(By You Yunting) Our website has previously  introduced the case where ABlnbev (China) Sales Co., Ltd filed a lawsuit against its competitor, who was unauthorized to use the bottles with the trademarks “Budweiser” and “ABlnbev”. Recently, the Shanghai Higher People’s Court made a final judgment in favor of ABlnbev (China) Sales Co., Ltd.

Introduction to the Case:

Appellant: (Defendant at the first instance): Xiyingmen Beer Company (the “Company Z”)

Respondent: (Plaintiff at the first instance): ABlnbev (China) Sales Co., Ltd

Court of first instance: Shanghai No.1 Intermediate People’s Court  No.: (2012)沪一中民五（知）初字第188号

Court of second instance: Shanghai Higher People’s Court  No.: (2013)沪高民三（知）终字第111号

In the first instance, ABlnbev (China) Sales Co., Ltd filed a lawsuit against Company Z, claiming that Company Z was unauthorized to use the bottles with the “Budweiser” trademark, “ABlnbev” trademark and its enterprise name “Anheuser-Busch InBev”. ABInbev further claimed that this resulted in the relevant public being led into confusion, with heavy damages caused to its trademarks, enterprise name and reputation.

The court of first instance held the following:

Firstly, that the word “Anheuser-Busch InBev”, as used on the beer bottles during Company Z’s manufacture and sale of its products can be considered an active use of the trademark;

Secondly, that it is not fair use to use recycled bottles labeled with the trademarks of others;

Thirdly, that the use of beer bottles labeled with the “Budweiser” trademark and the “Anheuser-Busch InBev” trademark may lead the public into erroneously associations between the two companies. For these reasons, the court decided to order Company Z to cease the use and damage of these trademarks and to compensate for the losses and expenses suffered by ABlnbev (China) Sales Co., Ltd to the amount of RMB 100,000. In addition, Company Z was ordered to make a written apology in Wenhui Daily, a local news outlet with considerable influence, to alleviate the damages suffered by ABlnbev (China) Sales Co., Ltd.

Dissatisfied with the original judgment, Company Z appealed to the Shanghai Higher People’s Court with new evidence. It provided evidence including registration documents and information about bottle recycling, and had a witness appear in court in order to testify that the use of such recycled bottles was a regular practice in the beer industry. Furthermore, it further attempted to prove that the bottles labeled with other trademarks were legally purchased instead of self-produced. However, the respondent also submitted new evidence regarding the submitted registration documents about the salvage station, attempting to prove the evidence provided by Company Z was false.

The court of second instance decided that the use of trademarks could be defined as: the affixation of trademarks to commodities, commodity packaging or containers as well as the use of a trademark on commodity exchange documents or in advertisements, exhibitions or for other commercial activities. Applying this to the facts of the case, Company Z’s use of the “Budweiser” trademark at the bottom of the beer bottle fell within the scope of the use of a trademark. As such, where the use of “Budweiser” trademark on the beer bottle plays a distinguishing role as to the source of the goods, even though the placement of the trademark at the bottom of beer bottle is likely to downplay the source of the goods, the appellant still used a similar design to that of the Harbin Beer brand of ABlnbev (China) Sales Co., Ltd. Although the appellant affixed other trademarks such as “喜盈门” and “HEIMEN” on the beer bottle, considering the popularity and brand awareness enjoyed by Budweiser, such a design could easily lead the public into erroneous associations between the companies, creating confusion.

As to whether its legal use of recycled bottle is a standard practice in the beer industry, the court determined as follows:

Firstly, that Company Z insufficiently proved that the disputed beer bottles were purchased from recycling companies.

Secondly, even though the disputed beer bottles were recycled from the market, such a reason for use cannot be used as a defense against trademark infringement, despite the fact that the recycling of bottles is in compliance with environmental guidance and best practices.

Finally, the appellant could have used the appropriate means, through the covering of another’s trademarks to prevent the creation of confusion amongst the public. However, as the appellant tried to use the bottles labeled with other’s trademarks in the full container load, and even used a similar design to Harbin Beer, eschewed that its true purpose was to mislead consumers.

For these reasons, the Shanghai Higher People’s Court rejected the appellant’s appeal and affirmed the original judgment.

 Lawyer’s Comment:

Apart from trademark infringement, this case also involved unfair competition. As Company Z used the beer bottle of Budweiser, as well as a similar design to that of Harbin Beer, owned by ABlnbev (China) Sales Co., Ltd. Based on these two factors, the court made the judgment of infringement. We will introduce another related infringement of packaging design in a later blog post.

We have previously expressed our comments about the first instance. Considering the numerous stories involving substantial injuries caused by exploding beer bottles, many beer companies have established exclusive systems for the manufacture of beer bottles to protect consumers from harm, and themselves from liability. As for small-sized companies who have not yet established exclusive systems for the manufacture of beer bottles, the cost-savings realized by not using these systems have become a hidden cost for the consumer. If these companies use the bottles from big companies, gaining the benefits of these exclusive processes without the cost of establishing one, this could be seen as a relative unfair competitive advantage to small companies.

In this case, the court also took social problems such as environmental protection into consideration to successfully resolve the conflict between intellectual property protection and the environmental protection afforded by bottle recycling. The court advised Company Z that they should use sticker labels to cover other companies’ logos, preventing the creation of confusion amongst the relevant public. We think that this guidance is of great help in the establishment of competitive standards between companies.

 Lawyer Contacts

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

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