(By Luo Yanjie) Recently, the Supreme People’s Court interpreted a definite attitude through a complicated case lasting for years that prior-used logo shall not be used as counterargument against latter registered trademark except under certain circumstances. The followings are our detailed introduction:

Introduction to the Case:

1st Retrial Petitioner (Plaintiff at first instance, Appellant at second instance): LIANG Huo  (the “Liang”);

2nd Retrial Petitioner (Plaintiff at first instance, Appellant at second instance): LU Yijian (the “Lu”)

1st Retrial Respondent (Defendant at first instance and Respondent at second instance): Anhui Caidiexuan Cake (Group) Co., Ltd (安徽采蝶轩蛋糕集团有限公司, the “CDX Company”);

2nd Retrial Respondent (Defendant at first instance and Respondent at second instance): Hefei Caidiexuan Enterprise Management Service Co., Ltd.（合肥采蝶轩企业管理服务有限公司, the “Hefei Company”）

Court of First Instance: Hefei Intermediate People’s Court  No.（2012）合民三初字第00163号

Second Instance: the Higher People’s Court of Anhui Province  No.（2013）皖民三终字第00072号

Retrial: Supreme People’s Court  No.（2015）民提字第38号

On October 28, 1999, Zhongshan Municipal Food Co., Ltd (Chinese name: 中山市饮食总公司) with its legal representative of Lu, obtained the exclusive right to the registered trademark of the “Caidiexuan” (written in Chinese: 采蝶轩) trademark (the “disputed trademark”) under the Class 30 for coffee, tea, syrup, cake, flour and so forth, after the trademark registration application was approved by the Trademark Office under the State Administration for Industry and Commerce (the “CTMO”). Later on April 14, 2001, the disputed trademark was transferred to Zhongshan Shiqu District Hongji Food Factory (Chinese name: 中山市石岐区宏基食品厂). On September 14, 2003, Lu and Liang were transferred the disputed trademark from the Hongji Food Factory and later obtained about 9 trademarks with regard to the different kinds and contents of disputed trademarks under the Class 30 and Class 43.

The CDX Company, used to be an individual business, was established on June 8, 2000 and mainly engaged in pastry baking, selling and so forth. On October 28, 2003, the CDX Company obtained the “Caidiexuan” trademark written in Clerical script under the Class 35 for advertising, hotel management and so forth. Besides, the CDX Company has been granted quantities numbers of awards and honors and began using the disputed logo as its bakeries’ brand name since the early 1990s. However, Lu and Liang still believed that the CDX Company’s behaviors constituted trademark infringement, and therefore they sued to the court.

 

The courts of first instance and second instance concluded the following opinions and made explanations:

1. The approved services of the disputed trademark owned by Lu and Liang are restaurant, snack bar etc., However indeed, a restaurant in the approved services of the disputed trademark are quite different from a bakery engaged by the CDX Company in such respects as the function, purpose, contents, way of serving and target consumer, consuming habits and in other areas.

2. When compared with the two trademarks, the Supreme Court determined that the two trademarks did not constitute similar trademarks since the disputed trademark co-owned by Lu and Liang is in a butterfly image while that of the CDX Company is written in Clerical script.

3. With regard to subjective aspects, in this case, the CDX Company does not have the intent to benefit itself by using other’s trademark nor does it exist other malicious intents like freeriding or brand imitating. In objective, the CDX Company’s use of the trademark on its bakery did not make consumers confused nor lead them into thinking that they are associated with each other and the goods and services made by the CDX Company are from Lu and Liang’s.

Therefore, courts of both the first instance and second instance concluded that the defendant’s behaviors did not constitute trademark infringement.

However, the SPC determined the followings:

1. The defendants shall not use the right of prior use as counterarguments.
2. The use of the disputed trademark by defendants has exceeded the approved scope of Class 35 for marketing service.

Therefore, the Supreme Court confirmed that the defendant’s behaviors constituted trademark infringement.

Lawyer’s comment:

1. Using the prior-used right as counterargument shall be premised on that the trademark shall obtain a certain degree of popularity at which shall be gained before the trademark registration 

According to prior legal practice, related practice always sticking to the principle of “first to apply” in trademark application process. However indeed there is a persistent debate on whether those prior used trademark should be protected and how to protect them.

With the latest Trademark Law has been put into effect in 2014, some legal provisions can be applied for such debate, and the Clause 3, Article 59 stipulated that where, before a trademark registrant applies for trademark registration, another party has used an identical or similar trademark with a certain reputation on identical or similar goods prior to the trademark registrant, the holder of the right to exclusively use the registered trademark shall have no right to preclude such other party from continuing to use the trademark for original purposes, but may require such other party to add a distinctive mark.

It is reasonable to come up with a conclusion from the aforesaid clause that although the prior-used right is acknowledged by laws and regulations, using such right still shall be based on several prerequisites. Back to this case, the CDX Company did use the disputed logo before that of the plaintiff and it did receive quite amounts of awards as well as honors after the plaintiff obtained the trademark right. Therefore, the Supreme Court still determined that the use of CDX Company constituted trademark infringement and the prior use right as regulated in the Clause 3, Article 59 of the Trademark Law shall not be applied in this case.

2. Not all selling services can be attributed under the Class 35 for Marketing.

In trademark application process, helping others to conduct marketing under Class 35 has always been a hottest one among registers. In fact, quantity number of understandings towards this item is a little deviating from what it is originally designed to. For instance, supermarket service does not constitute marketing service according to CTMO’s Reply for whether the 35^th category of the International Classification of Goods and Services includes emporium and supermarket (No.商标申字［2004］第171号) dated on August 3, 2004. However, with the amending of the Classification on Similar Goods and Services, the supermarket has been listed under the class of marketing service back again. With regard to this case, the defendant mainly engaged in bread and pastry selling, which the court believes belonging to the specific Bakery classification. Thus, a conclusion can be inferred that not all selling services can be categorized into the Marketing service under Class 35 and the marketing service is more accurately to be construed a comprehensive, specialized selling behavior such as supermarket.

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