The Recognition and Protection of Wellknown Trademarks of B&R Countries—Analysis on Turkish BEKO Trademark Infringement and Unfair Competition Case

Wang Xiaoming, Third Court of Guangdong Higher People’s Court

Ou Lihua, Third Court of Guangdong Higher People's Court

Synopsis

ZER Central Service Trading Co., Ltd. of Turkey (ZER) is the registrant of Nos. 1301945, 1323880, 1361801, 7022261 and 7022524 for the “BEKO” trademark. Except 1323880, four trademark designate goods in classes for electrical household appliances, and kitchenware in particular. Changzhou BEKO Co., Ltd. (Changzhou BEKO) and Shanghai BEKO Co., Ltd. (Shanghai BEKO), which are wholly owned by third parties not involved in this case, used the “BEKO” trademark under license of ZER, making continuous promottion and sale under “BEKO” from 2009 to 2014.  Because of the continuous business operations under the brandname “BEKO” by Changzhou BEKO and Shanghai BEKO, the brand became a household word among the relevant public in more than 10 provinces and municipalities in China.

Zhongshan City O-beko Electrical Appliances Co., Ltd. (O-beko) has registered the domain names www.O-beko.cn and www.O-beko. com without author i z a t i on and conduc ted e-commerce transactions related to small electrical household appliances. O-beko promotes household appliances branded O-beko on its website, and uses “ ”, “O-BEKO” and "OBEKO" logo in the prominent display on the website to promote and introduce its household appliances. O-beko also uses its unregistered English name Zhongshan City O-beko Electrical Appliances Co., Ltd., to promote and sell its household appliances.  

ZER considers that its trademark at issue is a famous mark, that O-beko has committed trademark infringement and unfair competition, and therefore requests cease and desist of O-beko’s infringing activities of its five exclusive trademark rights, cancel the domain name O-beko.com and O-beko.cn, an immediate injunction against trademark infringement and unfair competition, and compensatory damages plus reasonable cost, in the amount of one million yuan.  

The court of first instance held that the main business income of ZER was subject to loss for 5 consecutive years, and the evidence submitted by ZER can’t prove that it enjoyed a high reputation and market popularity in China’s market share and among the relevant public, and there was insufficient basis of “BEKO” trademark as a famous trademark. The registration of the domain names www.O-beko. cn and www.O- beko .com by O-beko Company and conducting e-commerce transactions of related products through the domain names infringed the exclusive trademark right of ZER. The use of a trademark similar to ZER’s registered trademark “BEKO” on the same or similar goods by O-beko violated the exclusive rights of No. 1301945 and 1361801 registered trademarks of ZER. The“O-beko”in the English name “Zhongshan City O-beko Electrical Appliances Co., Ltd.” was not used prominently in its products, and it didn’t constitute the situation that the same or similar words with other registered trademarks, as the enterprise name, were used prominently in the same or similar products, easy to cause relevant public to misunderstand.  Although O-beko used “O-beko” as its English name, it clearly indicated on its website that its company name is Zhongshan City O-Beko Electric Appliance Co., Ltd., which was different from the enterprise name “Beko” corresponding to the company established by ZER in China, not enough to cause the relevant public to misunderstand and confuse the source of products.  ZER failed to prove that annual sales on O-beko website were all infringement income, so the compensation amount from O-beko shall be reasonably determined based on t h e nature o f the infringement act, scale of operation and duration of Beko, variety of infringed registered trademarks, market price, famous degree of trademarks and reasonable expense paid by ZER to stop the infringement act and other factors.  The court of first instance ruled that O-beko is immediately enjoined from the use of domain name containing the words “obeko”  and “o-beko” from the date when the judgment was legally effective; O-beko shall immediately stop the infringement of No. 1301945 and 1361801 registered trademarks of ZER from the date when the judgment was legally effective, that is, O-beko Company shall immediately stop the use of “ ” logo on its website and products. O-beko s h a l l compensate ZER for the economic loss of 100,000 Yuan within 10 days from the effective date of the judgment; ZER’s all other claims are dismissed.

