(By Luo Yanjie) Abstract: In the event that a party unknowingly sells goods that infringe upon another party’s exclusive right to use a registered trademark but can prove that it has obtained the goods lawfully and is able to identify the supplier shall not be held liable for damages. In a case that a trademark holder separately sues sellers, despite no laws requesting the manufacturers to join in the lawsuit, for the purpose of preventing contradictory judgment, the courts could notify him or her requesting joinder. It is the manufacturers that could decide whether acting as a third party to join the lawsuit.
In our previous posts Why Did the Supreme People’s Court Changed Its Attitude towards Revoking Trademarks When It is Unused for 3 Years and Why Couldn’t the Right Holder of the “CASTEL” Trademark Not Prevent Another from Registering the Same as an Enterprise Name, we’ve already taken many introduction to the disputes of “CASTAL” trademark. Today, we would like to introduce a related case to “CASTEL” trademark for our readers.
Introduction to the Case:
Plaintiff: Panati Wine (Shanghai) Co., Ltd
1st Defendant: Wal-Mart Supercenter
2nd Defendant: Wal-Mart Supercenter Weifang Branch (the “Weifang Wal-Mart Supercenter”)
Court of first instance: Weifang Intermediate People’s Court No.: (2010)潍知初字第305号
Court of second instance: Shandong Province Higher People’s Court No.: (2012)鲁民三终字第121号
Mr. Li Daozhi registered the number 1392099 “卡斯特” trademark (read a “Ka Si Te” in Mandarin; similar to the phonetic pronunciation of CASTEL in Chinese) in China under Class 33 for wine in 2000. After then, Mr. Li Daozhi authorized Panati Wine (Shanghai) Co., Ltd to use his trademark and claim for its legal protection in the name of Panati Wine (Shanghai) Co., Ltd.
After found that Weifang Wal-Mart Supercenter sold some wine labeled and packaged with the Chinese characters “法国卡斯特” (similar to “French Castel” in English) and used the “卡斯特” trademark (hereinafter the “disputed trademark”) on the invoice, Panati Wine (Shanghai) Co., Ltd brought Wal-Mart Supercenter and Weifang Wal-Mart Supercenter to the courts, on the ground that the two defendants infringed its exclusive right of the disputed trademark, requesting the two defendants to assume infringement liability.
Wal-Mart Supercenter argued that it shall not assume compensation liability on the grounds that it unknowingly sells products that infringe upon another party’s exclusive right to use a registered trademark and could prove that the products are able to identify the supplier and also have obtained the goods lawfully.
The courts heard the case and decided that
First, the accused products and its packages labeled with “法国卡斯特” (meaning “French Castel”) are likely to lead relevant consumers into thinking that the accused products and the disputed trademark are associated with each other and cause confusion. Therefore, the accused products sold by Wal-Mart Supercenter infringed the exclusive right to the use of the dispute trademark and shall be ordered to cease the infringement liability.
Second, Wal-Mart Supercenter has already provided a complete chain of evidences so as to prove the Weifang Tianyi Economic and Trading Co., Ltd to be the identified supplier. As such, Wal-Mart Supercenter has sold the accused products without subjective faults. Therefore, the court rejected the claim of Panati Wine (Shanghai) Co., Ltd that requires the two defendants to compensate its losses.
1. Selling products of kindness that infringes upon another party’s trademark shall not be undertaken compensation liability.
Paragraph 3, Article 56 of the Trademark Law stipulates that In the event that a party unknowingly sells goods that infringe upon another party’s exclusive right to use a registered trademark but can prove that it has obtained the goods lawfully and is able to identify the supplier shall not be held liable for damages. Pursuant to this article, sellers would be undertaken compensation liability under the condition of subjective intention. In other words, in case that the trademark holder could not prove the sellers to be knowingly sold infringed products, if sellers could able to identify the supplier from the legally actual purchase receipt or contracts, the seller could exempt from its compensation liability.
In this case, the court decided the purchase contracts and receipts provided by Wal-Mart Supercenter in line with the element of legal acquisition and determined Wal-Mart Supercenter shall not undertake compensation liability. What shall be noted, the court clearly expressed that in the event that Wal-Mart Supercenter had not held the customs declarations or inspection certificate shall be considered not to fulfil its examination obligation.
2. In the preceding of suing sellers, the court should consider to notify the manufacturers to join in the lawsuit.
Article 52 of the Trademark Law stipulates that any of the following conducts shall constitute an infringement of the exclusive right to use a registered trademark: (2) Selling goods that violate the exclusive right to use a registered trademark. Therefore, selling goods that infringe upon another party’s trademark could be constituted a separately infringement. The right holders could utilize this article to institute a litigation in suing both sellers and manufacturers.
In practice, the empowerment of such right would also be abused by the trademark holders. In our previous post Why Couldn’t the Right Holder of the “CASTEL” Trademark Not Prevent Another from Registering the Same as an Enterprise Name, we noted that there are many disputes among the manufacturers that produces infringed goods, the trademark holder and the licensee regarding whether the goods produced by the manufacturers constitute infringement. However, in the preceding of separately suing sellers, by virtue of the afore-mentioned article, sellers would not make too many defenses of infringement and thus are likely to lead the court into judgment of trademark infringement in similar cases. It is undoubtedly unfair to manufacturers.
This is a defect in law enforcement. Therefore, we are suggesting that, in such similar cases, despite no laws requesting manufacturers to join in the litigation, for the purpose of avoiding contradictory judgment, the courts may notify manufacturers requesting joinder. It is the manufacturers that could decide whether acting as a third party to join the lawsuit.