fan Cai Trading Co., Ltd. and Its Affiliated Entity, Shiyan Royal Jienan Garment Factory

 

Author: Ason Zhang, Zhiling Zhao, assistant Ella Sun.

 

Overview:

 

The ruling of the subject case is a break from the norm. The appellant, the first-instance defendant Guangzhou Xin Fan Cai Trading Co., Ltd. and its affiliated entity, Shenzhen Baoan District Shiyan Royal Jienan Garment Factory applied for a number of trademarks in the name of the company and its shareholder Zhuang Ruyin, which infringe the trademark rights of the appellee, LS&Co., the plaintiff in the first instance, including “”, “”, “ ” and “”. In addition, the appellant Guangzhou Xin Fan Cai Trading Co., Ltd. also operated a physical store at 1278, Unit 1, of the Liuhua Garment Wholesale Market in Guangzhou. The decoration and the business card of the store also used the infringing mark. The appellee LS&Co. opposed the trademarks applied by the appellant and filed a civil lawsuit with Guangzhou Yuexiu District People's Court. On July 18, 2017, the court made a first-instance judgment, ascertaining that the appellant's actions infringed LS&Co.'s trademarks “”, “ ”, “ ” and “”, and the amount of compensation was CNY130,000 (approx. USD 19,117). After receiving the first-instance judgment, the appellant filed appeal of the case to the Guangzhou Intellectual Property Court. On April 24, 2018, as a propaganda case of World Intellectual Property Day, the Guangzhou Intellectual Property Court publicly heard the case at Guangdong University of Finance and Economics.

 

As the attorney of LS&Co., Chang Tsi & Partners carefully analyzed the case, searched for the breakthrough of the case and accurately developed the litigation strategy, collected evidence in a serious, extensive, in-depth and meticulous manner, carefully prepared and participated the trials of the case. During the trial, we emphasized the fact that the appellant did not normatively use his registered trademark and their bad faith of infringement. After the trial, the court of second instance made a final judgment on the case and upheld the original judgment.

 

1. Case background:

 

The two appellants in this case, with the purpose of getting free ride of famous brand, applied for a series of trademarks in the 2014 and 2016, which copied many of trademarks owned by LS&Co., including the well-known trademark “”, and used the infringing marks for physical store decoration, business cards and some products.

 

Prior to filing the lawsuit, LS&Co. had filed oppositions against some of the trademarks that the appellant had not registered with China Trademark Office. Given the bad faith of the appellant and their nonstandard use of their registered trademarks, the LS&Co. decided to file a trademark infringement lawsuit against the appellants and used the civil judgment as evidence to support its trademark oppositions.

 

On July 13, 2016, LS&Co. filed the trademark infringement case against the two appellants with the Guangzhou Yuexiu District People's Court on the grounds that the two appellants infringe the exclusive trademark right of LS&Co., and demanded them to stop the infringement. On July 18, 2017, after three hearings, the court of first instance made a first-instance judgment and found that the actions of the two appellants constituted trademark infringement. On August 18, 2017, the two appellants filed an appeal with the court of first instance.

 

2. Difficulties in the case:

 

During the trials of the first and first-instance, the trademark filed by the appellant Zhuang Ruyin “” in Class 25 was still in the opposition stage and was not registered. At the second instance stage, the China Trademark Office made a ruling that this trademark is not similar to the trademark "" owned by LS&Co. The result of the ruling was extremely unfavorable to LS&Co.'s claim of infringement. Moreover, the approval of the registration of this trademark directly caused the situation of conflicts between 2 registered trademarks. According to Article 1 of Provisions of the Supreme People's Court on Certain Issues Concerning the Trial of Civil Dispute Cases Involving Conflict of a Registered Trademark or Enterprise Name with Any Pre-existing Right, such disputes shall be solved through administrative procedures. It is highly probable that the court of second instance will, according to this provision, change the judgment of the court of first instance on the use of this trademark by the appellant.

 

Second, the appellant is extremely canny when designing the infringing mark by combining multiple infringing elements into one infringing mark. For example, the trademark "" in the case is a combination of the trademark "" registered by LS&Co., and the phonetic alphabet of the Chinese trademark "李维氏" and other elements. Since the word mark used in this trademark is more prominent and the Chinese characters are quite different from “李维氏”, when being compared separately, it is highly likely that these trademarks will not be recognized as similar trademarks by the court.

