China

GUANGZHOU STAR RIVER INDUSTRY DEVELOPMENT CO., LTD. AND GUANGZHOU HONGFU REAL ESTATE CO., LTD. V. JIANGSU WEIFU GROUP CONSTRUCTION & DEVELOPMENT CO., LTD. (2013) MTZ No. 102, SPC

Cause of action: Dispute over infringement of a trademark right and unfair competition

Collegial panel members: Wang Chuang | Wang Yanfang | Zhu Li

Keywords: enterprise name, name of real estate property, prior use, trademark infringement, unfair competition

Relevant legal provisions: Trademark Law of the People’s Republic of China (as amended in 2001), article 51 Interpretation of the Supreme People’s Court Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks, articles 9, 10 and 21

Basic facts: In the dispute over trademark infringement and unfair competition between appellants Guangzhou Star River Industry Development Co., Ltd. (hereinafter “Star River Company”) and Guangzhou Hongfu Real Estate Co., Ltd. (hereinafter “Hongfu Company”) and respondent Jiangsu Weifu Group Construction & Development Co., Ltd. (hereinafter “Weifu Company”), the combined mark, Trademark Nos. 1946396 and 1948763 (as illustrated) – authorized for use in relation to services falling into Class 36 of the International Classification of Goods and Services for the Purposes of the Registration of Marks (hereinafter the “Nice Classification”) (apartment rental and apartment management and other services) – was registered based on an application by Hongfu Company, and later successively transferred first to Hongyu Group (Hong Kong) Co., Ltd. (hereinafter “Hongyu Company”), a party not involved in the case, and then to Star River Company.

Hongfu Company was licensed to use the two registered trademarks and was entitled to file in its own name a suit alleging infringement. Hongfu Company and its affiliates successfully developed property projects bearing the name “Star River” in Guangzhou, Beijing, Shanghaiand other places. The fact that Hongyu Group and Star River Company won many awards for their work boosted the profile of “Star River” properties.

Since 2000, Weifu Company had successfully launched several real estate projects, including “Star River Garden”, “Star Garden” and “Star View Garden” in Nantong City, Jiangsu Province, and all such names had been submitted to the Nantong Municipal Bureau of Civil Affairs for approval. Star River Company and Hongfu Company initiated legal proceedings on the grounds that use of the phrase “Star River” in Weifu Company’s real estate projects infringed on their registered trademark right and constituted unfair competition.

At first instance, the Intermediate People’s Court of Nantong, Jiangsu, held that Weifu Company’s use of “Star River Garden” as the name of its real estate property development did not cause confusion among consumers about the source of that property and therefore did not constitute trademark infringement. Hongfu Company’s “Star River” real estate property development did enjoy a high profile in Guangzhou City, but Weifu Company had long been using the name legitimately. Weifu showed no subjective intention of profiting from the name by free-riding on Hongfu Company’s reputation nor was there, objectively speaking, any possibility of consumer confusion over the name; hence Weifu Company’s action, in using such a name, did not constitute unfair competition. The first-instance court rejected the claims filed by Star River Company and Hongfu Company.

Star River Company and Hongfu Company subsequently appealed to the Higher People’s Court of Jiangsu, which affirmed the first-instance judgment. Dissatisfied with the decisions at first and second instance, Star River Company and Hongfu Company lodged an appeal with the Supreme People’s Court.

Held: On February 26, 2015, the Supreme People’s Court delivered a civil judgment in which it overturned the decisions of the courts at first and second instance, and ordered Weifu Company not to use “Star River” as the name for any real estate property not yet sold or yet to be developed, and to pay Star River Company and Hongfu Company damages for economic losses in the amount of RMB50,000.

