15 Mar 2018 in Newsletter
UNIQLO Wins Trademark Infringement Litigation in China
Recently, the Guangzhou Intellectual Property Court issued the second-instance decision on Guangzhou Compass Exhibition Service Co., Ltd. and Guangzhou Zhongwei Enterprise Management Consulting Service Co., Ltd. (collectively “Compass/Zhongwei Company”) v. Fast Retailing (China) Trading Co., Ltd. (The famous brand UNIQLO’s retailer in China) and Fast Retailing (China) Trading Co., Ltd. Guangzhou Baixin Plaza Store (collectively “Fast Retailing Company”) regarding a trademark infringement, upholding the first-instance ruling and affirming that Fast Retailing Company did not infringe the exclusive right to use the trademark-in-suit.
The plaintiff, Compass/Zhongwei Company, is the owner of the Chinese Trademark No. 10619071 (the trademark-in-suit) (See Figure 1). The shareholder of the defendant Fast Retailing Company, Japan Fast Retailing Co., Ltd., has the exclusive right to the registered trademark “UNIQLO.” The accused mark (See Figure 2) in this case is used on the well-known “Ultra Light Down” series of jackets under the UNIQLO brand.
Around the end of 2013, Compass/Zhongwei Company offered to sell the trademark-in-suit to Fast Retailing Company for 8 million RMB, but Fast Retailing Company rejected the offer. As a result, Compass/Zhongwei Company filed 42 trademark infringement lawsuits in 19 courts across China containing the same legal pleadings and claims, attempting to exert pressure on Fast Retailing Company. Among these trademark infringement lawsuits, the Guangzhou Intellectual Property Court and the Zhongshan Intermediate Court held that Fast Retailing Company did not infringe the trademark-in-suit while the Zhejiang Higher Court, the Shanghai Higher Court and the Foshan Intermediate Court ruled the opposite. These trademark infringement rulings have frustrated UNIQLO’s development and operation in the Chinese market. The Guangzhou Intellectual Property Court’s recent favorable decision once again justified non-infringement of the products under the UNIQLO brand against the trademark-in-suit.
The key question, in this case, was whether the accused mark infringed the trademark-in-suit. According to Article 52.1 of the Chinese Trademark Law (as amended in 2001), using a mark that is the same or similar to a registered trademark on the same or similar category of goods without the permission of the trademark owner infringes the exclusive right to use the registered trademark. In order to rule whether Fast Retailing Company infringes Compass/Zhongwei Company’s registered trademark, the court needs to determine whether the accused mark is the same or similar to the trademark-in-suit.
In this case, the Guangzhou Intellectual Property Court did not find infringement of the trademark-in-suit. The main reasons are:
- in view of the general attention of the relevant public, the accused mark consists of two parts, the right part and the left part. The right part is composed of three vertically arranged English words “ULTRA LIGHT DOWN” which have clear pronunciation and meaning. Therefore, the accused mark and the trademark-in-suit are different in sound, shape, and meaning.
- Compass/Zhongwei Company did not actually use the trademark-in-suit. When Fast Retailing Company used the accused mark on the same category of goods, it used the accused mark with its well-known “UNIQLO” registered trademark, which would not cause likelihood of confusion. Consumers should have no issue identifying the source of goods.
Unlike the Guangzhou Intellectual Property Court’s decision in this case, the Shanghai High Court ((2015) Hu Gao Min San (Zhi) Zhong Zi No. 95) held that Fast Retailing Company infringed the trademark-in-suit. According to Article 10 of the Judicial Interpretation of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Cases of Civil Disputes over Trademarks, the principle in determining whether two marks are identical or similar should be based on the general attention of the relevant public, comparing the marks as a whole, as well as the primary elements of the marks. The comparison should be carried out against each mark in a separated and isolated state.
Accordingly, the Shanghai High Court did not consider the English words “ULTRA LIGHT DOWN” of the accused mark and ruled that: 1) When comparing the characters on the right side (referring to the English words “ULTRA LIGHT DOWN”), the characters on the left side of the accused mark (referring to “UL”) are significantly enlarged, deepened, and bold. For the general clothing consumers, the left part can be considered an independent mark. 2) When comparing the left part of the accused mark to the trademark-in-suit, the text and structure are the same except for a slight difference in the font’s weight. In the isolated state, from the general attention of relevant consumers for Category 25 clothing products under which the trademark-in-suit was registered, the overall visual effects of the accused mark and the trademark-in-suit are basically the same. 3) Fast Retailing Company contended that there was no likelihood of confusion because Compass/Zhongwei Company did not actually use the trademark-in-suit. However, such contention did not have any legal basis and therefore was overruled.
Nevertheless, the Shanghai High Court indicated that Compass/Zhongwei Company’s intention to register a large number of trademarks was to make profit by selling the trademarks instead of using them. Since Compass/Zhongwei Company did not actually use the trademark-in-suit, it should not suffer from any economic loss. Compass/Zhongwei Company filing a large number of trademark litigations against Fast Retailing Company was done in bad faith. Thus, the Shanghai High Court rejected Compass/Zhongwei Company’s claim on damages.
Despite the contrary decisions on trademark infringement, both the Guangzhou Intellectual Property Court and the Shanghai High Court declared that the trademark holders should enforce their rights in good faith. Although Fast Retailing Company successfully defended the trademark infringement litigation this time, it seems that neither the statutes nor the courts in China provided a consistent standard to reviewing issues regarding trademark infringement. Consequently, for international enterprises whose products may enter the Chinese market, it is imperative to build up relevant intellectual property portfolios in China as early as possible in order to avoid any unnecessary disputes and litigations.