Strategies to Protect your Unregistered Trademark in China —From the Perspective of LAFITE Cases

Yujing HOU, Partner, Senior Lawyer of UNITALEN ATTORNEYS AT LAW

Yazhou ZHANG, Partner, Senior Lawyer of UNITALEN ATTORNEYS AT LAW

I. A Throwback to “LAFITE” Cases in China 

CHÂTEAU LAFITE ROTHSCHILD, which was ranked the first place among the Five Grand Cru Class in 1855 and her wines have always been honored as “the Queen of the Wines”, enjoys a long history and achieves high worldwide reputation. Thanks to the media exposure in newspapers, magazines, films and TV dramas, Lafite wines have gradually become popular among customers in Mainland China since 1980s, and the brand officially took its first step to expand the business in Chinese market at the end of 1990s.

The trademark “LAFITE” was registered in October 1997, one year after its filing. The mark No.4578349 “ 拉菲庄园 (‘Lafei Manor’ in Chinese)” was filed in April 2005 by a third party with bad faith and later got registered, whereas the counterpart of LAFITE in Chinese“ 拉菲” had not been filed until July 2007. This prior mark had blocked “ 拉菲” from being registered and “ 拉菲” was therefore drawn into long-term administrative proceedings, including the review of refusal of trademark registration as well as the opposition procedure afterwards, which was initiated by the right holder of “ 拉菲庄园”. Till March 2017 when CHÂTEAU LAFITE ROTHSCHILD won the opposition, “ 拉菲” was finally registered in China Mainland.

After LAFITE wines were introduced into the Chinese market, many wines bearing the marks that are either similar to or even same as “LAFITE” have emerged, which forced CHÂTEAU LAFITE ROTHSCHILD to protect her intellectual property rights via different legal reliefs including AIC complaint and court litigations etc. Prior to the eventual registration of the mark “ 拉菲” in China, the litigation strategies of CHÂTEAU LAFITE ROTHSCHILD to fight against those infringers shifted by two phases:

1) Seeking for protection under the Anti-Unfair Competition Law (the “AUCL”) by claiming “LAFITE”to be the unique name of famous commodity;

ii) Seeking for protection under the Trademark Law by requesting the court to recognize “LAFITE” as an unregistered well-known trademark. Among all the judgments which have already come into force, there are three crucial cases which embody Chinese courts’ attitudes and standards towards unregistered trademarks.

Case I: ChateauLafite Rothschild v. Shenzhen JinHongDe Trading Co., Ltd.(Unfair Competition Case)

In 2011, CHÂTEAU LAF ITE ROTHSCHILD brought a lawsuit against Shenzhen JinHongDe Trading Co., Ltd. for trademark i n f r i n g e m e n t a n d u n f a i r competition by way of attaching the logo “LAFITE FAMILY” to the wine products. It produces and sells, registering “lafitefamily.

com” as domain name and using the mark “ 拉菲世族 (counterpart of ‘Lafite Family’ in Chinese)” in promotion. Apart from typical trademark infringement acts, like using “LAFITE FAMILY” and the domain name “lafitefamily. com”, the key arguable issue was whether the Chinese mark “ 拉菲世 族” constituted infringement on the mark “ 拉菲” which was not registered at that time. Regarding this issue, the court of first and second instance both held that the mark “ 拉菲” had established stable and direct relationship with the “LAFITE” wines, in which manner the mark “ 拉菲”had gained the required distinctiveness to identify the source of goods and thus was the unique name of the famous “LAFITE” wines. Therefore, the use of the wording “ 拉菲世 族”as a prominent feature on the infringing wines constituted unfair competition. This case was selected as the “Top 10 Cases of 2011” by the Supreme Court, for Chinese courts offered protection to the unregistered trademark “ 拉菲”in accordance with AUCL and further deterred free-ride behaviors. The court’s standard of determining whether imported foreign goods is famous as well as its positive attitude towards protecting imported foreign goods’ Chinese name were again affirmed by the Supreme Court through the release of this top case list.