Reasoning: With respect to the question of whether Weifu Company’s use, as the name of a real estate property, of the trademark over which Star River Company and Hongfu Company enjoyed the exclusive right constituted an infringement of that right, the Supreme People’s Court affirmed that article 50(1) of the Implementing Rules of 2002 of the Trademark Law of the People’s Republic of China prescribes that “the use of a sign which is identical or similar to another person’s registered trademark on the same or similar goods as the name or decoration of the goods, thus misleading the public”, shall constitute an infringement upon the exclusive right to use a registered trademark provided for under article 52(5) of the Trademark Law of the People’s Republic of China. In this case, Star River Company owned the exclusive right to use registered Trademark Nos. 1946396 and 1948763, which were approved for use, respectively, in relation to Class 36 services (including real estate rental and real estate agency) and Class 37 services (including construction, interior decoration and maintenance); Weifu Company had used such a name for its commodity housing.

With respect to the question of whether commodity housing (as goods) and real estate construction (as a service) are similar, pursuant to provisions in article 11(3) of the Interpretation of the Supreme People’s Court Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks, “similarity between goods and services” shall mean that there is a specific link between the goods and the services such that the relevant public may be easily confused. Service categories approved for the two registered trademarks involved in this case were real estate management and construction. When compared to the sale of commodity housing, the Court found the two to be similar in terms of function, purpose, consumers targeted and sales channels, among other things, and noted that both companies were real estate developers. Given this specific link between “real estate management and construction” and “the sale of commodity housing”, the Court affirmed a similarity between the former (as a service) and the latter (as goods).

With respect to the question of whether the use of “Star River Garden” as a name would be likely to mislead the public, the Court examined the facts established by the court at first instance. Hongfu Company and its related business units had promoted “Star River” real estate in Nanfang Daily, Yangcheng Evening News and related media since 2001, and properties with the name “Star River” had won relevant awards, fueling a high public profile; the phrase “Star River” was therefore a most distinctive and well-known component of the registered trademark at issue. Weifu Company named its real estate properties “Star River Garden”, which in fact played a role in identifying such property and essentially belonged to a specific type of business marks. The word “Garden” in such a mark was a general term for the name of the property, but the most distinctive element was the phrase “Star River” – a phrase that was identical in both writing and pronunciation to the distinctive element “Star River” in the two trademarks registered by Star River Company and Hongfu Company. Furthermore, because information now flows richly and easily within a modern society, it would not be uncommon to see real estate businesses develop a series of properties nationwide under such a name, and if Weifu Company were to perpetuate such use, it would cause confusion, misleading the relevant public to believe that such property was somehow linked with the “Star River” series of properties developed by Star River Company and Hongfu Company. On this basis, the Court found that Weifu Company’s use of the mark “Star River Garden” as the name of its property, which was similar to the trademark “Star River” over which Star River Company and Hongfu Company enjoyed an exclusive right of use, had caused confusion and misunderstanding among the public. Such use did constitute an infringement on the registered trademarks of Star River Company and Hongfu Company, and Weifu Company was to bear corresponding civil liability. The judgment at first instance that the use of “Star River” as only a name for real estate property could not cause confusion among the public about the source of the development was incorrect and the Supreme People’s Court overturned that finding.

With respect to the question of whether Weifu Company’s use of the name constituted an unauthorized use of another enterprise’s name, the Supreme People’s Court held that, based on facts established by the court at first instance, Star River Company (formerly Guangzhou Minyu Wood Co., Ltd.) adopted its current name in August 2007. Weifu Company was able to demonstrate an established custom of naming its properties using the word “Star” that dated back to 2000.

On May 15, 2006, for example, Weifu Company had applied to Nantong Municipal Bureau of Civil Affairs for permission to name a residential community “Weifu Star River” on the basis that “Star” had been the first word in its existing “Star Garden” and “Star View Garden” properties, and that “River” was meant to refer to the two rivers running through the new community. On May 25, 2006, Nantong Municipal Bureau of Civil Affairs granted Weifu Company approval to use the name “Star River Garden”. This use pre-dated Star River Company’s use of the phrase “Star River” as its name and hence the Supreme People’s Court held that Weifu Company had not committed unauthorized use of another enterprise’s name.