WANG SUIYONG V. ELLASSAY (2014) MTZ No. 24, SPC
Cause of action:
Dispute over a
trademark infringement
Collegial panel members:
Wang Yanfang | Zhu Li | Tong Shu
Keywords: abuse of rights, good faith, trademark, trademark
infringement
Relevant legal provisions: Civil Procedure Law of the People’s Republic
of China (as amended in 2012), article 13; Trademark Law of the People’s
Republic of China (as amended in 2001), article 52
Basic facts: Shenzhen Ellassay Garment Industrial
Co., Ltd. was founded on June 8, 1999. On December 18, 2008, the company
acquired Trademark No. 1348583 “歌力思” by way of transfer, which trademark was
approved for use on clothing products under Class 25 of the International
Classification of Goods and Services for the Purposes of the Registration of
Marks (hereinafter the “Nice Classification”) and had been approved for
registration in December 1999. On November 19, 2009, the trademark registration
was valid from December 28, 2009, to December 27, 2019. At the same time,
Shenzhen Ellassay Garment Industrial Co., Ltd. registered
Trademark No. 4225104“ELLASSAY”, which was approved for use on Class
18 commodities – that is, (animal) leather, wallets, travelling bags and
folders (leather products); leather belts, fur, umbrellas, walking sticks and shopping
bags – and valid from April 14, 2008, to April 13, 2018. On November 4, 2011,
Shenzhen Ellassay Garment Industrial Co., Ltd. changed
its name to Shenzhen Ellassay Fashion Co., Ltd. (hereinafter
“Ellassay”, the defendant in the first-instance
case). On March 1, 2012, the registrant of the trademark“歌力思” was accordingly updated to Ellassay under its new name. Wang Suiyong,
the plaintiff in the first instance case, registered Trademark No. 7925873 “歌力思”, which was approved in June 2011 for use
on commodities such as wallets and handbags under Class 18 of the Nice Classification.
Wang Suiyong had also applied to register Trademark No. 4157840 “歌力思/graphic” on July 7, 2004. In the second-instance
case on April 2, 2014, the Beijing Higher People’s Court affirmed that this
latter trademark infringed upon the prior trade name of Ellassay’s
affiliate Ellassay Investment Management Co., Ltd.
and hence did not
approve the
registration.
Since September 2011, Wang Suiyong had been buying leather bags with tags bearing “Chinese Brand Name: 歌力思, English Brand Name: ELLASSAY” at Ellassay
counters in Hangzhou, Nanjing, Shanghai and Fuzhou, through notarial procedures.
On March 7, 2012, Wang Suiyong filed an action
claiming that Ellassay and Intime
Department Store (Group) Company Limited (hereinafter “In time Department Store”) had infringed upon the trademarks “歌力思” and“歌力思/graphic” by producing and selling these leather
bags.
Held: On February 1, 2013, the Hangzhou Intermediate People’s
Court rendered its civil judgment ((2012) ZHZCZ No. 362), holding that Ellassay’s and Intime Department
Store’s production and sales of the disputed commodities infringed upon Wang Suiyong’s right to the registered trademark, and
ruled that Ellassay and Intime
Department Store should stop the infringement, compensate Wang Suiyong RMB100,000 or economic losses and reasonable expenses,
and mitigate the impact of such infringement. Dissatisfied with the decision, Ellassay lodged an appeal. On June 7, 2013, the Zhejiang
Higher People’s Court passed a civil judgment ((2013) ZZZZ No. 222) dismissing
the appeal and affirming the first-instance decision. Thereafter, Ellassay and Wang Suiyong respectively
applied for permission to appeal to the Supreme People’s Court. The Supreme
People’s Court granted permission and passed its
judgment on August 14, 2014, overturning the first-instance and second-instance
judgments, and dismissing all claims by Wang Suiyong.