Case II: ChateauLafite Rothschild v. DBR Lafite Wines Shenzhen Co., Ltd etc.(Trademark Infringement and Unfair Competition Case) 

In 2014, CHÂTEAU LAF ITE ROTHSCHILD sued DBR Lafite Wines Shenzhen Co., Ltd for : a) manufacturing and selling wines named “LAFFITTE 1770 / 拉菲 1770” and “LAFITE MONTEIL / 拉 菲蒙特尔”, which infringed her registered mark “LAFITE” and unregistered well-known mark “ 拉 菲”; and b) registering and using her unregistered mark “ 拉菲” as its trade name, which infringed the unregistered well-known mark “ 拉菲”. The key issue was focused on the Plaintiff’s claim that “ 拉菲”should be recognized as unregistered well-known trademark and obtain protection accordingly. The court, however, protected “ 拉 菲” as a unique name of famous commodity instead of unregistered well-known trademark. According to the court, since the mark “ 拉菲”had been recognized for several times by courts as unique name of famous commodity, it had in fact achieved a relatively high reputation as an unregistered mark. Considering that the infringers apparently had bad faith by copying the Plaintiff’s mark and free-riding on the Plaintiff’s reputation, it is reasonable for the court, based on the AUCL, to enjoin the defendants from using the marks in dispute and to request changing the trade name.

Case III: ChateauLafite Rothschild v. Shanghai BaoChun Wine Development Co., Ltd. etc.(Trademark Infringement Case) 

In 2015, CHÂTEAU LAF ITE ROTHSCHILD initiated a legal action against Shanghai BaoChun Wine Development Co., Ltd. etc. for its importing and selling wine products bearing the mark “CHATEAU MORON LAFITTE” and “ 拉菲特 庄园 (counterpart of ‘CHATEAU MORON LAFITTE’ in Chinese)”, which constituted trademark infringement on her registered mark “LAFITE” and unregistered well-known mark “ 拉菲”. In this case, to determine whether the English logo “CHATEAU MORON LAFITTE” constitutes a similar mark to the Plaintiff’s registered mark “LAFITE”, the court has to balance many factors, including the comparison between the marks and the fact that many marks that contained the wording “LAFITTE” had been successfully registered in France (thus issues such as the territorial nature of trademark arose as well). After rounds of arguments between the two sides, the court made conclusions on the following key issues: 1) the court confirmed that it was necessity to determine whether the mark “ 拉菲” constitutes well-known trademark, and that the mark “ 拉菲 庄园” registered by the third party had no effect on the well-known trademark recognition in this case as it had been invalidated during the litigation process and should be regarded as never existed; 2) the mark “拉菲” had established a stable and direct relationship with the mark “LAFITE” and thus achieving “well-known” status, based on the evidence submitted in this case along with several administrative decisions or judicial judgments in which the mark “LAFITE” was recognized as well-known by the Trademark Review and Adjudication Board (“TRAB”) or the courts. Therefore, the marks “CHATEAU MORON LAFITTE” and “拉菲特庄园”in dispute infringed the plaintiff’s registered mark “LAFITE” and unregistered well-known mark “ 拉菲”, due to which the defendants were ordered by the court to cease infringement, eliminate negative influence and pay the damages in the amount of 2 million Yuan.

This case was elected as Top 10 IP cases by Shanghai High Court and 50 Typical IP cases by the Supreme Court in 2017. According to the writers’ research, this is the first case where the court in Shanghai has ever recognized an unregistered well-known trademark. Also, it is the first civil case in the past 9 years in which the court recognized an unregistered well-known trademark following “ 苏富 比（counterpart of “SOTHEBY’S” in Chinese” case, “ 酸酸乳（means “Sour Sour Yogurt”）” case and “ 仙灵骨葆 （XianlingGubao, a type of medicine in treating osteoporosis）” case. Right after this “ 拉菲” unregistered well-known trademark case was unreleased, Beijing Intellectual Property Court subsequently entered into a judgment in which it recognized the mark “ 新华字 典 (means XINHUA Dictionary)” as unregistered well-known trademark, and again brought the public awareness to such issue.

