How to Determine the Recognition Level of Products in Unfair Competition Disputes in China, II

金莎vs费雷罗Comments on the unfair competition case between Ferrero and Jinsha

Today, we will share our opinions on the following issues related to the case introduced in yesterday’s post: the scope of name recognition, whether a product’s packaging can refer to the products of others, and protection over product packaging through the use of trademarks.

Lawyer comments:

The interpretations of the judges in the first and second instance courts and the review court help us better understand the following issues involved in unfair competition cases:

(1) The territory of the of the well-known product

On this issue, the understanding of the three courts was varied and repeated. The first instance court held that only the level of recognition within China is to be considered, while the second instance court held that the level of recognition both in China and overseas is to be considered. Finally, the Supreme People’s Court held that the level of recognition in China is the main consideration but that appropriate consideration of the level of recognition overseas is not to be excluded.

With regard to when appropriate consideration of the level of recognition overseas is not to be excluded, the following describes the writer’s experience. If the name or packaging of the product involved in the case was first adopted in a similar culture overseas, (for example, if the Ferrero Chocolate in the case had been called Jinsha Chocolate (金莎巧克力) in Hong Kong and Taiwan), and the domestic imitator used the territorial limit of trademark protection to maliciously copy the name, packaging, or other obvious marking of the well-known overseas product, then the level of recognition overseas must enter the scope of the examination and evaluation. This is mainly because, under such circumstances, it is hard for the domestic imitator to avoid suspicion of free riding on the reputation accumulated overseas.

(2) Can products use others’ packaging as a reference?

With regard to referencing the packaging of others, the Supreme People’s Court held that to make reference to others’ packaging is, in practice, quite common and should not be prohibited. But, the reference must be able to differentiate the different origins of the product. Where a product completely copies the packaging or decoration of another in the same class of products, it is suspected of unfair competition and is banned by the law.

In the case, the Supreme People’s Court decided that the foil and the transparent container used with the chocolates could be included in the general elements, and any other operators could use them for reference. However, the Supreme People’s Court also clarified that the design of the foil and containers also had great creativity, and Mengtesha largely copied Ferrero’s packaging. Therefore, this action is obviously suspect as having violated the rules set forth in the Anti Unfair Competition Law. This shows that the adoption of general elements cannot surpass the boundary of others’ original and symbolic elements. Otherwise, such reference is not adoption of the general elements.

(3) Protecting packaging through three dimensional trademark

Actually, under the current framework of Chinese law, Ferrero could use a three dimensional trademark for its packaging to fully protect its exclusive rights. In fact, Ferrero also confirmed that during this case it would use this strategy, but the entire story is fairly complicated.

In 2002, Ferrero Company finished a three dimensional trademark application for its packaging in Italy. Because both Italy and China are the members of WTO, in the same year, Ferrero Company applied to the China Trademark Office for a territorial extension of the trademark. But, the Trademark Office refused the application, claiming that the trademark lacked distinctiveness. After that, Ferrero Company filed for review with the Trademark Adjudication and Review Aboard (the “Board”), but the Board denied review for the same reasons. Afterwards, Ferrero Company filed an administrative lawsuit in the Beijing No.1 Intermediate People’s Court (the “Beijing Intermediate Court”).

The Beijing Intermediate Court’s judgment reversed Ferrero Company’s negative ruling. In 2007, the court approved the application for territorial extension on the grounds that the trademark applied for by Ferrero is “not within the scope of the normal selection of the chocolate industry and the packaging methods,” and that “the originality of the three dimensional trademark has already become a distinctive design of Ferrero, which enables the consumer to clearly judge the origin of the product covered by the trademark upon seeing it.” This was the first case using judicial channels to establish the territorial extension of a trademark.

Actually, by the regulations of the Trademark Law and our experience, registration of a three dimensional trademark must analyze the following factors: 1) the trademark has originality; 2) the trademark is non-functional; 3) the trademark’s contents do not violate China’s mandatory laws; 4) the trademark does not contain misleading geographical indications; 5) the trademark does no damage to others’ first rights.

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