Supreme Court Determined Trademark Non-infringement for Using Prior Enterprise Name with Good Faith

(By Luo Yanjie) Both the enterprise name and the trademark distinguish the sources of goods or services, so that in practice they may conflict with each other. However, trademark, an exclusive right, has functions so as to prohibit others from using it as enterprise name. Under some circumstances, the enterprise name can coexist with the trademark. In today’s post, we would like to introduce such a case.

Introduction to the Case:

Retrial Applicant (Plaintiff at first instance, appellant at second instance): Yinchuan Buma Trading Co., Ltd (the “Yinchuan Buma Trading”)

Retrial Respondent (Defendant at first instance, respondent at second instance): Dazhou City Kaida Business Hotel

Court of final appeal: Sichuan Province Higher People’s Court  No.: (2012)川民终字第119号

Court of retrial: Supreme People’s Court  No.: (2012)民申字第1543号

Dazhou City Kaida Business Hotel (translated from “凯达商务酒店”) was established on June 27, 2006 within the business scope of hotels, Chinese food, tea and bathing services. On September 28, 2007, Wang Hongjuan was approved to obtain the No.4153971 “凯达” (the “disputed trademark”) under the Class 43 for hotels, restaurants, bar services, teahouse and Cafes. On September 7, 2009, after the approval of the Trademark, Wang Hongjuan transferred the disputed trademark to the Yinchuan Buma Trading. Yinchuan Buma Trading held that Dazhou City Kaida Business Hotel was unauthorized to use the words containing the disputed trademark and thus engaged in trademark infringement. Subsequently, the Dazhou City Kaida Business Hotel brought Yinchuan Buma Trading to the court. The courts of first instance and second instance heard the case and determined that Dazhou City Kaida Business Hotel’s enterprise name, consisting of the disputed trademark, did not constitute infringement of the exclusive right of the disputed trademark. Dissatisfied with the ruling, Yinchuan Buma Trading appealed to the Supreme People’s Court.

The Supreme People’s Court held the following after deliberation:

1.    Where Dazhou City Kaida Business Hotel used the “Kaida Business Hotel” on its signboard and some service products, the use of “Kaida Business Hotel” simplified its enterprise name and should be considered fair use of its enterprise name.

2.    The Dazhou City Kaida Business Hotel’s use of the words “凯达” on some of its service products was similar to the use of an unregistered trademark, beyond the limit of the right of enterprise name as regulated in law. However, the use of “凯达” by Dazhou City Kaida Business Hotel was prior to the date of the disputed trademark registration. Furthermore, Yinchuan Buma Trading did not sufficiently prove that the use of “凯达” by Dazhou City Kaida Business Hotel  was done with subjective malicious intent.

For these reasons, Supreme People’s Court rejected the appeal application of Yinchuan Buma Trading, with the determination that Dazhou City Kaida Business Hotel did not engage in infringement.

Lawyers’ Comment:

  1. Judicial practice and legislation of trademark priority

Regarding whether a prior trademark user is entitled to the right of trademark priority, this was not clearly stipulated in our previous trademark law. The Supreme People’s Court determined that Dazhou City Kaida Business Hotel’s lawful use of its enterprise name was backed by Supreme People’s Court, acknowledging the existence of trademark priority in reality.

With the implementation of the currentTrademark Law, trademark priority is now stipulated. Paragraph 3, Article 59 of the currentTrademark Law stipulates that where, prior to a trademark registration application by a trademark registrant, another party has used a trademark which is identical or similar to the registered trademark, and has a certain reputation based on the same type of commodities or similar commodities before the trademark registrant, the holder of the exclusive right to use such a registered trademarks shall have no right to prohibit  such a pre-existing user from the continuous use of  such a trademark within the original scope of use, but may request that the user insert appropriate additional distinguishing mark(s). This means, that trademark priority is now explicitly regulated, although the current Trademark Law does regulate some limits on trademark priority.

  1. Lack of subjective malicious intent is a defense for trademark non-infringement.

Article 106 of the General Principle of the Civil Law stipulates that, in general, fault liability may be applied in infringement liabilities. However, this is controversial, as there are no explicit provisions in any relevant and separate laws to regulate the liabilities of intellectual property infringement. According to general understanding and judicial practice, Chinese courts generally apply the standard of presumption of fault in specific cases. In China, the approved trademark should be publicized by the Trademark Office. Now that everyone should have known that the trademark is approved for registration by the Trademark Office, one would be at fault and thus likely to have engaged in infringement if they are still using the approved trademark without authorization.

In this case, although the Supreme People’s Court had not elaborated too much on the above legal issues or legal theory, at least subjective malice is considered as a factor in judging whether infringement has been engaged in or not. However, in judicial practice there is no final standard in judging the cause of trademark infringement.

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