BMW v. MBLW: Targeting “Free-riding with Famous Brands”

2010/11/1Kevin Nie,China IP,[Trade Secrets]

On April 21, 2010, the Supreme People’s Court published its list of “Ten Major Cases Relating to National Judicial Protection of Intellectual Property for 2009.”(“Top Ten”1). The trademark infringement and unfair competition case BMW v. MBLW, represented by trademark attorneys Ma Qiang and Zhang Yazhou from Unitalen, was among the cases on the list. According to an official from within the intellectual property division of the Supreme People’s Court responsible for creating the list, the 10 major cases were elected through screenings and recommendations of courts at various levels. The cases were chosen not only because they solved some universal difficulties in the application of law but also because they had great social influence. Prior to the honor of making this list, the case was also honored by making the “Top Ten” list of the Quality Brands Protection Committee (“QBPC”) of the Association of Enterprises with Foreign Investment.
 
A typical case of “siding along with famous brands”
The reason why this case received widespread attention within and outside the industry has something to do with the world-famous status of the plaintiff, Bayerische Motoren Werke Aktiengesellschaft (“BMW AG” or “BMW”). As a “globally known” car maker, the BMW logo is very well-known.
 
BMW was founded in 1916 and its trademarks, the “BMW&Device,” “BMW,” and “Baoma” (Chinese equivalent of BMW) have been registered with the Chinese Trademark Office in class 12 in connection with “motor vehicles, motorcycles and parts thereof.” In addition, on March 26, 1997, the trademark “BMW” obtained a territorial extension of protection in China in class 25 in respect to clothing, footwear and headgear via an international registration of trademark under the Madrid System.
 
In 2001, Xiamen Ports Fashion Co., Ltd. and Century Ports Apparel (Xiamen) Co., Ltd., controlled by Ports Design Limited (Ports), was authorized by BMW to use the “BMW” trademark in their clothing and accessories within the territory of China. Ports is one of the enterprises authorized by BMW to manufacture and sell garments bearing the “BMW” logo worldwide.
 
“BMW” clothing and accessories with “BMW lifestyle” entered China and successfully prospered in the clothing market. According to public data, the “BMW Lifestyle” franchise has opened more than 40 branch stores in over 20 cities nationwide. “BMW Lifestyle” is the slogan used by BMW in selling BMW clothing and accessories, which can be abbreviated to BMWL. At the same time, BMW registered bmwlifestyle.cn and bmw-lifestyle.cn as its domain names on March 17, 2003.
 
In this case, the defendants Shenzhen Century Baoma Fashion Co., Ltd. (“Century Baoma”) and Jiaduorun Business Co., Ltd., used the trademarks “MBWL & Device” and “MBWL” in their clothing and accessories products and the trade name “Century Baoma,” which contain the trademarked term “Baoma”.
 
In August 2008, Unitalen Law Office accepted the commission of BMW and brought an action against Century Baoma and other infringers.
 
“The trademark ‘MBWL’ of Century Baoma is similar to the trademark ‘BMW’ of BMW in both form and pronunciation, which is very likely to cause confusion. Moreover, the use of ‘MBWL’ on the goods at issue is sufficient to mislead the relevant public into thinking that the goods were manufactured and sold by BMW, which infringed upon BMW’s trademark rights. Century Baoma’s infringing acts are of obvious bad faith and have caused damage to the credibility of BMW’s trademarks,” Ma Qiang expressed during the interview.
 
Zhang Yazhou told the reporter that the trademark “BMW” had enjoyed high reputation after long-term use. Therefore, BMW had the undisputed right to prior use of the mark and had the right to prohibit others from using the same or similar marks on the same or similar goods. In addition, Zhang Yazhou was of the view that Century Baoma’s acts, such as the trade name containing “Baoma,” the domain name being “bmwl.com” and the actual use of the mark “BMWL & blue and white device,” were evidence that it acted in subjective bad faith.
 
After adjudication, Hunan Higher People’s Court held that the defendant Century Baoma used trademarks “MBWL & Device” and “MBWL” in the products as well as the trade name “Century Baoma,” which could easily cause confusion and mistakes on the part of the relevant public as to the sources of the goods bearing the well-known trademarks and the goods carrying the disputed logos. The defendant Jiaduorun’s selling of infringing goods constituted infringement of the plaintiff’s trademarks and unfair competition. The defendant Fu Xianqin, an employee of Century Baoma, was also ruled as liable for trademark infringement and unfair competition for providing her own bank account for infringement use after having knowledge of the company’s infringing activities.
 
