How to Settle Conflicts on Commercial Marks of Time-honored Brands–Review on a Dispute over Unfair Competition (Nanjing Wuliangcai Glasses Co., Ltd v. Shanghai Sanlian (Group) Co., Ltd)

May 23, 2018     China Intellectual Property News    Page 09

Fan Jingbo, Chen Yunzhi

[Case No.]

(2015) Huang Pu Min San (Zhi) Chu Zi No.157

(2017) Hu 73 Min Zhong No.246

[Judgment Summary]

When it comes to conflicts oncommercial marks with specialhistorical backgrounds, it's necessary to review their historical origins and development, and also to take into account the status quo and current market pattern so as to make a fair judgment, and reasonably determine the way and scope of using the commercial marks involved by each party.

[Case Review]

In 1807, Wuliangcai changed "Chengmingzhai Jewelry and Jade Store"which was founded in Shanghai in 1719 and also engaged in glasses business into Wuliangcai Glasses Store, a specialized glasses store. Later it was renamed as Wuliangcai Glasses Company in 1926, and then renamed as Shanghai Sanlian (Group) Wuliangcai Glasses Company in October 1998. Nanjing Wuliangcai Glasses Co., Ltd, Nanjing Branch of Wuliangcai Glasses Company,was set upin 1947. However, due to historical reasons, Nanjing Wuliangcai Glasses Co., Ltd and Shanghai Wuliangcai Company are not related to each other anymore. Since 1989, Shanghai Sanlian (Group) Co., Ltd (hereinafter referred to as "Sanlian Group") and Shanghai Wuliangcai Company have registered several word marks of "Wuliangcai", which have already gained a high reputation through long-term use and were recognized as well-known trademarks in 2004. From 2004 to 2015, Nanjing Wuliangcai Company developed a large number of franchise stores nationwide, authorizing its branches and franchisees to use the enterprise name and the word markscontaining"Wuliangcai" during registration and operation and also conducting group buying activities on dianping.com. In its publicity, Nanjing Wuliangcai Company said it was developedfrom the Nanjing Branch of Shanghai Wuliangcai Company. Believing that the above-mentioned acts of Nanjing Wuliangcai Company constituted unfair competition by trademark infringement and false advertising, Sanlian Group and Shanghai Wuliangcai Company sued to court, requesting the defendant to stop the infringement, eliminate the ill effects and compensate for their losses and reasonable expenses.  

Huangpu District People's Court of Shanghai held that historically speaking, the enterprise name of Nanjing Wuliangcai Company was registered earlier than the registered trademarks of Shanghai Wuliangcai Company wereobtained and recognized as well-known trademarks. So, objectively speaking, the assumption that Nanjing Wuliangcai Company took advantage of the goodwill of Shanghai Wuliangcai Company is invalid. However, in the absence of evidence proving that the popularityand influence of its enterprise name had gone beyond the jurisdiction scope of the registration authority, Nanjing Wuliangcai Company's act of setting up unincorporated branches with enterprise names containing "Wuliangcai" was likely to cause confusion among the relevant public about the market entity of "Wuliangcai" products and the source of the goods and services, thus impairing the function of identificationof the registered trademark "Wuliangcai". In view of this, the court of first instance ruled that Nanjing Wuliangcai Company should stop the trademark infringement and unfair competition, ask its branches to cease registering and using enterprise names that contain "Wuliangcai" outside Nanjing, Jiangsu Province immediately, eliminate the ill effects and compensate for the plaintiffs' economic losses totaling RMB 2.6 million yuan. Refusing to accept the ruling, Nanjing Wuliangcai Company filed an appeal. Shanghai Intellectual Property Court dismissed the appeal and upheld the original judgment.

[Case Study]

The case involves a dispute over relevant commercial marks arising during the inheritance and development of the time-honoured brand "Wuliangcai".Given its extremely complex historical background, it's necessary to take into consideration various factors including"history, status quo, and fairness" to properly deal with the conflict of commercial marks emergingin a specific historical context.

First of all, from the perspective of development history, Nanjing Wuliangcai Company does have roots in the Wuliangcai glasses company in history. Its enterprise name containing "Wuliangcai" was registered earlier than the trademark involved was registered. So the court ruled that the act of registering enterprise name containing "Wuliangcai" didn't constitute unfair competition. 

Secondly, seen from the current situation, although the word "Wuliangcai" originated from "Wuliangcai Glasses Store" in history, the goodwill of the trademarkobviously owes it all to the continuous innovation and management of Shanghai Wuliangcai Company since it registered the trademark in 1989. Therefore, in the mind of the relevant public, the word mark "Wuliangcai" has established a stable correspondence to Shanghai Wuliangcai Company, and the goodwill carried by the trademark should be protected.

Thirdly, from the perspective of fairness, although Nanjing Wuliangcai Company and Shanghai Wuliangcai Company both have roots in the Wuliangcai Glasses Company in history, they are not related to each other. Consideringthe fact that the "Wuliangcai" trademark of Shanghai Wuliangcai Company enjoysa high reputation and has beenrecognized as a well-known trademark, while Nanjing Wuliangcai Company remains relatively unknown across the country, its act of developing numerous franchise stores nationwide, authorizing them to use "Wuliangcai" and declaring that it was developed fromNanjing Branch of Shanghai Wuliangcai Company implies its subjective intention to take advantage of the goodwill of Shanghai Wuliangcai Company, highly likely to mislead relevant consumers. In order to prevent such confusion among the consumers and to protect the interests of the trademark owner, it's necessary to restrict the scope of use of its enterprise name properly.

When handling this case, the court didn't make judgment simply based on logical reasoning, but also took full account of the history and development of relevant facts, traced the historical origin and the evolution of "Wuliangcai" as a time-honoured trademark and meanwhile considered the status quo as well asthe current market pattern. It restricted the geographical scope of use of its enterprise name by Nanjing Wuliangcai Company and stopped the company's unfair competition in business activities with consideration of the "history, status quo, fairness" and other factors. Such judgment not only safeguards Nanjing Wuliangcai Company's right of prior use of "Wuliangcai", but also effectively prevents it from gaining advantagefrom the popularity of the registered trademark of Shanghai Wuliangcai Company - "Wuliangcai". It's fair and reasonable to both the parties to maintain the present situation while enforcing proper restriction. It can also help maintain the status quo of the market. The court’s decision representsa typical application of the historical method, and the conflict of the commercial mark left over by history has been settled properly.

(Author’s Unit: Shanghai Intellectual Property Court)