Armstrong case highlights problem in determining similar goods

Armstrong case highlights problem in determining similar goods,[Trademark]

In China’s Trademark Law, similar trademarks and similar goods are the criteria for identifying trademark infringements. Similar goods are the prerequisite for similar trademarks. In practice, there is a quite complex relationship between the registered classification of goods and the actual use of goods, which makes it more difficult to determine the similarity of goods. Recently, Beijing Higher People’s Court made the final decision on the case of trademark infringement and unfair competition dispute between Armstrong World Industries (China) Ltd. and Anhui Armstrong Building Material Co., Ltd. The court dismissed the appeal and upheld the original verdict. Proceedings of the case showed that domestic courts are actively seeking solutions to the problem of determining similar goods.


Case

Armstrong World Industries is the first enterprise to produce mineral wool sound absorbing ceilings, and is currently the world’s largest supplier for such goods. Armstrong World Industries was founded in 1860 in Pittsburgh, PA in the U.S. After 150 years of development it has set up 32 factories in 8 countries, and the total number of employees has reached 9,100. In 2011, its global net sales reached 2.9 billion U.S. dollars (equivalent to about 19 billion yuan), and the company is listed in the Fortune 500.


In 1995, Armstrong World Industries entered the Chinese market and invested 42 million U.S. dollars in establishing the Shanghai Armstrong Building Products Co., Ltd., which was also one of the Ten Major Projects in Shanghai for the year. In the same year, Armstrong World Industries invested and established the Shanghai Worthington-Armstrong Metal Products Co., Ltd. In 2007, Armstrong World Industries invested 20 million dollars in Kunshan and set up the Kunshan Armstrong Wood Co., Ltd.


Over the years, Armstrong World Industries has made investments in China, and developed together with China’s national economy. It has created jobs, increased tax revenue, and accumulated wealth for its own development. As a responsible multinational corporation, Armstrong World Industries has established a good business image in the industry and has gained a high profile in China.


Anhui Armstrong Building Material Co., Ltd. was established in September 5th 2011, and its main business is the production and sale of mineral wool sound absorbing decorative board with the brand of “Armstrong.” The mineral wool board produced by Anhui Armstrong Building Material Co., Ltd. is used for indoor ceiling, and “Armstrong” is used as its trademark and in its trade name, which could easily lead to public confusion. The above acts of Anhui Armstrong Building Materials Co. Ltd. have caused great harm to the market development of Armstrong World Industries in China. Therefore, the U.S. attorneys of Armstrong World Industries repeatedly contacted domestic law firms in search of solutions.


In May 2012, Armstrong World Industries brought a civil tort litigation to Beijing Second Intermediate People’s Court on the grounds of trademark infringement and unfair competition. In view of the complexity of the case, the court, after several hearings, made the first instance verdict in December 2012, finding that the conduct of Anhui Armstrong Building Material Co., Ltd. infringed the earlier registered and well-known “Armstrong” trademark of Armstrong World Industries and constituted unfair competition by using the trade name on infringing products.


Anhui Armstrong Building Material Co. Ltd. was not satisfied with the first-instance verdict and appealed to Beijing Higher People’s Court. In July 2013, Beijing Higher People’s Court dismissed the appeal and upheld the original verdict made by Beijing Second Intermediate People’s Court.


Dispute

The focus of this dispute is that Wang Xiuying, the legal representative of Anhui Armstrong Building Material Co., Ltd., registered the “Armstrong” trademark under Class 17 “mineral wool board (insulation material)” as an individual. In fact, according to the Distinction of Similar Goods and Services (the Distinction) released according to Nice Agreement Concerning the International Classification of Goods and Services for the Purpose of the Registration of Marks (the Nice Agreement), Class 17 does not contain the product name of “mineral wool board (insulation material).” After the registration Wang Xiuying then licensed the trademark to Anhui Armstrong Building Material Co., Ltd., and the “mineral wool sound absorbing board” produced by Anhui Armstrong Building Material Co., Ltd. was used for indoor ceiling decoration. Armstrong World Industries believed that the infringing goods were actually “non-metallic ceiling” goods because of the products’ name, properties, uses and because other features were all connected to ceilings. Anhui Armstrong Building Material Co. Ltd. argued that the alleged infringing goods were “mineral wool boards” as approved in the registered trademark of its legal representative. Of course, the final court lawfully recognized the accused infringing goods were actually goods which were similar to the approved goods covered under the earlier trademark registered by Armstrong World Industries.


The plaintiff’s lawyer, partner of Beijing Unitalen Law Office Zhang Yazhou, said the case reflects the complex relationship that may exist between the goods registered for the trademark and the goods which are in actual use. Some companies and individuals have taken advantage of this to confuse the public. The successful resolution of this case has laid a solid legal foundation for Armstrong World Industries to protect intellectual property in China. Unitalen’s work in this case has also been highly praised by Armstrong World Industries.


