Why VICTORIA’S SECRET could not Prevent Selling a Parallel Imported Genuine Product Online in China?

维多利亚的秘密(By You Yunting) VICTORIA’S SECRET is the largest American retailer of lingerie whose products does not sell on the Internet in China. Considering the fact that a Shanghai-based company sold its products on the Internet in China and confessed that it was the unique designated general distributor in China, VICTORIA’S SECRET brought the Shanghai-based company to the court on the grounds of trademark infringement and unfair competition.

Introduction to the Case:

Plaintiff: VICTORIA”S SECRET STORES BRAND MANAGEMENT, INC.(the “VICTORIA’S SECRET”)

Defendant: Shanghai Jintian Clothing Ltd. (the “Jintian Ltd”)

Court of first instance: Shanghai No.2 Intermediate People’s Court

The plaintiff was founded in 1977 in America with its Chinese name “维多利亚的秘密” (a literal translation from English pronunciation). The plaintiff enjoys the name right for VICTORIA’S SECRET and holds four registered trademarks (the “disputed trademark”), including “维多利亚的秘密” trademark under Class 25 and Class 35, “VICTORIA’S SECRET” trademark under Class 25 and “VICTORIA’S SECRET PINK” trademark under Class 35. The plaintiff found out facts that, the defendant was unauthorized to announce it to be the unique designated general distributor and conducted businesses through the form of retailing and franchising in the name of the plaintiff to sell products labeled with “维多利亚的秘密” trademark and “VICTORIA’S SECRET” trademark. Afterward, the plaintiff filed a lawsuit to the court, alleging that the defendant infringed its exclusive right of the registered trademarks without authorization and constituted unauthorized use of its enterprise name and unfair competition arising from false publicity.

The defendant argued in a defense in the following. Firstly, the products sold by the defendant came from Intimate Brands, Inc (the “LBI”), parent firms of VICTORIA’S SECRET, thus meaning the products are authentic, on the basis of the evidences providing by the defendant that they purchased genuine products worth 5 million dollars. Secondly, where the plaintiff has not conducted retailing business in China, considering the defendant, acting as a distributor of LBI selling VICTORIA’S SECRET products, virtually, is the unique distributor in China, the defendant’s self-announcement is acceptable and thus the defendant did not have unfair competition acts arising from false publicity.

The court heard the case and held that:

1. Did the acts of the defendant constitute infringement of the exclusive right to use the disputed trademarks of the plaintiff?

The defendant purchased the genuine products of VICTORIA’S SECRET from the plaintiff’s parent firm LBI through the regulated channels. When selling products, utilizing the labels, hangers and packages as well as the disputed trademarks owned by the plaintiff are comprised of the behavior of “selling” as regulated in the Trademark Law and thus are unlikely to produce confusion among the relevant public. Therefore, the acts of the defendant prosecuted by the plaintiff do not constitute infringement of the exclusive right to use the disputed trademark.

2. Does the defendant’s acts constituted unfair competition?

Regarding the fact that the defendant has no retailers with physical stores in China, its evidences provided are not yet sufficient enough to prove its enterprise name, i.e, VICTORIA’S SECRET, to be highly popularity and awareness among the relevant public. Based on these facts, the plaintiff’s enterprise name can not obtain the protection for the right of enterprise name as regulated in the Anti-unfair Competition Law. Furthermore, the products sold by the defendant are authentic other than fake goods. Therefore, the acts of defendant do not constitute unfair competition resulting from the unauthorized use of its enterprise name.

In this case, the defendant cannot prove itself to be “the unique designated general distributor of America VICTORIA’S SECRET” and thus are likely to deliberately reproduce confusion with false facts. Objective, the defendant conducted false publicity. Therefore, the court decided the defendant to unfair competition and ordered it to stop the infringement and assume liabilities of compensation.

Lawyers’ Comment:

VICTORIA’S SECRET did not achieve their goals in this case. Despite the judgment of false publicity, the court has not yet decided the defendant to constitute trademark infringement. Many brand owners also encounter similar problems with that of VICTORIA’S SECRET. How to crack down on distributors who sell products over its range of business is always in a great trouble of brand owners.

In our experience, distributors would usually sell products online via the third e-commerce websites including Taobao.com, Amazon.cn and jd.com. When encountering similar problems, brand owners would first complain trademark infringement to the third e-commerce website involved instead of prosecuting sellers directly.

If the distributor could prove its products to be authentic, even involving a circumstance that sells products beyond its authorization of the use of the trademark such as parallel imported genuine products, the third e-commerce website would not remove the products involved but ask the brand owner to file a lawsuit.

For the sale of parallel imports, Chinese courts hold obscure attitudes. In most case, the courts would decide that the parallel imported genuine products constitute non-infringement to the brand owners. In a particular case, however, the courts would decide to constitute trademark infringement towards this problem.

In our opinion, it is hard to prevent distributors from selling its products online unless the brand owner conducts a severe management to its distributors. For example, if the parent firm of VICTORIA’S SECRET were concluded a contract with a clause restricting its availability online in this case, VICTORIA’S SECRET could file a lawsuit on the ground of responsibility for breach of contract. At the same time, the brand owner could add numbers to its products so as to ascertain the responsibility of distributors. In case the brand owners find out the sales of numbered products online, they could impose punishment to the distributors involved.

Lawyer Contacts

You Yunting:86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary


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