Both sides were unsatisfied and appealed. The court of second instance found that it was error for the court below to directly determine whether the trademark was famous, without examining whether the trademark in this case conformed to the principle of certification on demand; that it was error to use sustained losses of ZER for 5 years as basis for denying well known status of BEKO trademark; that O-beko’s trademark infringement or unfair competition did not hinge on whether ZER’s mark was famous; that ZER’s trademark in this case was sufficient to protect its rights; that the domain name registered by O-beko and the use of “ ,” “O-BEKO”and “OBEKO” logo infringed ZER’s trademark right, and the used English company name without registration constituted unfair competition; and that ZER spent nearly a million Yuan on the litigation, and O-beko had clearly earned more than a million yuan according to sales on its website.

The appeals court decided to affirm the first item of the decision below, that is, O-beko is immediately enjoined from using a domain name containing the words“obeko”“o-beko” from the date of the judgment; Abrogate the first instance judgment “plaintiff’s all other claims are

dismissed”; Change the second item of the first instance judgment as: O-beko shall immediately stop infringing upon the exclusive right to use No. 1301945 and 1361801 registered trademarks of ZER, and immediately stop using the “ ”, “O-BEKO” and “OBEKO” logo; Change item 3 of the first instance judgment as: O-beko Company shall compensate ZER for the economic loss and reasonable rights protection fee of 100,000 Yuan within 10 days from the effective date of the judgment; Dismiss other litigation claims of ZER Company.

Judge’s Comments 

ZER is a company from Turkey, an important country of the Belt and Road, and the registrant of “BEKO” trademark in that country.  The market share “BEKO” brand is top in Europe. This case is the first rights protection litigation filed when “BEKO” brand was infringed upon after entering the Chinese market. It is also the first case of "the Belt and Road" national intellectual property judicial protection accepted by Guangdong High People’s Court after China initiated the “the Belt and Road” national strategy. This case mainly involved the following two issues:

(I) Rule of judicial recognition of well known trademark and whether corporate profit could be a prerequisite for such recognition.

According to Article 5 of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law to the Trial of Cases of Civil Disputes over the Protection of Famous Trademarks, if the parties claim that the trademark is famous, they shall provide the market share, sales area and profits tax of the commodities using the trademark; period of continued of the mark; the means, duration, extent, capital investment and territorial scope of the advertisement or promotion activity for the trademark; records of trademark protected as a famous trademark; market reputation enjoyed by the brand; and other facts that prove that the trademark is already famous. The time, scope and manner of trademark use mentioned in the preceding paragraph shall include the situations of continuous use of the trademark prior to its approval of registration. The people,s court shall conduct an objective and comprehensive examination of evidence concerning the sustained use of the mark, industry ranking, market survey report, market value assessment report, and whether it is recognized as a famous trademark.

It is the primary purpose of ZER’s litigation in this case to request famous trademark recognition.  However, from the actual situation, even if all “famous” evidence submitted by it is confirmed, it can only at most prove that it has a certain reputation as a famous trademark in nearly half of China, and it can’t meet the standards off actual proof o f famous trademark. Moreover, four of the five trademarks claimed by ZER in this case are sufficient to protect their rights and this case doesn’t conform to the principle of famous trademark recognition on demand. In the first instance, it was error to directly conduct the fact finding without examining whether this case conformed to the premise (recognition on demand) of the famous trademark recognition.

