News | China and Cross-Strait

 

In Landmark Ruling, China's Supreme People's Court Invalidates the Trademark "aopu 奧普"

 

Source: China Enterprise Intellectual Property

 

On August 2, 2017, The Supreme People’s Court of the People’s Republic of China ruled in favor of the trademark “奧普aupu.” In this ruling the trademark “奧普aopu,” which was registered prior to 奧普aopu,” would be invalidated.

 

1.Brief

  • Modern New Energy Co. Ltd. is the owner of the registered trademark "奧普aopu " under Trademark No. 1737521 (date of filing: 2001/03/27; date of publication: 2002/03/28; exclusive period: 2012/03/28 -2022/03/27) for the use in goods of Class 6, which includes metal towel racks, metal fixed towel dispensers, metal building materials, metal components used in furniture, metal locks (non-electronic), metal furniture fittings, metal accessories for use in windows, nails, safes and metal boxes.
  • Hangzhou Aupu Electronic Co., Ltd. is the owner of the following trademarks, all of which are wordmarks:


Trademark Name

Category

Registration No.

Filing

 Date

Registration Date

Exclusive Period

奧普

11

730979

1993/09/04

1995/02/21

2015/02/21-2025/02/20

奧普

11

1187759

1997/04/16

1998/06/28

2008/06/28-2018/06/27

AUPU

11

1803772

2004/04/23

2002/07/07

2012/07/07-2022/07/06

奧普

6

3338892

2002/10/17

2004/03/21

2014/03/21-2024/03/20

AUPU

6

4217092

2004/08/12

2006/12/21

2016/12/21-2026/12/20

 

Trademarks Nos. 1187759 and 1803772 were each granted to Hangzhou Aupu Bathroom and Kitchen Appliances Technology Co., Ltd. (Hereinafter referred to as Hangzhou Bathroom and Kitchen) as a part of a non-exclusive trademark license agreement. Hangzhou Aupu manufactures and sells buckles carrying the "AUPU奧普®" logo, which is stamped on the side of said buckles.

 

2.Reasoning on the First Instance Judgment 

 

The Court in the first instance ruled thusly: the alleged infringement existed where the metal buckle's protective film bearing thoroughly the logo "AUPU奧普". Although Hangzhou Aupu Bathroom and Kitchen manufactured the product with packaging that contained a separate translucent plastic cover, the "AUPU奧普" logo was still clearly visible on the product itself after said cover had been removed. Hangzhou Aupu Bathroom and Kitchen’s acts regarding the use of the "AUPU奧普®" trademark should be viewed as constituting trademark use. The trademark in dispute was approved for use in commodities belonging to a class which includes metal building materials. The accused infringing products were metal buckles, which belong to the category of metal building materials. 

The alleged infringement pertains to products belonging to the "metal building materials “category. The use of the trademark in dispute by Modern New Energy falls within the proper use of this class of goods. Hangzhou Aupu Bathroom and Kitchen, in manufacturing the metal buckles visibly marked with the "AUPU奧普" logo, when compared with the trademark in dispute, only the Chinese characters "奧普" are exactly the same whilst the English letters "AUPU" show a difference between a trademark in dispute as the English letters in said trademark are arrayed as "aopu," with only one Latin letter being different than the "AUPU” trademark. From calls to determine the function of the trademark, both are similar insofar as they contain the Chinese characters "奧普.” In terms of appearance of the characters, both AUPU奧普」andaopu奧普」possess such a degree of similarity that it could easily create confusion for the consumer. As such, according to Articles 9 and 10 of Judicial Interpretations of Civil Trademark Cases, the use of the "AUPU奧普" logo by Yangyan and Aupu Bathroom and Kitchen for their metal buckles constitutes an infringement of the trademark rights that had been granted to Modern New Energy.

 

Ø   The Court of the First Instance held that forward confusion and trademark similarity was at play. The Court first considered whether or not the allegedly-infringing trademark was used as a trademark. Then, the court took into account the category to which the trademark belonged. The Court maintained that the trademarks were similar in terms of both appearance and the category to which they belonged, to the effect that the use of the trademark in dispute could cause confusion in the market. However, the court did not take into account the evidence of actual confusion such as the degree of consumer’s attention. Thus the ruling issued by the Court of First Instance was in error. 


