Perspectives on the dispute of “Daoxiangcun”

By Kevin Nie, China IP,[Trademark]

Over the years, in Chinese market of pastries and mooncakes, the Daoxiangcun (“稻香村”) brand and the related trademark litigations have been a dazzling and perplexing phenomenon to the public, particularly the consumers that are kept in the dark. In addition to the many litigious acts, the attack and defense maneuvers between Suzhou Daoxiangcun Company and Beijing Daoxiangcun Company have caught the most attention from the industrial sector.
 
In a recent trademark seminar in Beijing, academics and professionals from colleges and institutions engaged in a sufficient discussion on legal issues surrounding the brand.
 
Historical review
 
As a well-known southern-style brand for pastries and mooncakes, Daoxiangcun enjoys a very high reputation and goodwill. According to historical data, as early as in 1773 of Qing Dynasty, there was already a Suzhou Daoxiangcun Tea Foods Store.
 
It began to use the term “稻香村” in its shop sign, shop name and package labels. It also used the term, though unregistered, to market its products.
 
The late Qing Dynasty and the early Republic of China witnessed the growing reputation of Daoxiangcun, which was registered as a shop name with the Ministry of Agriculture and Commerce of the Republic of China. After the founding of the People’s Republic of China in 1949, the Daoxiangcun brand has been still used, and has been used continuously for 242 years to this day.
 
In the late Qing Dynasty and the early Republic of China, Suzhou Daoxiangcun Tea Foods Store saw its sales people and technicians go to other places and develop branch stores, including the Daoxiangcun store near Guanyin Temple at Qianmen Gate in Beijing, and another one at the West High Street in Baoding.
 
The Daoxiangcun store near Guanyin Temple at Qianmen Gate in Beijing went bankrupt and disappeared during the warlord period. The Daoxiangcun store at the West High Street in Baoding also went out of business and www.chinaipmagazine.com 3-4/2015 China IP 63 its assets were put into the hands of the receivers. After 1949, however, the Baoding store was restored and continued to use “稻香村” on the shop board. The store was recognized and included into the list of Protected Cultural Relics.
 
On April 2nd 1982 and May 24th 1988, the Baoding store applied for the registration of the trademark “ 稻香村牌” (“Daoxiangcun Brand” No. 184905) and the trademark “ “ (No. 352997). The requests were approved and the trademarks registered on July 5th 1983 and June 30th 1989 respectively. They were among the earliest food trademarks registered in China.
 
In 1984, Beijing Daoxiangcun Southern Style Food Store was incorporated at Beixinqiao Street and later reorganized into Beijing Daoxiangcun Co., Ltd. (Beijing Daoxiangcun Company). In 1996, Beijing Daoxiangcun Company applied for and was granted the trademark “稻香村” for glutinous rice dumplings, but failed to have the same mark registered for pastries. In the same year, Beijing Daoxiangcun Company also applied for and was granted the “三禾” (“Sanhe”) trademark for pastries. In the everyday usage of the trademark, it stated that it owned the “三禾” trademark and reminded consumers to recognize it.
 
In 2003, to avoid being charged for trademark infringement for using the “稻香村” logo, Beijing Daoxiangcun Company entered into a license contract with Baoding Daoxiangcun Store which owned the trademark “稻香村” for pastries. The contract allowed Beijing Daoxiangcun to use the trademark “稻香村”, and as consideration, Beijing Daoxiangcun would sell a few products produced by Baoding Daoxiangcun Store.
 
On March 24th 2004, to grow the old and reputable Daoxiangcun brand for pastries and to introduce the modern corporate governance system, Suzhou Daoxiangcun Store, Baoding Daoxiangcun Store and Beijing XinyaFunfood Co., Ltd. jointly established Suzhou Daoxiangcun Food Industry Co., Ltd. (Suzhou Daoxiangcun Company). Suzhou Daoxiangcun Store, as the owner of the old and reputable brand, became the controlling shareholder and included all of its stores, factories and staff into the new company. On November 14th 2004, to create unity between the shop names, the trademarks and the brand, Baoding Daoxiangcun Store transferred its trademarks No. 184905 and 352997 to the newly-established Suzhou Daoxiangcun Company.
 
Reportedly, to protect its trademark rights and interests, straighten out the Daoxiangcun market and maintain the quality and reputation of its products, Suzhou Daoxiangcun Company started a long-time campaign and scores of infringement based legal actions have been brought up. With the integration efforts of the time-honored Suzhou Daoxiangcun Store, Suzhou Daoxiangcun Company granted licenses to Beijing Daoxiangcun Company and Baoding Daoxiangcun Store, so that the latter two could use the Daoxiangcun brand and protect the related rights permanently. It led to a relatively stable and advantageous market for the Daoxiangcun companies or stores in Suzhou, Baoding and Beijing. As a result, the Daoxiangcun brand entered into a fast-growing phase. Beijing Daoxiangcun Company mainly ran specialty stores in Beijing, with its products mostly for selling within the territory of Beijing.
 
