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

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Comments on the unfair competition case between Ferrero and Jinsha

Today and tomorrow, we will analyze several issues raised by the Ferrero and Jinsha unfair competition
case. Namely: the scope of name recognition, whether a product’s packaging can refer to the products of others, and protection over product packaging through trademark protection. Today, we will briefly introduce the case facts and the opinions held by the deciding courts.

Case summary:

Ferrero Company registered the trademark “FERRERO ROCHER” in China in 1986 and its FERRERO ROCHER chocolate (“Ferrero Chocolate”) entered the Chinese market in 1988. The Ferrero Chocolate packaging has the following features: 1) gold, ball-shaped foil wrapping; 2) the “FERRERO ROCHER” trademark printed as a decoration within an oval on the gold foil; 3) each chocolate wrapped in gold foil is padded with additional brown paper; 4) outer packaging is made of transparent plastic, so that the inner gold-wrapped balls can be seen from the outside; and 5) a red ribbon-like decoration printed on the trademark of the chocolate.

In 1990, Zhangjiagang No.1 Dairy Plant (“Zhangjiagang Dairy”) began to manufacture “Jinsha” chocolate, whose packaging closely resembles Ferrero Chocolate. Jinsha chocolate earned several awards in China, and “JINSHA” was registered as a trademark in China. In 2002, Zhangjiagang Dairy transferred the Jinsha trademark to Mengtesha Company, a company in which it had invested with another foreign company. In 2003, the Mengtesha Company registered the trademark “TRESOR DORE” and printed it on the packaging of Jinsha chocolate.

Based on the similar packaging used by Jinsha chocolate, Ferrero Company filed a lawsuit against Mengtesha Company in the Tianjin No.2 Intermediate People’s Court (the “Tianjin Intermediate Court”), accusing it of unfair competition and demanding that it pay compensation and stop manufacturing the allegedly infringing product.

After the hearing, the Tianjin Intermediate Court held that although Ferrero Chocolate entered the Chinese market fairly early, it was sold by way of consignment, so its consumer base is narrow, and it has not accumulated much social recognition. Through years of operation, however, Jinsha Chocolate accumulated high recognition, which has not been affected by the change of the investor from Zhangjiagang Dairy to Mengtesha Company and the amendment of the trademark to “JINSHA TRESOR DORE.” Furthermore, both manufacturers clearly show their trademark on an obvious place on the outer packaging, so, objectively, it is not likely to lead to consumer mistake. On these grounds, the Tianjin Intermediate Court refused Ferrero Company’s petition.

Ferrero Company appealed, and the court of second instance overturned the judgment made in the first instance court. The court held that unfair competition liability had been established on the part of Mengtesha Company. The court provided the following reasoning for its decision:

(1) Well-known product as stipulated by the Anti Unfair Competition Law refers to products that have been sold in a specific market and are known to the relevant public. Determining the recognition of the product is based on the comprehensive consideration of its reputation in both the specific domestic and international markets, and the understanding cannot only be based on the reputation in the territory of China.

(2) In this case, the relevant chocolate packaging was first adopted by Ferrero Company. Mengtesha Company, on the other hand, could not prove its packaging is of its independent design. For this reason, it can be found that Mengtesha Company intentionally used Ferrero Rocher’s special packaging and decoration.

(3) According to the principle of good faith and publicly acknowledged commercial ethics, well-known products are the results of faithful business operation. In the law, the results of unfair competition tactics cannot be used as the basis for evaluating name recognition.

After the judgment in the second instance, Mengtesha Company applied for the review in the Supreme People’s Court. After hearing the case, the Supreme People’s Court sustained the decision made by the second instance court and provided further interpretation as follows:

(1) Well-known product as stipulated in the Anti Unfair Competition Law refers to those products that have a certain reputation in the territory of China and also have been widely adopted by the relevant public. The domestic protection of internationally well-known products is still based on popularity within China. On the other hand, the reputation of the product or the service is produced from production, sales, or other business activities in China. Determination of a well-known product is a comprehensive decision, and elements to consider include the sales time, sales territory, sales amount, and the sales target; the determination also considers the time, extent, and territorial scope of advertising, all of which are elements influencing the protection over the well-known product. The determination also does not exclude appropriate consideration of the popularity of the product overseas.

(2) The operator has the right to design its own packaging with the reference to the general elements of others’ design. But, the new design must be adequate to distinguish it from others’ packaging and decoration and cannot imitate the special packaging or decoration that shows the origin of another product and thus leads to confusion or mistaking in the market. Otherwise, this will constitute unfair competition in the market.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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