IX. Case on Copycat "HEYTEA" Operator’s Refusal to Accept the Trademark Infringement Administrative Punishment

Plaintiffs Chen Xiaolong, Chen Liliang and Wang Huagui refused to accept the Defendant's trademark infringement administrative punishment made by Shanghai Pudong New Area Intellectual Property Office [Administrative Judgment (2018) H 0115 XC No. 373-375 of Pudong New Area People's Court of Shanghai, members of the collegial panel: Jin Minzhen, Ni Hongxia Lu Guangyi]

[Case Brief]

On December 15, 2017, Shanghai Pudong New Area Intellectual Property Office issued administrative penalty decisions to the Plaintiffs Chen Xiaolong, Chen Liliang and Wang Huagui, stating that the tea shop that the three Plaintiffs jointly invested in and operated was officially opened for business on September 17, 2017, which marked with “” in the store signboard, the store's promotional banners, price lists and tea cups. The third person, Meixixi Catering Company, registered the trademarks No. "19" “” and No. 13595312 “” for the approved services of the 43rd category of cafes, teahouses, restaurants, etc. The three Plaintiffs, without the permission of the trademark registrant, use the logo similar to the registered trademark of the trademark owner in their store advertisements, in-store promotional banners, price lists, and milk tea cups on the same kind of service, which may easily lead to confusion and has constituted the act as stipulated in Article 57(2) of the Trademark Law. According to the provisions of Article 60, Paragraph 2 of the Trademark Law, the three Plaintiffs were ordered to immediately stop the infringement and each was imposed a fine of RMB 4,000 yuan. The three Plaintiffs dissatisfied with the administrative punishment and filed a lawsuit to the court respectively, arguing that the alleged infringing trademark was authorized by Kaizhimei Catering Company to use by the three Plaintiffs. The two parties signed a catering service agreement (franchisee contract), and Kaizhimei Catering Company charged the Plaintiffs franchise fee and issued a license. The Plaintiffs used the infringing trademark only for one month without knowing the true condition and without the intention of infringement. Therefore, their illegal act was slight and did not cause harmful consequences. They requested the court to revoke the decision made by the Defendant, and exempt the Plaintiffs from the fine imposed on them.  

[Adjudication]

The court of first instance held that the Defendant has the statutory power to investigate and handle complaints and reports of violations of the exclusive right to use registered trademarks within its jurisdiction. In the three cases, the Defendant Shanghai Pudong New Area Intellectual Property Office carried out the work of accepting, investigating, inquiring, and feedbacking the complaints of the citizens. The law enforcement procedures were in compliance with the relevant regulations. The focus of the dispute in the three cases was whether the Defendant’s administrative penalties for the trademark infringement of the three Plaintiffs were correct in terms of application of law and whether the amount of punishment was legal. Firstly, the penalty exemption stipulated in Article 27, Paragraph 2 of the Administrative Punishment Law is that no penalty will be imposed on an act of administrative offence for it does not meet the penalty requirements. The actions of the three Plaintiffs have not yet met the three elements of “slight violation”, “timely correction” and “no harmful consequence”. Secondly, the amount of penalty imposed by the Defendant on the three Plaintiffs was legal. Each Plaintiff invested 1/3 to open a store, and the turnover gained from the official opening date of the store to the investigation date was 12,000 yuan. The decision, according to such situation and based on the investment ratios and income share ratios of the three Plaintiffs, determining that the illegal business amount of each Plaintiff shall be 1/3 of RMB 12,000 yuan, i.e. RMB 4,000 yuan, and making corresponding administrative penalties, was not in violation of the law. In summary, the judgment rejected the Plaintiffs’ claim. After the judgment of the first instance, none of the parties appealed, and the first-instance judgment took effect.

[Typical Significance]

The three cases exemplified the people's courts’ role in giving full play to the judicial leading role, supporting the administrative organs to actively perform their duties in accordance with the law, comprehensively safeguarding the administrative order of intellectual property rights, and vigorously promoting the administrative protection of intellectual property rights. At the same time, the ruling of this case suggests that the franchisee should conduct a strict examination of the relevant qualifications of the licensor and the legality of the operating resources before engaging in related operations to protect their rights. This case is of positive significance for standardizing, purifying the market transaction order, and safeguarding the legitimate rights and interests of consumers.

photo from: heytea.com