Unilever Defeats Squatting of POND’S Trademark in China

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(By Luo Yanjie) Today we will introduce a typical example of a trademark squatting case. Unilever recently succeeded in defeating trademark squatting after it undertook a nine year objection to prevent a similar trademark from being registered under a different class.

Case introduction:

On May 28, 2003, Mr. Shi filed a personal application for “POND’S/ 旁氏” (the “disputed trademark”) under Class 5 for tonics (medicine), baby milk powder, air fresher, sanitary napkins and dental lacquer. However, in the period of trademark opposition for primary publication, Unilever filed an opposition, alleging that its prior registered “旁氏/POND’S” trademark (the “reference trademark”) had become a well-known trademark in China. Unable to achieve a supporting judgment from the Trademark Office and the Trademark Review and Adjudication Board (the “TRAB”), Unilever brought the case to the court.

The Beijing No.1 Intermediate People’s Court held the following:

1. As Unilever’s reference trademark had been used and promoted for facial cosmetics since 2004, and around several provinces in China, before Mr. Shi’s registration, the court determined the reference trademark to be a well-known trademark in the field of facial cosmetics in accordance with the law.

2. The approved use of the disputed trademark for baby milk powder, sanitary napkins and dental lacquer would constitute a similar trademark to that of the reference trademark. Even though the approved use of the disputed trademark upon tonics (medicine) is different on function and purpose from that of the reference trademark, the awareness and popularity of the reference trademark is likely to lead consumers into thinking that they are associated with each other and cause confusion, thus decreasing the distinctiveness of the reference trademark and ultimately harming the interests of Unilever.

For the above reasons, the Beijing No.1 Intermediate People’s Court decided to overrule the judgment of the TRAB.

Lawyer’s Comment:

1. The new trademark regulations have contained trademark squatting to some extent.

Pursuant to the Trademark Law, both natural persons and companies can register trademarks. For a long time, China has adopted an across-the-board policy of trademark application towards applicants, i.e., anyone could apply for trademarks under various classes. As such, the result is that many large natural persons are rushing to register famous oversea brands as in this case.

In 2007, the Trademark Office issued an Important Notice for Trademark Regulation Formality of Natural Persons (the “Important Notice”) stipulating that natural persons must submit evidence of their business operation when applying for trademarks; foreign natural persons do not have such restrictions. From the perspective of fairness, such an exception results in the provision of favorable treatment of foreigners. Since the Important Notice was regulated, it has also attracted controversy on the grounds that Article 4 of the Trademark Law stipulates that any natural person, legal person, or other organization can file an application for registration. Simultaneously, the Important Notice imposed restrictive regulations on domestic natural persons, thus embracing a narrow interpretation of the Trademark Law. However, the Trademark Office, acting as an administration, is itself unauthorized to interpret laws.

Despite this controversy, it is impossible to deny that such exceptions act to limit and increase the difficulty of trademark squatting.

2. Well-known trademark cross-protections should be reasonably defined.

According to the Trademark Law, well-known trademarks should receive cross-protection on the grounds that the registration of a similar trademark in cross-classes may mislead the public and damage the interests of the registrant of a well-known trademark. It follows then that, in the case of the sequence of characters being the fundamental difference between two trademarks, avoiding the confusion of the public is primary purpose of cross protection, rather than the prevention of damage to the interests of the registrant of the well-known trademark.

In this case, for the approved use of the trademark on goods such as baby milk powder, sanitary napkins and dental lacquer, it is likely that an association would be created with Unilever’s reference trademark, with resulting confusion that could mislead consumers into the belief that Unilever had promoted such goods.

For tonics (medicine), where consumers obviously will not be misled into erroneous relationships between the two trademarks, the court ruled that the function and purpose of tonics (medicine) is sufficient to distinguish the disputed trademark from that of the reference trademark. However, the reference trademark still deserved protection on the grounds that such a registration would decrease the distinctiveness of the reference trademark.

It appears from the circumstances of the case that such admittance is reasonable, but this ruling naturally violates the purpose of the legislation; cross-protection should be afforded from consideration of the possibility of damage to a well-known trademark. In the situation of some unrelated goods, consumers will obviously not be misled into erroneous belief as to the existence of a certain state of affairs with a well-known trademark. As such, judgments for cross-protection almost always accompany damages on the grounds of decreasing the distinctiveness of a well-known trademark among consumers, i.e., trademark dilution.

There is an international tendency to prevent trademark squatting through the principle of trademark dilution. However, in the current Chinese judicial environment and legislative conditions, there is a valid and productive discussion to be had determining whether trademark dilution is a reasonable condition of well-known trademark protection beyond the legislation.

Lawyer Contacts

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

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