In December 2009, Hunan Higher People’s Court rendered the first instance judgment, enjoining the three defendants to stop infringement of the plaintiff’s exclusive right to use a registered trademark, cease unfair competition, publish apologies in a nationwide newspaper to eliminate the ill effects, and ordering Century Baoma and Fu Xianqin to make compensation in the amount of 500,000 Yuan for the losses of the plaintiff. The ruling has become effective since the parties did not appeal after the first instance decision.
 
Committing infringement via “ghost companies”
A striking feature of the present case is that the defendants achieved the goal of taking a taking free ride on the high reputation of famous brands by establishing a “ghost company” abroad.
                                                                                  
“Century Baoma” had once expressed in public that it entered Asia in 2004, with Hong Kong Century Baoma Group Co., Ltd. as the general agent, and in 2005 it entered the Chinese mainland market, represented by Shenzhen Century Baoma in China. Prior to this, its business was mainly in Europe. However, investigation revealed that the so-called “Hong Kong Century Baoma Group Co., Ltd.” was actually a “ghost company.”
 
The reporter learned from the relevant department that for a long time many mainland companies have been establishing “ghost companies” abroad (mainly in Hong Kong) for the purpose of evading certain risks, such as avoiding tax or creditors, transferring state-owned assets in the early past years. In recent years, there has been an increasing tendency for these “ghost companies” to imitate others’ trademarks by making use of Hong Kong’s loose company registration system. The relevant government agencies in Hong Kong, for instance the Intellectual Property Department and Companies Registry, have taken a number of administrative measures to decrease the occurrence of such acts, but these effort have produced very little effect.
 
According to Ma Qiang, as of 2005, the defendant “Century Baoma” opened up many franchised stores around the country and racked up huge illegal profits by making use of its Hong Kong company, “Century Baoma Group Co., Ltd.,” the infringing domain name www.bmwl.com.cn, and the improperly registered trademark “BMWL & Device.”
 
Additionally, in the present case there is also the fact that a natural person participated in the joint infringement. One of the defendants, Fu Xianqin, an employee of Century Baoma, provided her own bank account for Century Baoma to use for the purpose of receiving security deposits and payments for goods from the franchise stores. Therefore, the lawyers from Unitalen assisted BMW in applying to the court in a timely manner to freeze the individual infringer’s bank account that was used for infringement, granting property preservation and holding Fu Xianqin and Century Baoma jointly and severally liable, which is the embodiment of the issue of joint compensation by joint infringers in this present case.
 
First recognizing well-known marks and then determining infringement
After hearing the case, Hunan Higher People’s Court held that the plaintiff’s registered trademarks had become well-known marks after long-term use and widespread publicity. As the rights holder of the well-known trademarks, the plaintiff’s lawful rights should be protected under the law.
 
One important reason that the case was honored as one of the QBPC “Top Ten” list is because the three trademarks (“BMW,” “BMW & Device” and “Baoma,” which are the Chinese version of BMW), were registered by BMW in China under class 12 (which is limited to motor vehicles, motorcycles and parts) and were recognized as well-known marks in the case. Although the infringement occurred in class 25 (which is limited to clothing and accessories), the lawyers from Unitalen presented enough evidence to convince the court to enter a judgment declaring the three trademarks to be well-known for class 25 purposes as well, and thereby the defendant’s trademarks constituted infringement and unfair competition.
 
The QBPC fully endorsed the practice of the Unitalen lawyers of determining infringement through, “recognizing trademarks as well-known,” thinking that this move “set a precedent for judicial practice and provided a good example for well-known foreign companies in applying for recognition of well-known trademarks in judicial cases.”
 
