Trial Docket: (2017) Yue 20 MinChu No. 2
Guangdong Province
[Headnotes]
The transformation, in actual use, of regular registered trademarks into infringing trademark is a trend that is becoming a real concern. There is no need to cancel the accused trademark before initiating a law suit. In this case, 3M paid special attention to searching and submitting the evidence proving the intentional action of the trademark owner and got a favorable decision from the court.
[Synopsis]
Plaintiff: 3M Company (3M)
Defendant: MAO Qingyu & Zhongshan San En Meng Electronic Appliance Co., Ltd. (San En Meng)
3M is a world-renowned innovative technology company. In 2013, 3M registered the trademark "" in Class 11, covering "water filter, water purification device". The 3M trademark had been used in China for a long time, and were already known to the relevant public.
On July 1, 2013, a natural person Mao Qingyu filed a trademark application for "" in Class 11, covering the same goods "water purification equipment and machines, etc." The trademark consists of the Chinese character "了" (which is pronounced "liao" or "le") and the letter "M". The trademark was registered on January 14, 2015. Mao set up a company called Zhongshan San En Meng Electronic Appliance Co., Ltd. (San En Meng) on April 2, 2015, and authorized the company to use the trademark "". In September 2016, Mao handed over the position of legal representative to his father. However, in practical use, the "了" part of San En Meng's trademark was subtly modified so that the trademark was transformed into "", a sign visually very similar to 3M. 3M filed a civil litigation against both Mao and San En Meng before the Zhongshan Intermediate Cour t , Guangdong Prov ince, seeking for cessation of trademark infringement and damages.
The defendants argued that they were using their own trademark "", which was registered. The Court ruled in favor of 3M, and held that: (1) The registered trademark "" consists of the Chinese character "了" and the uppercase letter "M", while the accused trademark "" is a combination of the Arabic numeral "3" with the letter "M". The pronunciation and meaning of the two marks are obviously different. It is not just a nuance, since "" changed the distinctive features of "". Thus, the court found that the act of using "" does not constitute "standard use" of the registered trademark "". (2) Given the strong distinctiveness of the mark "" and the reputation of the products among the relevant public, the accused trademark "" constitutes trademark infringement. (3) The "" trademark owner, Mao, and the company San En Meng, set up to conduct the industrial activity, were found jointly liable. 3M had submitted notarized websites and recordings to the Court, proving that Mao and San En Meng were both aware of the high reputation of the trademark "" in purifier industry, and that Mao was perfectly aware that his trademark "" was being t ransformed by San En Meng to become the infringing use of "".
The Court calculated the damages by referring to the full statutory amount provided by the law. As it was difficult to assess San En Meng's illegal profits or 3M's actual loss, the Court determined the amount of compensation by considering the following factors: (1) Large-scale production and sales of the infringing products (30-40 models o f infringing products offered to sale on various e-commerce platforms); (2) Long duration of infringement (since the setup of San En Meng, still lasting during the process of court hearing); (3) San En Meng refused to provide financial documents reflecting the production and sales quantity of the infringing products and the profit, therefore, it should bear unfavorable legal consequences. The Court hence determined that San En Meng has benefited enormously from the infringement; (4) San En Meng and Mao apparently acted in bad faith in free-riding the reputation of the "" trademark; (5) 3M paid for the reasonable cost in order to stop the infringement. On October 30, 2017, the Court ruled that Mao Qingyu and San En Meng shall bear joint and several liability for a compensation of RMB 3 million. Wanhuida Peksung represented 3M in the civil proceeding.
[Judge's Comment]
The transformation, in actual use, of regular registered trademarks into infringing trademark is a trend that is becoming a real concern. These subtle transformations cannot easily be anticipated, and even if they are, the CTMO will not necessarily refuse the registration of a trademark because it might be transformed and become infringing. Where this happens, the AIC will usually refuse to take any action, because the defendant will claim that it is simply using a variant of its registered trademark. Civil litigation is therefore necessary. It is possible by an SPC interpretation of 2009, which specifically mentioned the case where a registered trademark is transformed in actual use: in such case, there is no need to cancel the accused trademark before initiating a law suit.
The difficulty in such cases is to prove the liability of the trademark owner who can easily claim that the act of licensing its registered trademark is perfectly legal, and that it cannot be held responsible for what the licensee does with the trademark. In this case, 3M paid special attention to searching and submitting the evidence proving the intentional action of the trademark owner.
This case shows the determination of the courts to sanction such behavior. In particular, the reluctance of the defendant in disclosing its accounts had an obvious impact on the court 's decision.