3.Second Instance Judgment
 

 

The court of second instance held that because Hangzhou Aupu Bathroom and Kitchen continued to manufacture and sell metal buckles stamped with the "AUPU奧普" trademark, which it knew to be similar to the allegedly-infringing trademark in appearance, Hangzhou Aupu's acts constitute a violation of Modern New Energy's exclusive rights of trademark. Of the two trademarks, Hangzhou Aupu Bathroom and Kitchen’s "奧普" registered trademark was more well-known and it was unlikely that consumers would mistake the buckles manufactured by Aupu Bathroom and Kitchen and sold by Yangyan to have been manufactured or sold by Modern New Energy. However, it was equally likely that metal buckles sold and manufactured by Modern New Energy would not be mistaken as having been manufactured or sold by Aupu Bathroom and Kitchen, nor is it likely that a consumer would hold the misconception that the aforementioned parties had any sort of business relationship. The above situation should result in disappearance of the trademark in dispute from the consumer's consciousness, or at least reduce the likelihood of the consumer being conscious of said trademark. This in turn hinders Modern New Energy's legal use of the trademark in dispute, thus harming Modern New Energy's legitimate interests.

 

Ø   The Court of the Second Instance ruled on the basis of "reverse confusion." The fame possessed by the electronic appliances sold by Hangzhou Aupu Bathroom and Kitchen with the "奧普" logo was quite high, while that of Modern New Energy with the registered trademark in dispute was quite low. Thus, Hangzhou Aupu Bathroom and Kitchen’s acts create confusion for the consumer regarding the source of the products in question as well as the relationship between the two. 

Ø   "Trademark confusion doctrine" and "trademark dilution doctrine" are two important concepts enumerated in PRC "Trademark Law." "Trademark confusion theory" includes measures aimed at combating "forward confusion" and "reverse confusion." The effort to combat "forward confusion" is done in order to prevent a junior user from obtaining and undue benefit from a senior user, whereas judicial efforts to combat "reverse confusion" are made in order to prevent a junior user from misappropriating the senior user's trademark in order to prevent the senior user from having his trademark and business reputation “overtaken” or “overwhelmed” by the junior user.


4.Judgment as result of  the Retrial: Opinion of the Supreme People's Court

     The court reasoned the basis for Modern New Energy’s claim on the rights in this case. The principle of proportionality and the encouragement of innovation serve as the basis for intellectual property protections in China. The principle of proportionality entails that the strength and protection scope of intellectual property must correspond proportionally to the contribution and innovation that said specific invention creates to society. The requirements of the aforementioned principle are met only when the strength and the scope of the protections is proportional to the innovation and contribution that the invention has to society. The degree of trademark protections must be proportional to the distinctiveness and fame of the mark deserves. The trademark which pertains to this case is composed of both Chinese characters and Latin letters, of which the Chinese characters “奧普are made up to be a man-created term carrying a large degree of distinctiveness . 奧普” is the same as the tradename used by Hangzhou Aupu Electronics Co. and Aupu Bathroom and Kitchen Appliance Co. are the same. 

The Court has found that “奥普” was first used in 1995 by an affiliated enterprise of Aupu Kitchen and Bathroom Appliance Co., and was approved as a registered trademark for goods of Class 11. In June of 2001, “奥普was recognized to be a famous trademark by Hangzhou City. Later on, “奥普” was recognized by Zhejiang Province to be a well-known tradename. The “奥普” series trademarks were then recognized by Zhejiang Province to be a famous trademark and was held by provincial judiciary system to be a well-known trademark. Thus, before the trademark in dispute had been applied for registration, it had already been in used by Hangzhou Aupu Electronics Company, Aupu Kitchen Appliance Company as well as affiliated enterprises. The “奥普 series of trademarks were well-known in electronics such as Yuba (a multifunctional heater), which was very related to products belonged to the “metal building materials” category that the trademark in dispute was approved to be used. In contrast, after Modern New Energy became in possession of the trademark in dispute, it mainly exploited its rights for the trademark in dispute primarily through licensing the same to Lingpu Corporation.  