This case was also named as one of the, “Ten Major Cases Relating to National Judicial Protection of Intellectual Property for 2009.” The Supreme People’s Court, in elaborating the significance of the case, pointed out that this case concerned the legal protection of well-known trademarks and trade names of high reputation and the judgment effectively curbed such unfair competition acts as “imitating famous brands” and “free rides.” In the present case, the court, after consideration of the distinctiveness and market popularity of the plaintiff’s registered trademarks, determined that the plaintiff’s trademarks were well-known marks, and thus the defendants’ use on their clothing and accessories of “MBWL & Device” and “MBWL” logo that were similar to the plaintiff’s registered trademarks was likely to mislead the relevant public into believing that the goods the defendants manufactured and sold were authorized by the plaintiff, or were in some way associated or connected with the plaintiff, e.g. the mistaken belief that the use of the trademarks had been licensed by the plaintiff or that the defendants and the plaintiff were associated companies. The defendants improperly used the market reputation of the plaintiff’s well-known trademarks to gain illegal profits, causing damage to the plaintiff’s legitimate interests and constituting infringement of the plaintiff’s exclusive right to use registered trademarks. The court also specified that registering a name for commercial use knowing that the combination of words was so similar to the trade name of another product with such a high reputation was obviously in violation of the principle of honesty and credibility. Deliberately misleading the public is a typical act of unfair competition.
 
BMW’s victory in administrative action
On November 1, 2005, long before the initiation of the civil action, BMW filed an application with the Trademark Appeal Board (TAB) of the State Administration for Industry & Commerce for cancellation of the registered trademark “MBWL,” claiming that the trademark “MBWL & Device” of Century Baoma Group Co., Ltd. was an intentional imitation of its “BMW Lifestyle” trademark.
 
On May 4, 2009, the TAB rendered the decision ordering that the trademark of “MBWL & Device” under No. 3246546 be cancelled from leather shoes, clothes and caps and but allowed it to be maintained in other goods, such as clothing ties. The TAB stated in its written decision that “MBWL” and “BMW” were both trademarks of graphics combination with only one letter different. Both graphics were composed of an inner ring and an outer ring, resulting in similar visual effect on the whole. Meanwhile, in actual use, the alternating blue and white design of “MBWL” trademark was quite similar to that of the “BMW” trademark, which belonged to the BMW company. In addition, the trade name of Century Baoma Group contained the two characters for “Baoma” and its domain name was www.bmwl.com.cn, which is likely to confuse and mislead consumers as to the sources of the goods. Thus, the two trademarks are similar. As a result, the TAB made the above the decision. Dissatisfied, Century Baoma Group appealed Trademark Appeal Board to the Beijing No.1 Intermediate People’s Court on September 9, 2009. BMW joined the action as the third party. On April 12, 2010, Beijing No.1 Intermediate People’s Court heard the case.
 
After the hearing, the court held that the overall visual effects of the disputed mark and the cited mark were similar, and their use on similar goods would easily cause the relevant public to mistake the source of the goods or to believe the plaintiff was in some way connected with the third party, thus injuring the legitimate rights of the plaintiff and the relevant public. The two trademarks constituted similar marks on similar goods. The TAB was correct in determining that the disputed trademark’s registration in leather shoes, clothing and caps was illegal. On April 26, 2010, the Beijing No.1 Intermediate People’s Court entered the first instance judgment, affirming the TAB’s decision.
 
“Century Baoma” changed into “Fengbaomafeng”
According to Daily Economic News, “Century Baoma” had changed its name to “Fengbaomafeng,” and the registered website (www.mbwl1961.com) cannot be opened now. On April 15, the person now in charge of “Feng Baoma Feng” stated that it had taken over the business of the former, “Century Baoma,” And that due to trademark disputes, “Century Baoma’s” clothing manufacturing had been stopped. The person stated that the former franchised stores can use the brand of Fengbaomafeng if they would like to continue their business. 
 
The reporter of this magazine searched “Fengbaomafeng” via the Internet and discovered that a company with the name of Guangzhou Century Baochi Fashion Industrial Co., Ltd. was using this brand. The company claimed in its website (http://user.efu.com.cn/fhq/bmwl/) that it was the general agent of Germany Century Baoma Group Co., Ltd. within the territory of China and had been the business agent and market executive for Germany’s Century Baoma Group Co., Ltd. in mainland China since 2005.
 
Interestingly, the logo of “Fengbaomafeng” is almost the same as the trademark of the former “Century Baoma.” The only difference is that it is more simplified with the words deleted and the figure remained, which, however, looks more like “BMW” trademark than before.
 
It is learned that some administrative departments for industry and commerce have noticed the logo of “Fengbaomafeng,” and deemed it trademark infringement and are taking corresponding measures to combat it.
 

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