Suzhou Daoxiangcun Company invested a huge amount of money and developed a number of modern factories throughout China. Due to the nationwide sales efforts, the Daoxiangcun brand became very popular among Chinese consumers, and one of the best-known national brands for pastries and bread.
 
In 2009 and 2012, the registered trademark “稻香村” was recognized as a Famous Mark of Zhejiang Province, and in December 2013, a Well-Known Mark of China.
 
Attacks and defenses on trademarks
 
In 2005, to cater to the aesthetic perception of consumers and to display the internal meanings of the Daxiangcun brand in better ways, pursuant to modern business practices, Suzhou Daoxiangcun Company created a “fan-shaped” Daoxiangcun trademark, on the basis of the existing registered trademark, by considering also the “稻香村” logo that was used as the old shop sign and on the old packages, as well as the shape of fans popular in the Qing Dynasty. In July 18th, 2006, it filed an application with the State Administration of Industry and Commerce and applied for the trademark “ “ for Category 30 “pastries, bread and crackers,” a category that had been approved for the prior registered trademark “稻香村”.
 
On January 18th 2008, Beijing Daoxiangcun Company, when it negotiated with Suzhou Daoxiangcun Company for the renewal of the license agreement, filed an application for the trademark “ “ (No. 6517496) for pastries and mooncakes, which was dismissed by the Trademark Office on the ground that the application was identical with or similar to the prior trademarks numbered 184905 and 352997 owned by Suzhou Daoxiangcun Company.
 
On January 22nd 2008, an agreement was concluded between the two companies, which allowed Beijing Daoxiangcun Company to use the trademark “稻香村” for pastries. As consideration, Beijing Daoxiangcun Company would allocate 3% of its COLUMN China Intellectual Property 64 China IP 3-4/2015 sales income from the licensed goods to the publicity of the Daoxiangcun brand. The contract was not renewed upon expiration.
 
On May 20th 2009, the “fan-shaped” Daoxiangcun trademark that Suzhou Daoxiangcun Company requested passed the preliminary examination and was published by the Trademark Office. The preliminary category granted for the trademark includes “pastries, crackers, bread and mooncakes,” and the preliminary approval number was 5485873.
 
During the term of publication, an opposition was raised by Beijing Daoxiangcun Company, which was overruled by the Trademark Office.
 
Disagreeing with the ruling, Beijing Daoxiangcun Company filed a review request with the Trademark Review Board of the State Administration of Industry and Commerce by arguing that the “fan-shaped” Daoxiangcun trademark was similar to its own registered trademark as approved for glutinous rice dumplings.
 
Suzhou Daoxiangcun Company argued that the “fan-shaped” Daoxiangcun trademark contained words, pronunciations and meanings that were the same as those in its prior registered trademark “稻香村”.
 
Moreover, the category of products for the requested trademark was exactly the same as that for the prior registered trademark. So the requested trademark was just an extension of and did not go beyond the scope of products as granted for, the prior trademark. The Trademark Review Board decided that the “fan-shaped” Daoxiangcun trademark of Suzhou Daoxiangcun Company should not be registered. The disagreeing Suzhou Daoxiangcun Company brought the case to the Beijing First Intermediate People’s Court. On February 20th 2014, the court decided to affirm the original decision of the Trademark Review Board. Soon the disagreeing company appealed to the Beijing Higher People’s Court. On May 8th 2014, the court decided to dismiss the appeal and affirm the original decision. The company applied to the Supreme People’s Court for a retrial and the application was dismissed on December 19th 2014.
 
On March 9th 2010, Beijing Daoxiangcun Company applied for the trademark “ “ for pastries.
 
Compared with the previously dismissed trademark “三禾+北京+稻香 村” (“Sanhe + Beijing + Daoxiangcun”), the new application did not contain “三禾”. This time the Trademark Review Board published the trademark after the preliminary examination, instead of dismissing it on the ground of its identicalness or similarity with the prior trademark “稻香村” owned by Suzhou Daoxiangcun Company.
 
According to the Beijing Daily, a person in charge of the Trademark Section of the Administration of Industry and Commerce of Beijing said that “Through investigation and consultation with the Trademark Office, the Administration recommended that Beijing Daoxiangcun Corporation should apply for a trademark that consists of ‘北 京稻香村’ (‘Beijing Daoxiangcun’) and begins with the name of its region.” Suzhou Daoxiangcun Company raised an opposition during the term of opposition, which was overruled by the Trademark Office. Disagreeing with the decision, it applied to the Trademark Review Board for a review. The Trademark Review Board ruled that the trademark concerned should be approved and registered.
 