Reasoning: The Supreme People’s Court opined that good
faith is a basic principle with which all market players should comply. On the
one hand, it encourages people to accumulate social wealth and supports the
creation of social value through honest work, and it protects property
interests formed on this basis, as well as the freedom and right to dispose of
these interests for proper and legitimate purposes. On the other hand, it also
requires people to be honest and faithful in market activities, and to seek
interests without prejudicing others’ legitimate interests, public benefits and
market position. The principle of good faith should also be followed in civil
proceedings. While it safeguards the parties’ rights
to exercise and dispose of their civil and procedural rights to the extent
permitted by law, it requires that the parties exercise their rights in good
faith and with due care without harming others’ and public interests. Any malicious
acquisition or exercise of rights that disrupts fair market competition and
which goes against the letter and the spirit of the law, with the intention of
damaging others’ legitimate interests, is an abuse of rights and related claims
brought in those circumstances shall not be protected or supported by law. Registration
of Trademark No. 4157840 “歌力思/graphic” had not yet been approved at the time of
the claim; hence Wang Suiyong had no right to use it
as a basis for suing others for trademark infringement. But did Ellassay and In time Department
Store infringe upon Wang Suiyong’s Trademark No.
7925873“歌力思”? The Court found as follows.
First, Ellassay
owns the legitimate existing prior rights to the trademark. Ellassay
and its affiliates had used “ELLASSAY” as a trade name as early as 1996 and
obtained the registered trademark “ELLASSAY” on commodities such as garments in 1999.
As a result of long-term use and extensive publicity, “ELLASSAY” now enjoys high visibility in the market
as Ellassay’s trade nameand
registered trademark. Thus Ellassay owns the existing
prior rights to the trademark “ELLASSAY”.
Secondly, Ellassay’s
use in this case was based on legitimate rights, and both its methods of use
and the nature of that use are legitimate. In terms of venue of sales, Ellassay’s allegedly infringing products were displayed and sold
at Ellassay counters within Intime
Department Store, and the counters clearly indicated the provider of the
allegedly infringing products by displaying Ellassay’s trademark “ELLASSAY”. Given that Ellassay’s business marks, including its trade name and trademark,
are highly visible in the market and that Wang Suiyong
failed to prove that the mark “歌力思” enjoys the same level of visibility, Ellassay’s sales of allegedly infringing products at
its counters were unlikely to lead ordinary consumers to falsely believe that these
products were supplied by Wang Suiyong. In terms of Ellassay’s specific methods of use, the trademark “ELLASSAY” was marked both on conspicuous areas of
the packaging and inside the allegedly infringing products, and only the
characters“品牌中文名 (Chinese Brand Name)：歌力思” were printed on the product tags.Because “歌力思” is Ellassay’s trade name and is used as the substitute for the
trademark “ELLASSAY”, there is nothing obviously wrong with Ellassay using the Chinese characters 歌力思 on the tags of the allegedly infringing
products to indicate the product manufacturer. It did not intend to attach
itself to Wang Suiyong’s trademark “歌力思” and the label would not prevent ordinary
consumers from differentiating the correct source of the allegedly infringing products.
On this basis, Intime Department Store’s sales of the allegedly infringing products is not prohibited
under law.
Finally, Wang Suiyong’s obtaining of the trademark “歌力思” and exercising of the trademark right was
neither justifiable nor appropriate. The trademark “歌力思” comprises the Chinese
characters 歌力思, which are exactly the same as the
Chinese characters of the trade name first used by Ellassay
and in the earlier registered trademark “ELLASSAY”. 歌力思 is an invented phrase
without any intrinsic meaning, but with a considerable degree of
distinctiveness. Common sense dictates that it is unlikely that a company will
register the exact same trademark by coincidence without seeing or knowing of
the prior existing one. As a business operating in a similar area and with a
similar business scope, it is even less likely that Wang Suiyong
did not know about the existing trade name and trademark “ELLASSAY”. In such circumstances, it is difficult
to say that it would be appropriate for Wang Suiyong
to apply for the registration of a trademark “歌力思” on handbags and wallets, among other
things.
Accordingly, the Supreme People’s Court found that Wang Suiyong’s claim against Ellassay’s fair use of a trademark that Wang Suiyang
had acquired maliciously constituted an abuse of rights.