K.D.F. Distribution (Shanghai) Co., Ltd. vs. Aquatherm Pipe System (Shanghai) Co., Ltd. for Appeal of Dispute over Infringement of Trademark Ownership and False Propaganda

Basic facts

K.D.F. Distribution (Shanghai) Co., Ltd. (K.D.F. Distribution), the trademark owner of the “洁水(Jieshui)” word mark, had the exclusive right to sell the water pipe products of Germany Aquatherm GmbH, an outsider of the case, in China before July 1, 2013. After that date, with the ending of the cooperation agreement between K.D.F. Distribution and Aquatherm GmbH, Aquatherm Pipe System (Shanghai) Co., Ltd. became the new agent in China for selling the products of Aquatherm GmbH. The “洁水(Jieshui)” trademark registered by K.D.F. Distribution before July 1, 2013 was only for promoting and selling the products of Aquatherm GmbH. K.D.F. Distribution was still the holder of “洁水 (Jieshui)” trademark after that date and applied it in the promotion of other manufacturers’ pipe products. As for Aquatherm Pipe System (Shanghai) Co., Ltd., it authorized Ousu Company as the exclusive agent in Shanghai to sell the products of Aquatherm GmbH. Both Aquatherm Pipe System (Shanghai) Co., Ltd and Ousu Company adopted propaganda slogans such as “Previous German Jieshui and Now German Aquatherm” and “German Aquatherm (Previous German Jieshui) – Unchanged Quality”, as well as statements such as “previous agent once used German ‘Jieshui’ in promotion in China. The German manufacturer officially has adopted the Chinese mark ‘阔盛’ in the promotion in China market since July 1”, “the previous Chinese trademark ‘洁水(Jieshui’ used in China is held by the previous agent and has no connection with German Aquatherm and Aquatherm GmbH now”. K.D.F. Distribution held that the act that both Aquatherm Pipe System (Shanghai) Co., Ltd and Aquatherm GmbH had adopted the aforesaid propaganda slogans constituted the infringement of trademark ownership and false propaganda. So K.D.F. Distribution requested the court to rule that the two defendants should stop the act and compensate economic losses and reasonable cost totaling RMB 5 million.

 

Results of judgment

All K.D.F. Distribution’s claims were rejected in the first trial by the People’s Court of Xuhui District. The company refused to accept the judgment and then instituted an appeal. Shanghai Intellectual Property Court held after the second trial that as it was the fact that the “洁水(Jieshui)” trademark was once used by K.D.F. Distribution for promoting the products of Aquatherm GmbH, both Aquatherm Pipe System (Shanghai) Co., Ltd. and Ousu Company had to inform the customers that the products pointed out by the “洁水(Jieshui)” trademark were changed. Subjectively the two companies used the “洁水(Jieshui” trademark in good faith while the way of use was not beyond the reasonable limits, which would not lead to the confusion of customers for the source of products. So the acts of both companies were fair use of the trademark. In addition, the expression of the propaganda slogans of both Aquatherm Pipe System (Shanghai) Co., Ltd and Ousu Company was not completely correct, but it did not trigger the effect of misleading customers, so these propaganda slogans did not fall into the false propaganda in the sense of anti-unfair competition law. The court rejected the appeal and affirmed the original judgment.

Typical significance

This case was about the standards to identify the fair use of trademarks and false propagandas. From the perspectives of the subjective intention, way of use and the likelihood of confusion, the trial court viewed the accused acts fell into the fair use. For the identification of the accused false propaganda, the court emphasized the interpretation of the propaganda slogans as a whole and carried the comprehensive identification via the combination of the factors such as the general attention and the existing cognitive experience of the relevant public. Therefore the judgment of this case possessed some referential significance in the trial of similar cases.



 

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