However, what this case revealed was that Lingpu, in its use of the trademark in dispute, that it had misused or prominently displayed the letters “奥普” in its products was penalized by either SAIC or deemed as uncompetitive practices by the relevant judicial branch . Which competitor’s it was using fame was Aupu electronics Company who was already well-known in the market. Modern New Energy, which had a supervisory responsibility over Lingpu’s use of the trademark and also acted as joint plaintiff with Lingpu in a lawsuit over the trademark in dispute, was supposedly to be fully aware of Lingpu’s acts. Thus, Modern New Energy did not  submit supportive evidence for the case showing that it had in its correct and proper exercise of its trademark rights for the trademark in dispute to afford the trademark in dispute enough distinctiveness and fame protectable by the law.  

From this it can be seen that the characters "奧普" used in the allegedly-infringing trademark are actually well-known due to the acts of Aupu Kitchen Appliance as well as affiliated enterprises. Although the  registered trademark in dispute enjoys exclusive trademark rights for "metal building materials," the strength and scope of the protections afforded to the holder of said trademark should correlate with the contributions made by the holder made towards making the trademark more well-known or distinctive.  

Then, the next question is whether the use of allegedly infringing mark results in market confusion? According to the facts reviewed by the Court, from the standpoint of the senior user Hangzhou Aupu Electronic Appliance Co., in addition to “奥普” and “AUPU trademarks for bathroom appliances, which belong to Class 11, Hangzhou Aupu Electronics Co. for its “metal building plates and metal partitions,” which belong to Class 6, had the trademarks “1+N” and “1+N浴頂.” Hangzhou Aupu has also used the trademarks “1+N,” 1+N浴頂” and “浴頂” for its “bathroom fittings,” which fall under Class 11. Viewing the fact that all of the above registered trademarks were successfully registered on a date prior to which the alleged infringement occurred, Modern New Energy’s act of certified purchase of the allegedly-infringing products took place in one of the retail stores of Aupu Kitchen Appliance Co.’s dealer.  

The defendant prominently displayed both “奥普 and “1+N 浴頂” on the sign on its premises. From the standpoint of the products that contained the allegedly-infringing mark in relation to the use of the trademark in question, the packaging of the product on which the alleged infringement took place, aside from the description “product name: common buckle” which appeared on said packaging, said packaging also clearly displayed the name of Aupu Kitchen Appliance Co. in full as well as the trademarks “1+N浴頂” and “浴頂.” After said packaging had been opened, one could see that the sides of the buckle had the trademark “AUPU奧普®” as well as 1+N浴頂” and the name Aupu Kitchen Appliance Co. in full. From this it can be seen that location in which the allegedly-infringing product was sold and the official sales location of Aupu Kitchen Appliance Co. were one and the same. The aforementioned store prominently displayed the distinct portion of the company name as well as the name of the registered trademark.  

The packaging for the allegedly-infringing products is clearly marked with the full company name Aupu Kitchen and Bathroom Appliance Co. as well as the trademark "1+N浴頂," which had been registered for products in Class 6, owned by Hangzhou Aupu Electronics Co. Ltd. Thus, a consumer could easily tell the difference between the aforementioned trademark and the allegedly infringing trademark. This would not lead one to misidentify the aforementioned products as having been manufactured by Modern New Energy, nor would it result in the damaging of Modern New Energy's commercial reputation. It should be noted that what trademark law is to protect is a trademark’s function of allowing one to identify or differentiate between the source of goods or services rather than the trademark logo itself secured by an administrative act of registration.  

Therefore, the similarity of a trademark logo itself is not the decisive factor in determining whether or not infringement has occurred; if an action undertaken by any party does not inhibit any person or persons' ability to identify or distinguish between goods or services -and thus does not lead to confusion in the market - then such actions are not considered illegal with respect to trademark law. Accordingly, Aupu Bathroom and Kitchen Appliance’s use of the allegedly infringing mark did not constitute trademark infringement against the trademark in dispute. Thus, Yangyan's sale of the allegedly infringing products does not constitute trademark infringement. The Court thus concluded the first ruling was erred and ordered to remand.

 

Ø   Main Points of the Supreme People’s Court’s Judgement 

1. Trademark laws afford protections over a trademark’s function to identify or distinguish the source of a good or service, rather than to protect the trademark logo itself. Thus, similarity between trademarks was maintained not to be a decisive factor in determining trademark infringement. If an entity's actions did not inhibit the ability of any party to identify the source of a good or a service or to distinguish between goods or services, and if the actions on the part of any party do not lead to confusion in the market, then such actions are not considered to be illegal.