“The key to winning the case is to clarify the nature of the allegedly infringing goods. To be honest, the nature of the accused infringing goods is quite confusing. To discover out their function and uses, we can not just rely on self-perception of the goods or the superficial interpretation of the Distinction. We must rely on numerous sources of objective evidence to illustrate the similarity. I am very pleased that the judges hearing the case were not fooled by the illusion. They managed to uncover the truth and accurately recognized that the allegedly infringing goods were used for indoor ceiling decoration,” said Zhang Yazhou.


According to Zhang Yazhou, lawyers for this case undertook a great deal of careful and meticulous preparation in order to obtain this satisfying result. To understand what the accused infringing goods exactly are, lawyers looked up the literature for the comprehensive evolution history of interior ceiling materials. They meticulously researched patent literature and especially professional books to understand the difference between what “mineral wool” is and what “mineral wool board” is. Moreover, lawyers bought mineral wool, mineral wool boards and other products, visited building materials markets and consulted with experts and relevant participants of the building materials market. With reference to views from all parties, they successfully identified that the allegedly infringing goods were in fact indoor ceilings.


In this case, the court also concluded that the acts of Anhui Armstrong Building Material Co., Ltd. constituted unfair competition. As Zhang Yazhou explained, in this case the accused infringer registered “Anhui Armstrong Building Material Co., Ltd.” as the enterprise name. The word “Armstrong” in the trade name conflicted with the plaintiff’s wellknown trademark, and could cause confusion to the public. This infringed upon the plaintiff’s goodwill and went against the principle of good faith. Based on Article 2 of the Antiunfair Competition Law, the court ruled that the accused infringer’s acts constituted unfair competition.


In addition, the accused infringer used the false slogan “Armstrong, 150-Years of Quality Inheritance,” which showed the intent to promote products by taking advantages of other’s goodwill which constituted unfair competition. The unfair competition acts involved in this case are typical in the sense of using other’s earlier registered trademark as a trade name and thus causing public confusion.


Legal basis

The Nice Agreement is an important agreement that China has joined. Its most important content is to provide a unified international classification of goods or services for the purposes of trademark registration. The Nice Agreement establishes a specialized organ to explain, comment, revise and improve the International Classification of Goods and Services for the Purposes of the Registration of Marks (Nice Classification). After years of continuous development and improvement, Nice Classification has been widely used and accepted by countries throughout the world and its influence is also increasing.


The Distinction is the normative document developed and published by China’s trademark authority according to the Nice Agreement and Nice Classification. In practice, China’s trademark examination authority and the Trademark Appeal Board often use the Distinction as the basis for determining whether goods or services are similar without any further breakthrough in independent research. However, courts also treat the Distinction as the criteria, but often break from the classification standards.


Talking about the role and limitation of the Distinction in determining the similarity of goods, Zhang Yazhou believes that the Distinction is useful in that it is a really important part for trademark registration. Trademark registration can not be done without it. However, the Distinction has its limitations mainly in two aspects: Firstly, the classification of the Distinction is disjointed from real life. For example, some industries have established standards for identification and classification of goods, but the classification of the Distinction conflicts with the industry standards. In determining the nature of goods in accordance with industry standards, the class of product may be quite different from the Distinction; in judging in line with the Distinction, the result may not match with the actual products applied by the trademark registrants. Secondly, the Distinction has always lagged behind changes in the goods, which evolves with social and economic development. Previously unrelated goods can become closely linked over time. If the closely related goods are mechanically determined as “not similar” according to the Distinction and thus not protected, it would be very unfavorable for the right holders.


Article 28 of China’s Trademark Law provides the “same or similar trademarks” as criteria for refusing an application for trademark registration. In addition, Article 52 applies the “same or similar trademarks” criteria for trademark infringement. Article 52 provides that the act of using a trademark that is identical with or similar to a registered trademark in respect of the identical or similar goods without the authorization from the trademark registrant shall be an infringement of the exclusive right to use a registered trademark. According to Article 11 of the Interpretations on Several Issues Related to the Trial of Trademark Civil Disputes by the Supreme People’s Court, “similar goods” means goods that have identical functions, uses, production entities, sales channels, target consumers, etc., or goods that the relevant public would normally consider to have a certain connection and thus easily cause confusion. Article 12 of the interpretations also provides, to determine whether goods or services are similar, it should make an overall determination based on the normal knowledge of the relevant public with regard to the goods or services. The Nice Classification and the Distinction may be used as references for determining the similarity of goods or services.


The second instance court held that to determine whether goods are similar, one should undertake a comprehensive comparison based on the general public’s knowledge of related goods. The Nice Classification and the Distinction may be used as reference. Therefore, the court’s decision is consistent with the relevant provisions of the interpretations.


