(By You Yunting)To save costs, Chinese beer manufacturers have been using recycled bottle to refill beer, and while most large-scale beer manufacturers will engrave their trademarks into their glass bottles, as well as recycle their own bottles. However, for small-scale beer manufacturers, such practices are impractical, and when small beer manufacturers use other larger manufacturer’s bottles with their trademarks, all the ingredients for trademark infringement are present. In today’s post, we will introduce to you two cases heard by two different courts concerning the same issue.
Case I: A judgment from the Shanghai No. 1 Intermediate People’s Court (“Shanghai Court”).
In September 2012, ABInbev (China) Sales Co., Ltd. filed a lawsuit with the court, claiming its rights over the trademarks “Budweiser” and “ABInbev”. The Zhejiang-based Xi Yin Meng Beer Company (“Company Z”) used bottles with the trademarks “Budweiser” and “ABInbev” without any license during the manufacturing and sales period; it also used the “ABInbev” trade name. All of these combined can reasonable lead to confusion among the public. In addition, such impermissible use of its marks would inevitable cause material damage to the trademark, trade name or reputation owned or enjoyed by the plaintiff and trademark owner. The defendant argued that the allegedly infringing bottles were merely recycled bottles, and were used primarily for holding the beer. The defendant Company Z then argued that this simple use of the plaintiff’s bottles could not be considered “free riding” on the reputation of the plaintiff’s trademark. Moreover, the defendant argued, the use of recycled bottles was in line with state policy as well as being a common practice in the industry. The defendant highlighted its own trademark located on the bottle labels, allowing any consumer to easily distinguish it from the plaintiff’s product, making it unlikely any consumer would confuse the two.
According to the court’s opinion, the trademarks “Budweiser” and “ABInbev,” as used on the beer bottles during during the plaintiff’s manufacture and sales of its product can be considered a proper and active use of both marks. In addition, the court held that, despite the use of recycled beer bottles meeting environmental protection policies, the “transfer” of the beer bottles themselves was merely a transfer of the bottles as property; such transactions did not transfer any rights in the use of the marks located on the bottles themselves. Therefore, the court found that the transfer of the beer bottles did not grant the defendants a license, express or implied, in the use of the plaintiff’s trademarks. According to the Trademark Law, any unlicensed use of a trademark on an identical product is considered infringement. Taking into account this legal basis, the defendant’s actions constituted trademark infringement, and therefore the court found that the defendant should assume all liability for such infringement. For this reason, the court ordered defendant Company Z to cease damaging the trademark “ABInbev,” and to compensate losses and expenses suffered by the plaintiff in the amount of RMB 100,000. In addition, the defendant would be ordered to make a written apology to the Wenhui News, a local news outlet with considerable influence, in order to alleviate the damages suffered by the plaintiff. In this case, the plaintiff originally claimed more than five million RMB in losses and damages when it first filed its lawsuit with the court.
Case 2: A judgment from the Hunan High People’s Court (“Hunan Court”)
The Chongqing Beer Company (“Company C”) owned a trademark comprised of a water-drop shaped trademark in Class 32 for beer products, and registered it with the trademark office. According to Company C, the He Quan Beer Company (“Company H”)‘s “Jinxi” beer also used a substantially similar water-drop shaped trademark on its beer bottles. Due to this similarity, Company C filed a lawsuit in court, claiming Company H had infringed upon its trademark.
The Changde Intermediate People’s Court heard the case in the first instance, and the judge adopted an opinion similar to that of the Shanghai Intermediate People’s Court in the prior case, finding the following: first, Company H made use of the trademark without any license from Company C, and second, also failed to enter into any contractual agreement with Company C to discuss the possibility of gaining a license from Company C to make use of its trademark in selling and marketing its own product. In this case, the court found, Company H’ unlicensed use of the water-drop trademark on its bottles in the process of beer manufacturing and sales infringed the exclusive rights enjoyed by Company C in use of its marks.
The court in the second instance found that: first, Company H’s product was unlikely to lead to confusion among consumers as to whether Company H’s product was in fact Company C’s product or somehow related to Company C’s product. The court explained that Company H expressly labeled its product as “Jin Bian Xi Beer” on its bottle cap, bottleneck and bottle labels. Furthermore, the court stated, the bottles used by Company H were indeed not produced by Company H; however, Company H made use of recycled bottles merely to store its product, rather than advertise it. In other words, the court found that Company H had not in fact “used” Company C’s trademark in violation of Company C’s rights, and this objectively would not lead to consumer confusion. For this reason, the court found that Company H’s actions did not meet the statutory requirements for the determination of trademark infringement. For this reason, the court ruled that no trademark infringement had occurred, and that Company H would not be required to assume any liability as alleged by Company C.
Morever, the court stated that the use of recycled beer bottles could met state policy in promoting the use of recyclable goods; specifically, the General Administration of Quality Supervision, Inspection and Quarantine (“GAQSIQ”)’s Compulsory Standard on Beer Bottles, GB4544-1996, and the Ministry of Commerce’s “Management Laws on Renewal Resource Recycling;” therefore, the court determined that the use of recycled bottles was a common practice in the industry. For this reason, the court advised that Company C should have foreseen a scenario in which its bottles labeled with the water-drop trademark would be recycled and used by other manufacturers. For this reason, the court ruled it would not reasonable to charge others with infringement, as no factual basis or legal grounds could be found for such allegations.
Finally, the essence of this case is one of the conflicts between the trademark rights enjoyed by parties and environmental protection rights enjoyed by the general public. For the protection of IPR, any such use shall be within the scope as permitted by law; in terms of the trademark rights enjoyed by Company C, they shall also be legally protected. On the other hand, Company C’s claim over the water-drop trademark on its bottles was beyond the scope of the law. The court, if it indeed supported such claims, would essentially prohibit the recycling of similar labeled beer bottles, which would severely damage the public interest in making use of such recyclable goods. Based on the above points, the second instance court reversed the first instance court’s judgment, and ruled that Company H’s actions had not constituted infringement.
China is too big to see different cases on identical or similar questions of law. The cases described herein are simply an example. Theoretically, the argument presented by the Hunan Court is more persuasive, since the consumer mainly distinguishes products by looking at the label, or in this case, the cap of the bottle. The words on the bottle itself would not lead to substantial confusion among the public. At the same time, bottle recycling also involves environmental issues. To look at the issue from another point of view, we tend to find that the Shanghai court has taken a higher stance.
In previous years, we have seen and heard numerous stories involving substantial injuries caused by exploding beer bottles. For this reason, many beer companies have established exclusive systems for the manufacturing of beer bottles, through which they mark their names or trademarks on the bottle. For most big companies, this also has the dual effect of ensuring the consumer that its products are safe to consume. This also leads to considerable extra costs, however, including factory lines, logistics and losses of the bottles released to smaller companies.
As for the small companies, few have set up any special system, which has saved them substantial costs. However, that cost saving has become a hidden cost to the consumer. If they use the bottles from big companies, this means they have incurred no or little costs related to the bottle and packaging. On the other hand, they have gained the peace of mind associated with using bottles manufactured by larger beer companies. This could be seen as a relatively unfair advantage to smaller companies at the larger companies’ expense. Due to this, many larger beer manufacturers prohibit the use of their bottles by smaller companies.
The courts, in addition to consideration for IPR infringement and environmental issues, should also consider orderly competition in the market and the guiding role of the law. If it determines the use of others’ bottles will lead to trademark infringement, this would lead to small companies no longer using the bottles and investing in their own systems of bottling beer. In the long term, this would help encourage fair competition and promote orderly social development.