First-instance case number: (2018) Zhejiang 01 Preliminary Civil Judgement No. 2617

Second-instance case number: (2019) Zhejiang Final Civil Judgement No. 939

According to the principle of exhaustion of trademark rights, the resale of parallel-imported genuine products without changing the original state of the goods will not cause the relevant public to confuse and misunderstand the origin of the goods, and does not constitute an infringement of the trademark rights of the goods. The use of other people's trademarks on the door, exterior wall, window, etc. of shops selling genuine products will not cause the relevant public to confuse the source of the goods. However, it may cause the relevant public to misidentify the subject of the commercial management of the specialty store or believe that there is a specific association between the accused infringer and the trademark owner. Imitating other people's influential store decorations to sell genuine products will cause the relevant public to mistakenly believe that the accused infringer is a franchisee, thereby improperly gaining additional competitive advantages and constituting unfair competition.

Case introduction

Appellant (plaintiff in the original trial): Burberry Group PLC (referred to as Burberry Company)

Appellees (defendants in the original trial): Hangzhou Feacome Import & Export Trading Co., Ltd (referred to as Feacome Group), Yiwu Travelling Merchants Investment Development Co., Ltd. (referred to as Travelling Merchants Company)

Burberry Group has registered the "BURBERRY" series character trademark on the 18th category of luggage, wallets and other commodities, the 25th category of clothing and other commodities, and the 35th category of clothing and apparel retail stores' business management and other service categories. The "BURBERRY" product trademark has a high reputation and was once recognized as a well-known trademark and included in the National Key Trademark Protection List. Burberry Group uses the unique check design in its store decoration, with black as the base tone and check print as decoration. The overall use of inclined design and the check print composed of lines, and the use of white capital letters "BURBERRY" logo on the background. Burberry Group asserted that the overall business image constituted by the elements as mentioned above belonged to the packaging and decoration of well-known commodities.

In Yiwu City, Zhejiang Province, where the Travelling Merchants Company operates the "Heart of Yiwu" shopping mall, Feacome Group opened a "BURBERRY" specialty store with a black exterior wall and a check pattern with an inclined design and white capital letters "BURBERRY" on the background. The interior wall is white in tone, with horizontal check pattern as the background, and the black capital "BURBERRY" logo is used on the background. The shop window is decorated with several check-patterned wooden components; all the labels, English tags and shopping bags inside the store are marked with "BURBERRY" in large font. The product is also accompanied by a certificate of conformity, with the external label marked with "FEACOME" logo and the internal description text marked with "BURBERRY" and Feacome Group as its distributor.

Burberry Group held that the use of the "BURBERRY" logo by Feacome Group and Travelling Merchants Company infringed on its three trademark rights and corporate name rights in the categories of goods and services, and Travelling Merchants Company imitates its influential store decorations and constituted a trademark infringement and unfair competition. So it sued to the Intermediate People's Court of Hangzhou City, Zhejiang Province, requesting an order for the two companies to stop the infringement and pay damages of RMB 5.1 million jointly and severally.

The court held in the first instance that: Feacome Group imported and re-sold the original products and the packaging with the "BURBERRY" trademark in China product did not infringe the trademark rights of the goods involved, nor did it constitute an infringement of the company name rights of Burberry, but constituted an infringement of the service trademark right in the case. Burberry Group’s shop decoration involved in the case has a certain influence, and Feacome Group’s use of similar decorations with the same overall style constituted unfair competition. In summary, the court’s judgment of the first instance: Feacome Group to stop the infringement, and jointly compensated Burberry Group for economic losses and reasonable rights maintenance costs of RMB 500,000 along with the Travelling Merchants Company.

All parties refused to accept the judgment of the first instance and appealed to the Zhejiang Higher People's Court.

The Court of Second Instance held that: the goods in question in the case sold by Feacome Group were genuine products from Burberry, and the sales did not weaken the core function of the trademark involved in the origin of the goods, and the existing evidence was not sufficient to prove that the accused act was scandalizing or diluting the goodwill of the trademark, so it did not constitute an infringement of the trademark right of the goods involved in the case. However, the word "BURBERRY" was conspicuously marked on the front door, exterior wall and window of the shop involved in the case, which exceeded the reasonable limit of describing the brand of goods sold by the company. It easily misled the relevant public into thinking that the shop in question was directly managed and opened by Burberry, and that it was the same type of service using the trademark "BURBERRY". The same trademark constituted an infringement of Burberry's service mark rights. Regarding Burberry’s claim that the company’s name rights have been infringed, since Feacome Group’s publicity and use are mainly based on the use of the "BURBERRY" logo in the sense of trademark, and Burberry had obtained remedies based on the service mark, the act in question did not constitute an infringement of the right to a company name. Feacome Group had decorated the store in question in imitation of Burberry's influential décor, which led consumers to believe that the store was a Burberry store or a franchise store, thereby to generate more trust in quality and service, and to make shopping choices. This behavior improperly obtained additional trading opportunities, obviously harmed the legitimate rights and interests of Burberry Group, violated the principle of good faith and business ethics, and constituted unfair competition. The Travelling Merchants Company should bear joint and several liabilities with it according to the case.

In summary, the court ruled in the second instance: to reject the appeal and uphold the original judgment.

Typical meaning

With the globalization of commodity circulation and the development of China's judicial practice, in recent years, the local courts have gradually reached a consensus on the principle of not infringing trademark rights on the sale of parallel imported commodities. However, in the process of resale of parallel imported goods, there are often situations in which trademarks of others are used beyond the reasonable and necessary scope. The judgment, in this case, regulates the above behavior, clarifies the rights of parallel import re-sellers, and clearly determines that shop decorations with a certain degree of distinctiveness and popularity are "commodity decorations with certain influence" protected by the Anti-Unfair Competition Law, effectively stopping the improper acquisition of the goodwill of others, and maintaining a good business environment for fair competition.