Judicial practices

Currently there are certain differences in the understanding and practices used by various domestic courts to determine the similarity of goods. Zhang Yazhou Said that in most cases domestic courts strictly follow the Distinction in determining the similarity of goods. Article 51 of the Trademark Law also makes it clear that the exclusive right to use a registered trademark is limited to the trademark which has been approved for registration and to the goods in respect of which the use of the trademark has been approved. Once the approved goods are clear, the basic boundaries of registered trademark rights are clear. It should be said that, in most cases, the Distinction causes no controversy in determining the product attributes, relationships and boundaries. Therefore, it is absolutely correct for local courts at all levels to identify the scope of trademark protection in accordance the Distinction. However, in some cases, if the goods are correlated, or become closely related after integration, it might be not objective to define the protection scope of a registered trademark in accordance with the Distinction , which may cause many problems.


Zhang Yazhou believed that the biggest problem for trademark infringement cases is to determine the similarity of trademarks or goods. This seemingly simple problem is actually very difficult. Therefore, different opinions exit on how to resolve this argument in practice: two similar trademarks do not lead to infringement, whereas two dissimilar trademarks do not mean non-infringement. The key to this problem lies in whether the two marks cause confusion to the relevant public.


In recent judicial practices, some courts found that the Distinction can serve as a reference point, rather than the only standard for determining the similarity of goods. Even if the cited trademark and the opposed trademark do not belong to the same international classification of goods, it does not necessarily lead to the conclusion that they are “not similar goods.”


In the trademark administrative dispute of Hangzhou Tucano Shoe Co., Ltd. v. Trademark Appeal Board & Take Seven (Holdings) Ltd., the Supreme People’s Court clearly put forward the principle of determining similar goods and provided a detailed explanation. The Supreme People’s Court held that when determining the similarity of goods in trademark disputes, controversies and subsequent infringement proceedings, courts should not mechanically and simply take the Distinction as the basis or standard. Judges should consider more practical elements and make judgments with full consideration of the circumstances of the cases. It should be emphasized that, since the determination is made on a case by case basis, the similarity of goods is not absolute or immutable and the relationship may be different from case to case based on the different facts. Related goods are often determined by the Distinction as nonsimilar, but in fact they have strong correlations and the coexistence of the two kinds of goods can easily lead to confusion. These goods should be placed under the framework of similar goods. As long as the public believes that the goods or services are provided by the same party or there is special relation between the providers, the related goods can be judged as similar goods in legal terms.


In the trademark dispute cases concluded by Beijing courts in 2012, there were a number of cases involved with the determination of the similarity of goods. In the administrative trademark case of KSS Co., Ltd. v. Trademark Appeal Board & Chen Haiting, Beijing Higher People’s Court found that the Distinction was only a reference for determining similar goods at trial. Goods classification is dynamic, and consequently courts need to judge according to the related market conditions and the general knowledge of the public. In the administrative trademark dispute of Shandong Dayu Longshen Wine Co., Ltd. v. Trademark Appeal Board & Hu Jianying, Beijing Higher People’s Court held that the examination on similar goods should not be the comparison of physical attributes, but should compare the product function, use, production entities, sales channels, and consumer groups. Courts should compare their similarity and relationship, whether the coexistence of the two trademarks can cause the relevant public to conclude that the goods are from the same provider, or there is a specific link between the providers. In the trademark appeal dispute of Ginwa (Group) Co., Ltd. v. Trademark Appeal Board & Kunming Green Valley Biotech Co., Ltd., Beijing Higher People’s Court held that the determination of similar goods should also consider the public’s awareness of the earlier registered trademark and other factors.


Thus, in addition to the Distinction, courts will also consider functions, uses, production entities, sales channels, consumer groups and related factors, as well as the reputation of earlier trademark and the coexisting relationship to identify similar goods.


Zhang Yazhou pointed out that the current trademark infringement cases showed the following trends: Firstly, well-known trademark protection has become a hot spot, which is partly caused by the goods classification of the Distinction. In some cases, the alleged infringing goods are actually related to the goods protected by registered trademarks, but the Distinction defines them as different goods. So, the right holders can only seek well-known trademark recognition and request that the Court grant cross-class protection according to the Article 13 of the Trademark Law. Secondly, in certain trademark infringement cases, the alleged infringer has a registered trademark, a design patent, or other civil rights as defense. The legal relationship in the case is more complicated. Courts must first clarify the relationship between the legal rights, and then determine which scope of claims the alleged violation falls within.


In recent years, many famous enterprises have encountered practical problems in trademark management and protection. In this regard, Zhang Yazhou noted that trademark problems appear to be trivial, but its impact is difficult to assess if handled carelessly. In recent years a number of trademark cases have caused wide concern, such as the “iPad,” “Wong Lo Kat,” “Lafite,” “JAC,” and others. From a legal sense, trademark is not equivalent to brand: brand is a management issue focusing on communication, while trademark is a legal issue with the emphasis on right authorization and protection. These two issues complement each other. However, they have their own characteristics and can not replace one another. Therefore, it is advised that enterprises should treat trademarks with the awareness of rights confirmation and protection.


(Translated by Li Guanqun)

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