II. Brief Introduction of Legal Issues in Dispute

There are two approaches to seek protection for unregistered trademarks: claiming unique name of famous commodity under the AUCL, or claiming unregistered well-known trademark under the Trademark Law, with each having its pros and cons. How to choose between the aforesaid two options becomes the primary question for the right holder of an unregistered trademark when claiming its rights.

From the court’s point of view, well-known trademark recognition means much heavier workload as the court needs to report the case to provincial level court before a decision is made. Since the court is allowed to cite Article 30 (regarding similar trademarks used on similar goods/services) when the plaintiff claims Article 13 ( regarding the protection of well-known trademarks) in administrative procedures to avoid well-known trademark recognition, i s i t reasonable to dismiss the plaintiff’s request to recognize unregistered well-known trademark but instead to protect the mark as a unique name of famous commodity? Why would those trademarks with significant commercial values encounter such difficulties in seeking legal relief when infringement happens? The main reason is that in most cases the trademark rights obtained through registration prevail over those obtained through trademark use. The reasons of non-registration mainly lie in the following aspects: 1) It is hard to have the mark registered due to its lack of inherent distinctiveness, such as “ 酸酸乳”“ 仙灵骨葆”“ 新华字 典”; 2) The registrant of foreign trademarks, when stepping into the Chinese market, may only register the original trademarks yet ignore the necessity to register the counterpart Chinese characters.

Situations may get worse when someone with bad faith register the Chinese counterpart mark prior to the foreign trademark owners, for example the mark “ 苏富比”“ 拉 菲”. Here in this article, we’ll pay less attention to the inherent distinctiveness of the unregistered trademark but focus on how to balance the interests vested in the holder of unregistered trademark and the registered trademark owner.

Under the current legal framework in China, the Trademark Law only sets out in Article 13 that any mark infringing on the unregistered well - known trademarks shall be prohibited from registration and use. The Article 63 of the Trademark Law, which lays out the standards to determine the amount of damages in trademark infringement cases, is in fact a part of Section 7 titled “Protection of Registered Trademark Rights”. Therefore, the liability of infringing unregistered well-known trademarks remains blurred as to whether the infringer should be ordered to pay any damages apart from ceasing infringement in civil trademark cases. 

The following parts of this article will briefly discuss the issues mentioned above, based on the current laws and regulations, as well as the previous cases and scholars’ viewpoints.

III Choice Between Seeking for Protection under Trademark Law or Anti-Unfair Competition Law 

1. Analysis on Pros and Cons of Both Options

From the perspective of the plaintiff, it is relatively easier to claim names, packaging or decoration of commodity with a certain degree of influence under Article 6 of the revised AUCL (same as “unique name of famous commodity” stipulated in Article 5 before AUCL is revised) than to claim unregistered well-known trademarks under Article 13 of the Trademark Law, as the former sets a lower threshold in terms of the level of reputation the mark must have achieved. However, protection granted to unregistered well-known trademark is stronger, as an unregistered well-known trademark will be offered all the special protection that a registered well - known trademark may enjoy except for the cross-class protection, including prohibiting others from using similar marks on similar goods/services or using the unregistered trademark as its trade name.

From the perspective of court, it will only determine on whether a trademark is well-known when it is prerequisite to grant protection under that case’s circumstances, namely the principle of “recognition upon demand”, thus the standard to recognize an unregistered trademark should be especially stringent. Now that the AUCL has set out provisions regarding protection on unique name of famous commodity, which could satisfy the trademark owners’ fundamental needs to protect their marks that are not registered yet enjoy a high reputation. It is not unreasonable for the court to resort to the relevant provisions in AUCL and thus avert recognition of well-known trademark. Under the current legal practice, some courts tend to choose this path, namely to offer protection to unregistered mark under the AUCL rather than the Trademark Law, when the owner of the unregistered mark claims under both the unique name of famous commodity provision and well-known unregistered trademark provision, such as “ 诸葛 酿/ZhuGe-made Wines” case and“’ 荣华月饼/Ronghua Mooncake” case.