Up to the date of this article, Suzhou Daoxiangcun Company has brought the case to the Beijing Intellectual Property Court, pending for a decision.
 
Experts’ perspectives
 
The contest over the “稻香村” mark reflects that Chinese companies attach more importance to their trademarks, and that they develop different understandings and concerns over trademark-related legal provisions in the market sector.
 
In the workshop, the experts agreed that the existing dispute could be 企业 ? 经济E NTERPRISES 72 Suzhou Baoding Beijing www.chinaipmagazine.com 3-4/2015 China IP 65 summarized into the following two actions of Beijing Daoxiangcun Company: One action is that during the licensed usage of the trademark “稻香村”, it applied for the trademark “三禾+北京+稻香村” and after being rejected, applied again for the trademark “北京+稻香村”. After the license term expired, without due permission, it continued to use the trademark “稻香村” for its pastries.
 
The second action is that it raised an opposition against the “fan-shaped” Daoxiangcun trademark that had passed the preliminary examination and was published by the Trademark Office. These actions have destroyed the market that builds on the license system.
 
Regarding the first action, the participants agreed that the registration of the trademark “稻香村” for glutinous rice dumplings by Beijing Daoxiangcun Company does not constitute a fair cause for the company to raise an opposition to the “fan-shaped” Daoxiangcun trademark which was supposed to be used for pastries. The trademark “稻香村” that was transferred to and owned by Suzhou Daoxiangcun Company was registered earlier than the incorporation date of Beijing Daoxiangcun Company and the filing date of the above trademark. In other words, Suzhou Daoxiangcun Company owns the prior trademark rights when pastries are concerned. The “fan-shaped” variant was a redesign on the basis of the very same trademark.
 
It contains the same pronunciation and meaning, and the optimized shape cannot substantively lead to a view that the variant and the original trademark are two distinctive trademarks from each other.
 
Moreover, the variant was supposed to be registered for the same product category as the prior registered trademark. Since there have been two existing registered trademarks that are granted for similar goods, it would be unreasonable to use either one of them to deny the identical extension of the other.
 
The experts also said that the “fan-shaped” trademark, if registered, would not damage the order of the Daoxiangcun market of either Beijing Daoxiangcun Company or Suzhou Daoxiangcun Company, nor cause confusion among consumers with respect to the related goods. Thus, the registration of the “fan-shaped” trademark is legal and compliant.
 
This is because the scope of usage for the “fan-shaped” trademark is no more than that approved for the registered trademark “ “ which is already owned by Suzhou Daoxiangcun Company earlier than Beijing Daoxiangcun Company. The “fan-shaped” trademark is the natural extension or continuation of the prior trademark. Moreover, this prior trademark has been recognized as a well-known mark, which guarantees it an even bigger restraining power.
 
Compared with Suzhou Daoxiangcun Company, Beijing Daoxiangcun Company does not own any exclusive trademark right with respect to pastries, mooncakes and bread, a category that has been approved for the prior trademark. It cannot possibly create a state of order in the market of these products, or use such a non-existent market to counter the registration of the “fan-shaped” trademark for the category of products as approved for the prior trademark.
 
Regarding the second action, the participants agreed that “稻香村” was the main and distinctive component of the trademark concerned of Beijing Daoxiangcun Company. When the entire picture is viewed, the font size of “北京” is very small so that the term is unable to stand on itself to identify the products. The addition of “北京” cannot differentiate its source of goods, nor eliminate the confusion among the relevant public. In light of the main part which is “稻香村”, on the contrary, it proves the subjectiveness of Beijing Daoxiangcun Company in adding an element that is insignificant and unable to differentiate its source of products. Moreover, Beijing Daoxiangcun Company was once a licensed user of the trademark “稻香村” and exploited the trademark to develop a stable market share in the region of Beijing. However, the share of the market could never be the reasonable ground for any similar trademarks to obtain distinctiveness, or for the authority to protect such market, or for the licensed user to obtain any independent trademark rights.
 
The experts agreed that regarding the application for the “fan-shaped” Daoxiangcun trademark by Suzhou Daoxiangcun Company and that for the trademark “北京+稻香村” by Beijing Daoxiangcun Company, the government offices failed to comply with relevant provisions in law in the granting and validation proceedings.
 
Instead, they adopted double standards to minify the restraining power of the prior registered trademark of Suzhou Daoxiangcun Company and arbitrarily enlarge the restraining power of the prior registered trademark of Beijing Daoxiangcun Company to cover the unapproved category of “pastries.” They damage the rights and interests of Suzhou Daoxiangcun Company, as well as other owners of the trademark “稻香村” for Category 30 and the consumers.
 
Now, the contest over the trademark “稻香村” keeps on fermenting, which is believed by some to be a game between law and personal relations.
 
The final result is clandestine and causes concern. We will continue to focus on how the parties will respond in the future.
 
(Translated by Ren Qingtao)

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