2. The principles of proportionality and the encouragement of innovation serve as the bases for intellectual property protections. The strength and scope of intellectual property protections should correlate with the innovativeness and level of contribution rendered through the use of a party's intellectual property rights. The standards for the principle of proportionality are met only where the scope and strength of protections for users is proportional to the innovative qualities of patent / trademark and the contribution said patent / trademark has to society, to the effect that it truly encourages creativity and innovation. Also, the strength of trademark protections should be proportional to a trademark's distinctiveness and fame. 

3. What the trademark law is to protect is the reputation bore by a mark, rather than the mark logo itself. Therefore, for the trademark infringement dispute of “trademark confusion” or “trademark dilution,” the decisive criteria are that if the commercial reputation of the given mark bears is damaged. As said, the strength and scope of protection to IP is in proportion to the degree of innovation and contribution of said specific IP right. Likewise, the scope of trademark protection is flexible that its level of protection correlates to its distinctiveness and fame deserved. In an infringement case of “trademark confusion,” similarity of marks is the necessary but not sufficient condition in determining constitution of an infringement. Only the likelihood of confusion serves to be both the necessary and sufficient condition.

 

The Supreme People’s Court indicated In its administrative verdict that the registration of "奧普aopu" is of malice intent. In the circumstance where "奧普aupu" was registered, there was a company named Qicai who registered a trademark which included the disputed "奧普." Afterwards Qicai changed its company name and used the Chinese characters "奧普" in the distinctive portion of its name. At the same time, it changed the scope of its business and began selling and manufacturing bath accessories, towel racks and bathroom fittings which were related to Yuba products. The court stated that "it can be seen that in filing for the registration of the now disputed trademark, changing the name of its business and then the scope of its business, Qicai's actions were part of a concerted strategy to hoard the "奧普" -related resources so as to misappropriate of the reputation hitherto enjoyed by products under the Hangzhou Aupu’s cited trademark."  

In November of 2009, Hangzhou applied to the Trademark Review & Adjudication Board (TRAB) for the invalidation of the trademark "奧普aopu." In July of 2015, after six years of examination, the TRAB decided that Hangzhou Aupu's "奧普aupu" trademark was a well-known trademark, but due to insufficient evidence, that the disputed trademark had been registered for over 5 years lapsing the timeframe for initiating dispute resolution mechanism, and that the disputed trademark had been approved for the goods in category of metal building materials which was not similar to the cited trademark and was thus considered unlikely to cause confusion in the market. As explained, the disputed trademark had co-existed with Hangzhou Aupu's trademark for 13-year and did not cause any instability in the market. Thus, the TRAB ruled to maintain the registration of the disputed trademark "奧普aopu".  

Hangzhou Aupu did not disagreed with appeal the ruling, and thus filed its own administrative lawsuit to the Beijing IP court. In June of 2016, the Beijing IP court determined that Hangzhou Aupu's "奧普aupu" trademark was a well-known trademark and that the registration of "奧普aopu" trademark was malicious.  Hence the normal 5-year window for protecting the allegedly-infringed trademark did not apply. Also, there is a strong correlation which exists between Class 6 products for “metal building materials” and the Yuba products which bear famous trademarks . The disputed trademark and the use therefore is likely to cause confusion in the market as well as misidentification, and further compromise market instability. Given the above situation, TRAB's decision is vacated. On March 2, 2017, the Beijing Higher People's Court dismissed New Modern Energy’s appeal, and thus upholding the Beijing IP Court's decision. 

Subsequently, Yunan Aopu and Modern New Energy appealed the verdict to the Supreme People's Court, which dismiss the request for retrial. By this time, the controversy over the "奧普" trademark had raged for 7 years had finally concluded. The Court's ruling will deter future instances of free-riding, while also encouraging businesses to be more proactive in safeguarding their rights. It is possible to fight back against infringement via administrative means or through legal actions as this will not only cause the infringers to cease his or her infringing actions, but more importantly, allow one to claim damages. Regarding free-riding by registering a trademark, it is possible to file an invalidation or objection against said free-rider in order to prevent the free-rider from registering the trademark.


 

for any questions relating to this topic, please contact us at cjchen@tsailee.com.tw 

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