(By Luo Yanjie) Abstract: Whether the confusion has been made among the consumers is the basis on which to judge the unfair competition liability. In recent two years, some China companies have engaged themselves in the fake licensing as first to establish a company outside mainland China in Hong Kong, with the same name like those reputed brands and then gain the benefits from the free riding on it. But once it has been judged confusion among the consumer, even it is licensed through the legal procedure, it shall also take the infringement liability.
L’oreal is the worldly noted brand for cosmetics, and the company has been awarded the “Most Popular Foreign Brand in China, 2002” , “Top Three Brands of the Market Share in Cosmetics Market in China, 2003”. And just due to its popularity, it has been knocked off in the China grey market. In this article, we would introduce you a typical infringement case coming from the knock-off infringement, which was made by the licensing of a same-named briefcase company in HK. Through the judgment of the Shanghai court, the licensed company was punished for administrative penalty for its administrative liability.
Case Summary:
In 2007, upon the report by L’oreal, Jinshan Commerce and Industry Administration in Shanghai took a on-stie inspection in the storage of Luofuxianni Company (the “Company L”). As checked, the investigated brand “Luo Fu Xian Ni (罗芙仙妮)” and “Bi You Quan (碧优泉)”. On the packaging of the product, it could find the statement of “licensed and produced under the supervision of French L’oreal Group”. The total product is of a large number. As though by Jinshan Authority, it has constituted the unfair competition, and thereafter fined it an administrative punishment. With the dissatisfaction on the decision, Company L filed the review in the municipal administration for commerce and industry. But the decision of the review sustains the original punishment. As still dissatisfied with the decision, the company filed an administrative lawsuit in the court, accusing Jinshan administration and putting L’oreal as the third party in the lawsuit.
According to the opinions of Shanghai No,1 Intermediate People’s Court: the brand “碧优泉”, read as “Bi You Quan” in Pinyin, is with slight difference with that the name of the L’oreal’s product “Biotherm (read as “Bi Ou Quan” in Pinyin and 碧欧泉in Chinese”, and as judging the trademark on it, it also resembles the trademark indicated on the product of L’oreal, and moreover it could also find the trademark “L’oreal” on the outer packaging of it, as well as the “France” and “French L’oreal” on it. Despite French L’oreal Group is not the same subject as accused in the original instance, but Frech L’oreal Group is the company established by the legal representative of the plaintiff on May 27 2003 in Hong Kong, which is to infringe others’ company name right. Considering the reputation of “L’oreal”, the normal consumers are not likely to distinguish the product of the plaintiff from those produced by the genuine L’oreal. Basing on these reasons, the court refused the claims of the plaintiff.
Lawyer Comments:
The misconduct of the China company in this case is the newly emerged free-riding get to be popular in China in the recent years, and the followings are our analysis on it:
1. The confusion among the consumers is the key to judge the liability of unfair competition
As provided in the Unfair Competition Law:
“using, without authorization, the name, packaging or decoration peculiar to well-known goods or using a name, packaging or decoration similar to that of well-known goods, so that his goods are confused with the well-known goods of another person, causing buyers to mistake them for the well-known goods of the other person;”
It shows in the article that, to judge the unfair competition, the most direct basis is whether the consumer would mistake the products involved in the case.
In the case, on the product manufactured and sold by the plaintiff, it could see “France” and “L’oreal”, and with that decoration, the operator would like to mistake its brand with that the worldly known one. Moreover, the defendant deliberately set up a company with the same name of L’oreal Company, and then afterwards made the licensing, indicated the mis-understandable description on its outer pachaging. All these have shown the malicious intension of the defendant. Therefore, the consumer would objectively be misled, and hence the court judged the unfair competition liability of the defendant and confirmed the legitimacy of the administrative punishment.
2. It remains illegal if to conceal the illegitimate purpose as disguised with a lawful method
The French L’oreal Group actually exists as claimed by the plaintiff, but it was actually established by the legal representative of the plaintiff in Hong Kong and as a briefcase company. Despite as judged from the law, to indicate “French L’oreal Group” on the outer pachaging of the plaintiff is not fully false propaganda, but just like what has been found in the court, as considering French L’oreal Group does no carry out any actual business, and was established for the licensing of “Luo Fu Xian Ni”, the plaintiff could only be confirmed the target to avoid the statutory examination standard as provided in the mainland China’ laws, and hence to fulfill its target which is not sound in the law. therefore, although the plaintiff has set up the company with lawful procedures, and made the so-called licensing, and yet due to the illegal purpose, the, it shall also be chased the infringement liability.
Lawyer Contacts
You Yunting：86-21-52134918 youyunting@debund.com/yytbest@gmail.com
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