It was also error that the primary reason for not recognizing the famous trademark in the first instance was the loss of enterprise. The famous trademark not only carries the popularity of commodities, but also carries the reputation of commodities. It is also related to the goodwill of commodities and the reputation of enterprises. Generally speaking, the higher the popularity and reputation of products are, the stronger the profitability is and therefore the more unprofitable products are. However, whether the enterprise’s products are ultimately profitable is closely related to overall management and operation cost of enterprises, operating strategy, whether the performance pricing of products is beneficial to marketability, market adjustment and fluctuation, etc., and it isn’t necessarily related to whether the enterprise has a famous trademark.  Whether the enterprise is subject to loss or profit as a whole isn’t a necessary factor to recognize a famous trademark. That a trademark which is widely known to the relevant public in China and enjoys a good market reputation is the necessary factual condition for famous trademark recognition. Only when the loss of the enterprise is directly related to the trademark popularity and product reputation can it be taken as the consideration factor. However, even in this case, the loss is the result rather than the cause, and the reason why it isn’t recognized as a famous trademark isn’t the loss of enterprise, but based on the fact that the trademark popularity and product reputation aren’t high. It is necessary to make a selective analysis to clarify the relationship between the loss of enterprise and famous trademark recognition.

(II) Limits on the legitimacy of English name used by enterprises 

The enterprise name is the name of the business entity, the collection and direction of all the corporate marks and the direct mark to distinguish the market entity. It has the most intuitive and clear market recognition ability, and easily becomes the gripper and platform for the infringement of commercial marks. The registration of enterprise name shall comply with the provisions of laws and administrative regulations. According to Articles 6 and 8 of the Provis ions on Administration of Enterprise Name Regulation, an enterprise is allowed to only use one name; the enterprise name shall use Chinese characters; if an enterprise uses a foreign language name, such a name shall be consistent with its Chinese name and shall be recorded with the competent authorities for recordal. The use of enterprise name shall conform to the principle of good faith and shall not prejudice the lawful rights of others.  The adoption of an English business name shall be lawful: First, it shall be consistent with the Chinese name; second, it shall be recorded with the competent authorities for recordal; third, it shall be unique, and only one English name can be used.       

The use of English business name shall be lawful: First, it shall comply with the principle of good faith and can’t be used in bad faith; second, the lawful prior rights of others shall be avoided and the lawful rights of others shall not be infringed upon.

As far as this case is concerned, there is no validity and legitimacy in the adoption and use of the English name of O-beko. The English name of O-beko is not recorded and has no corresponding relationship with the Chinese name.  The foreign word “O-beko” in the English enterprise name doesn’t correspond to its characters “Ouboer” but it does correspond to “BEKO” trademark, which was first registered and used by ZER in this case and had a certain popularity and market reputation among the relevant public; O-beko failed to use the registered English enterprise name normatively.  The English enterprise name is de-administrated for simplified use, its English name “O-beko”  is highlighted, or the English company name and “ ” logo are used together to introduce products and the “O-beko” brand attributes are strengthened, which clearly overstep the limits on the fair and bona fide use of enterprise name, violate the principle of good faith, mislead the public, violate the rules of fair competition and shall be deemed to constitute unfair competition.

A request for injunction is another purpose of ZER in this case. The gripper of infringement of O-beko Company is its English name . Other infringement marks, domain names and others were expanded and derived on this basis, and finally a threedimensional multi-dimensional comprehensive infringement recognition network was formed. The first instance of this case failed to grasp the relationship between alleged behaviors and the essence, failed to make an analysis from the illegality of adoption and use of the English buiness name, firmly believed that unfair competition wasn’t constituted and facts and applicable law were wrong simply for the reason that it also used a Chinese company name different from the one established by ZER in China, so it was insufficient to cause the relevant public to misunderstand and confuse the source of the products.

Defendant O-beko as an enterprise with main operation of international trade, didn’t make no attempt to make innovation, just sought imitation, took the logo approximate to “BEKO” trademark of ZER as its English name, domain name and trademark, took its unregistered English business name as the infringement fulcrum and implemented the infringement acts in all dimensions through different methods such as highlighting use, covert use, combination use and multi-party use. It attempted to share the market interests of others through “free riding”, reap where one has not sown and mislead the public, which not only harmed the oblige, but also harmed social public and consumers and eventually harmed the actor itself. The cognizance and treatment of infringement act of O-beko is directly related to the basic development view, market view and legal value orientation. Only by accurate self-positioning, avoiding imitation of “free riding”, seeking self-development through innovation and owning independent brands can export-oriented enterprises achieve real sustainable development.