However, in case where the owner of the unregistered trademark only claims its rights according to the well-known unregistered trademark provision under the Trademark Law, whether the court has grounds to in turn apply the AUCL to offer judicial protection still remains unclear yet. But it is not necessarily bad for the unregistered trademark owners if the court decides to cite the relevant provisions under the AUCL, especially when the trademark owner could not provide sufficient evidence to prove that the unregistered mark has actually achieved the level of “well-known”, which actually means a double insurance to ensure protection.

However, if such judicial practice prevails, it will lead to a situation where the provision of well-known unregistered trademark under the Trademark Law would end up on the shelf as the court can always choose to resort to AUCL to avert well-known recognition no matter how sufficient evidence the trademark owner can provide. As the Professor Xiaoqing FENG mentioned, the crossover between the “unique name of famous commodity” and “well-known unregistered trademark” should not become the ground for the court to deny the application of the well-known unregistered trademark provision of the Trademark Law. For the owner of the unregistered trademark, the most ideal mode would be where the court reviews the evidence and decides whether it is sufficient to recognize the unregistered trademark as well-known according to the claims of the trademark owner, and meanwhile consider the possibility to turn to apply the AUCL if the level of reputation is insufficient to support recognition of well-known unregistered trademark. But as it can be seen, most court will choose to dismiss the plaintiff’s claim when there is no need or the evidence submitted is not able to meet the reputation standards to recognize well-known trademark, which means the court leaves the trademark owner with both the option to choose one legal relief and the corresponding risk to be dismissed.

Here it is necessary to point out that, in addition to the two aforesaid approaches, there is another way to obtain protection for unregistered trademarks, namely to claim that the infringing Chinese mark constitutes a similar mark to the registered foreign trademark by way of demonstrating the stable and direct bond between the registered foreign trademark and its Chinese version. Detailed discussion of such circumstance will be omitted here as it is no big difference with the general trademark infringement cases.

2. Multiple Natures of A Same IP Right

Despite the barriers encountered by a well-known unregistered trademark due to either its lack of inherent distinctiveness or its later filing, it may get registered during the litigation process after the blocks are cleared. Does this take away the necessity of well-known recognition of this later registered trademark? Let’s take a look at “ 七天连锁酒店/7 Days Inn” case. In this case, the plaintiff’s mark “ 七天连锁酒店” had been used for many years and achieved a high reputation before its registration in February of 2013. But the accused infringement began in July 2012 and lasted till the case filing date, when the plaintiff’s mark had acquired registration. The court of first instance held that the evidence provided by the plaintiff was insufficient to prove that the mark which was not registered then had became well - known when the accused infringement happened. The court of second instance, however, avoided analysis on whether the accused behavior constituted infringement but made its points on the liability of infringement. According to the court, the liability of infringing on the rights in unregistered trademarks involve nothing more than stopping infringement, so there is no need to divide the accused infringement into two phases (before/after the mark “ 七天连锁酒店” was registered) and discuss the two phases respectively. Besides, recognition of well - known unregistered trademark would be unnecessary as the protection given to registered trademark under the Trademark Law is sufficient to allow the court to enjoin the infringers from further infringement. Here the writers are not going to discuss whether it is correct to limit the civil liability of infringement on unregistered trademark to mere ceasing infringement, but at least it is not justified to simply skip the examination of the infringing behaviors happening prior to the mark’s registration.

Regarding this issue, the court’s opinion provides more valuable information by the “New Balance”case. In the case, the court clarified that the law does not deny the existence of two types of intellectual property rights on one objection (here refers to the “N” design). When a decoration of famous goods is later registered as a trademark, the trademark owner is entitled to the protection afforded respectively by the AUCL and Trademark Law at different stages, which are not contradictory in themselves. If the “N” design could not receive protection under the AUCL just because it later became a registered trademark, this will result in an unfair situation where the prior rights will not be appropriately protected, meaning that the plaintiff is not able to seek relief for the infringement conducted before the registration or to invalidate those trademarks filed prior to the registration based on decoration of famous goods. The court which decided the “ 拉菲 特庄园(CHATEAU MORON LAFITTE)”case mentioned earlier in this article also holds similar opinion.

