Trademark “Zhuomuniao”: Cancelled for Squatting Though It Has Been Put into Use

(By Luo Yanjie) Abstract: when applying for a trademark, the trademark office will judge the similarity of the submitted trademark based on the International Classification of the Trademark Registration for Product and Service (the “Classification”), but the court does not use that as the only standard. Even if the court finds that the later trademark application to be similar with the earlier applications, if the trademark office approves the later applied trademark’s application, the earlier trademark holder shall have no right to demand the later user for any damages.

Qihao Company (the “Company Q”) is the trademark holder in China of“Zhuomuniao”, a famous French clothing brand. But as seen in mainland China, there are many knock offs or similar trademarks, and their main purpose is to confuse the consumer. In this case, the accused Hangzhou Zhuomuniao Company (the “Company Z”), is the one of those knock off makers. But what shows the company’s cleverness is the company has made use of the defect of the trademark holding of the plaintiff, and thus makes its own holding lawful,. But that could not exempt it from being cancelled.

Case Summary:

Company Z applied the trademark “Zhuomuniao” on May 26th 2000 in the Class of 25 over the shoes product and then was approved

On February 3rd 2004, Company Q filed the application to cancel the disputed trademark. According to the advocacy of Company Q, the company has applied the trademark in Class 25 and 18 (excludes the subclass covered by the application of Company Z), the specific one applied is “the image of a bird+ TUCANO” and the image only. Through using the brand it has become globally famous, and it has also been decided as a well-known brand through the judicial decision. The disputed trademark shall be the one squatted by others, which has also infringed on the interests of Company Q. The Trademark Adjudication and Review Board (the “Board”) decided after the examination that the product covered by the disputed trademark is different from those covered by the trademark applied by the plaintiff, therefore, it sustained the application of the trademark.

Dissatisfied with the decision, Company Q filed an administrative lawsuit in the court: the court finds that the disputed trademark is appointed on the product of shoes and boots, and the reference trademark has been approved for clothing products. Despite difference of the trademarks involving the materials and purpose,  the targeted consumers for both company is the same. Furthermore, under the current commercial circumstance, company that manufacture clothing often produce shoes as well, and then sell them through the same channel, like the franchise store or over the counter. At the same time, the disputed trademark has only slight difference over the image of the bird as compared with the reference trademark. But the two are very much the same. Based on the facts investigated, the reference trademark has gained a high reputation. The disputed trademark looks very similar to the reference trademark.

Furthermore, the court held that although through the use by Company Q of the disputed trademark, it has gained higher reputation, because Company Q used very similar image and words, for those without inside knowledge of the companies, one can easily believe the two trademarks belong to the same company, or have some sort of relationship, thereby easily confusing the customers. In the end, the court ruled that the disputed trademark shall be revoked.

Lawyer Comments:

That is a typical free riding trademark case of Chinese companies. In the case, what is of Chinese company’s genius is that it captured the defect of the incomplete trademark strategy of the company and acquired the trademark right. However, the court finally canceled the application for the following reasons:

1. The trademark classification is a reference but not the deciding element for similar product judgment

Despite according to the Classification, Company Z’s trademark is not within the same sub class of that applied by Company Q, as provided in Article 12 of Interpretation on Several Issues concerning the Trial on Trademark Disputes:

“For the court’s decision on whether the product or service trademarks are similar to each other with referring to Article 15 of the Trademark Law, it shall comprehensively judge basing on the common judgment of the public on the product or service; the classification could be taken as the reference for the judgment over the similar product or service”

It could conclude from above that, the court has the right to make the adverse judgment based on the facts as referred to the Classification. In this case, despite the shoes are not of the same sub class with that of clothing, the court takes that in real practice, the sales method, consumer, and channel are almost the same for both, and therefore they would constitute asimilar product.

2. Even through usage, fake brand could still be cancelled, but no later than 5 years from its application

The real value of the trademark origins from its actual usage, and to protect the market reputation accumulated through actual usage is the purpose of the trademark legislature. In this case, although Company Z has used the disputed trademark in practical business to fight for the trademark, the fact that Company Q did not timely filed the application on its sub class of shoes, shall also be blamed for the current conflict. Yet, considering the principle of preventing free riding and confusion, and the malicious intention of Company Z in the application, the court ruled that the trademark shall be revoked.

3. Why didn’t the court rule a compensation for the infringement?

The brilliance free ride that Company Z took in the case is that normally such behavior would be required to compensate the damaged party, but in this case, we see that Company Z was not found liabile for its using of the registered trademark. According to the Rules on Several Issues on the Trial of Civil Dispute of the Conflict between the Company name, Trademark and other First Rights (the “Rules”):

“When the plaintiff files the lawsuit basing the claim that the disputed trademark has been approved but similar or identical to its first approved trademark, the court shall inform the plaintiff to settle the dispute in the authority approving the application basing on Paragraph 3 in Article 111 of the Civil Procedure Law. ”

It could be concluded from the above regulation that, the first approved trademark holder could not filed the civil lawsuit to settle the dispute against the later applied same or similar trademark, but could only go through the administrative procedure, which has no regulation for compensation.

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