 

Third, the infringement mark “” used by the appellant is significantly different from the registered trademark “” of LS&Co. Given the fact that the Arcuate Mark of LS&Co. is less well-known than the word mark “LEVI'S”, in many cases, such infringing marks are not recognized by the court as infringement.

 

3. Our litigation strategy:

 

After our careful analysis, we believe that the issue of the case is whether the disputed mark used by the defendant is similar to the plaintiff's registered trademark, especially whether the use of the marks will cause confusion. Based on the above, we have developed the following litigation strategy:

 

First, through the analysis and comparison of the elements of the trademarks, we prove that the design concept of the infringing marks came from the series of trademarks of LS&Co. In this regard, we specifically made a comparison PPT to show the court the batwing design of  the infringing mark used by the appellant, "LIWEISHI" word and "里威士" Chinese all inspired by the registered trademark "" and “李维氏” registered by LS&Co. The appellant’s combination of the infringing elements should also be subject to legal sanctions.

 

Secondly, through the analysis of the infringing mark actually used by the appellant and their purpose of applying for the infringing marks of the case, we proved that the appellant’s infringement is extremely obvious. We also drafted a case statement to prove:

 

1) The trademark "" of LS&Co. is actually used on the "LEVI'S" branded jeans with high reputation;

2) The mark "" used by the appellant deliberately removes the distinctive word "里威士", which is included by their registered trademark " ", making the infringing mark more misleading to the consumer;

3) In the notarized recording, the appellant personally acknowledges that their purpose of applying for the trademarks is to get free ride of famous brand.

 

4. Significance of the case:

 

First, in this case, the infringer's infringement mode is very common in practice. On one hand, the infringer applies for the infringing marks with the China Trademark Office, in order to justify their infringement. On the other hand, the infringer did not use the applied marks normatively, attempting to confuse the source of goods through such means to achieve the purpose of trademark infringement. On the premise that the infringing trademark has been registered, the court of second instance did not apply Article 1 of Supreme People's Court on Certain Issues Concerning the Trial of Civil Dispute Cases Involving Conflict of a Registered Trademark or Enterprise Name with Any Pre-existing Right, ignoring the conflicts between 2 registered trademarks. On the contrary, the court adopted the higher legal principles of fairness, honesty and credit, and the protection of prior rights. The court directly ascertains that the use of the combined mark will cause confusion and constitutes a trademark infringement.

 

Second, the second-instance judgment of this case is different from other similar cases in the past. It recognized that the Arcuate Mark of LS&Co. has a high reputation through long-term promotion and use, and has established a connection with LEVI'S brand jeans, which is one of the iconic elements of Levi’s jeans. In the previous cases, the court generally concluded that the Arcuate Mark used together with the well-known “LEVI’S” word mark is lack of its distinctiveness and popularity, so the court is inclined to be conservative on protection of this trademark. The judgment of the subject case proves that multiple trademarks on one product can simultaneously identify the source of the product. The recognition of the reputation of Arcuate Mark by the Guangzhou Intellectual Property Court will undoubtedly greatly enhance the protection of this trademark in the Guangdong province where jeans are mostly produced.

 

The third significance is the considering of the bad faith of the Defendants when deciding the similarity of the involved trademarks in an infringement case. According to the law, judges should only compare the construction, appearances of marks when deciding if there is infringement. In this sense, the letters of “LIWEI’SHI” used by the Defendants in the mark“” and “” looks nothing like the client’s Batwing Design, as the client’s mark does not include any letters. Even though, the court makes the pioneering ruling, concluding that the Defendants’ bad faith is so obvious that public’s confusion overweighs the importance of similarity of trademarks in appearance.

 

On December 6, 2018, the local influential press, Nandu Daily published an article about the subject case on its official Wechat account. This article was published as an advertising campaign for the 4th anniversary of Guangzhou IP Court. This article is also published on the official Wechat account of Guangzhou IP Court. The case is labeled as an excellent case by the court. It is rare to see that a court proactively promotes a case, not to mention that this court is Guangzhou IP Court with influence of the whole Guangdong Province. We believe the court’s promotion of this case indicates our conspicuous achievement of trademark enforcement in Guangdong Province, especially the anti-dilution of Arcuate Mark. This trademark previously was considered to be lack of distinctiveness, but now is referred to as “classic logo” of LS&Co. The Arcuate Mark is now recognized as a trademark with reputation with equal status as the LEVI’S word mark. It is a big progress.

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