IV Rights Conflicts Between Unregistered Trademark and Registered Trademark 

Since 2010, the brand owner of LAFITE has acquired judicial protection of the mark “ 拉 菲” based on unique name of famous commodity or well-known unregistered trademark in many cases. On the other hand, there is a trademark “ 拉菲庄园” filed by others in April 2005 and registered in November 2007, and was then announced invalid in December 2016. During the 9-year time when the mark “ 拉菲庄园”was validly registered, whether should the rights based on the mark “ 拉菲” be limited by the registered trademark rights vested in the owner of the mark “ 拉菲庄园”? The writers believe the answer is NO according to the current legal practice in China. In the judgment of the “84 HaoBangShou (means good helper)”case, the court said that the rights of a registered trademark do not necessarily exclude and reject other prior intellectual property rights. According to the court, other prior rights should be protected when they are legally formed and have reasonable legal grounds.

There may also be viewpoints that when the defendants or third party owns registered trademark, the plaintiff can no longer request protection for the unregistered trademark which is similar to the registered one and used on same/ similar goods, as allowing for such claims may overlap with the protection scope of the registered trademark. Such opinion is mostly based on the official reply made by the Supreme Court in the “ 荣华月饼 (Ronghua Mooncake)” case that the protection afforded to unique name of famous goods under the AUCL is supplementary and secondary and the unique name or other unregistered trademark rights cannot be established after a similar mark is registered. But those viewpoints may have left out the time limit “after registration of the trademark” mentioned in the Supreme Court’s reply. If, prior to the registration of the defendant’s or third party’s trademark, the plaintiff’ s mark has already achieved a relatively high reputation either as unique name of famous goods or well-known unregistered trademark, then the registration of the mark cannot limit the plaintiff’s rights or even will probably be invalidated. This is also the crucial point in the success of LAFITE cases, where the plaintiff has provided sufficient evidence to prove that the mark “ 拉菲” has enjoyed a high level of fame since 1990s, far earlier than the filing date of the registered trademark “ 拉菲庄园”.

V. Civil Liability of Infringement on Unregistered Well-Known Trademark 

In fact, to read only from the legal provision itself, the Trademark Law does not limit the civil liability of infringement of well-known unregistered trademark to stopping infringement and preclude paying for damages. Article 58 of the Trademark Law, which belongs to Part VII titled “Protection of Registered Trademark”, also forbids others to use well-known unregistered trademark as trade name; and Article 63 which stipulates the damage issue does not explicitly restrict its application to only registered marks.

Experts have divisions in terms of whether damages should be awarded in civil cases related to infringement of well-known unregistered trademarks. Some scholars hold the point that the protection offered to unregistered trademark is based on trademark use, thus should be supplementary and secondary compared to the protection of registered trademarks and be restricted to a certain degree. But others suggest that the owner of unregistered well-known mark should be given the right to claim damages under the Trademark Law.

From the perspective of judicial practice, all the aforesaid cases involving recognition of well-known unregistered trademark have awarded damages except for the “苏富比(SOTHEBY’S)” case. In the case of “ 新华字典 (XinHua Dictionary)”, the court held that the infringing use of marks, which are similar to the unregistered mark that has attained high reputation through extensive commercial use, on same/similar goods is actually free-riding on the business reputation of the famous brand. Therefore, the infringement of unregistered trademark should involve liability to pay for damages. In the “仙灵骨葆 （XianlingGubao, a type of medicine in treating osteoporosis）” case, the court held that infringement on the well-known unregistered trademark will lead to possible decrease of the trademark owner’s market share, which will bring about more serious damages compared with using well-known trademarks on different class of goods/service. The protection offered to well-known unregistered mark should be broader than that given to unique name, packaging and decorations of famous goods.

In the aforesaid “ 拉菲特庄园 (CHATEAU MORON LAFITTE)” case, the court has eventually ordered the infringers to pay damages in the amount of 2 million Yuan in the judgment, which has set out a good example regarding liability of infringement on well-known unregistered trademark along with the“ 新华字典” and “ 仙灵骨葆”cases.

Photo from: 699pic.com.