One is the company that has widely used and promoted "Xinbailun" nationwide to make numerous consumers think the trademark "新百伦" owned by the famous U.S. sports footwear brand "NewBalance", and the other is a Guangzhou-based brand with the trademark "新百伦" registered long time ago. Who shall legally own the trademark right for "新百伦"?

    Recently, the Guangzhou Intermediate Court has sentenced a case with the highest ever tort damages, and brought in a verdict that the general agency named Xinbailun Co. (新百伦公司)of the foreign brand "NB" in China shall pay tort damages up to CNY99.8 million to the local brand.

Foreign brand used "Xinbailun" as its Chinese name

    The brand "NewBalance", founded in the United States in 1906, is a famous foreign sports footwear brand. In 2006, Shanghai-based Xinbailun Co. was established to be in charge of the sales of "NewBalance" sports footwear series products in China.

    In order to adapt to the market culture of China, Xinbailun Co. had chosen the Chinese name "新百伦" for promotion and marketing, and used the "新百伦 NewBalance" logo in its product advertisements. With the market expansion of the brand, the concept that "新百伦" is "NewBalance" has been well known and widely accepted by Chinese consumers.

"NewBalance" is not "新百伦"

    While "新百伦" became more and more popular, it was accused of being fake, and a complaint was filed against Xinbailun Co. with a court.

    It was because Mr. Zhou, a Guangdong businessman, had registered the trademarks "百伦" and "新百伦" with the Trademark Office of the State Administration for Industry & Commerce as early as 2008, and has the exclusive right to use the two trademarks. In the meantime, Mr. Zhou also established a company to produce male shoes under the trademarks "百伦"and "新百伦", and have franchise counters in large department stores.

    Mr. Zhou discovered that Xinbailun Co. had used "新百伦" as its trademark during the sales, which "caused numerous consumers and operators to mistakenly think the trademark "新百伦" was the Chinese trademark of products of the defendant Xinbailun Co., and frequently caused some customers to ask if his products were under the brand "NewBalance".

    Mr. Zhou held that the deeds of Xinbailun Co. had separated the certain link between him as the trademark owner and the registered trademark "新百伦", inhibited him from building and expanding the value space of the trademarks "百伦" and "新百伦", and thus constituted trademark infringement.

Xinbailun Co. is to blame for "mala fide use"

    During the court hearing, Xinbailun Co. defended that in the above using cases, Mr. Zhou's company name "新百伦" was only used as the Chinese name of "NewBalance" products, but not highlighted on products as the company name, which shall be defined as bona fide use, and claimed that it had used "新百伦" in product sales far earlier than the time the plaintiff had used the trademarkin product sales and its way of use had not caused any confusion to consumers or the relevant public, so it was not an infringement.

    But, the Guangzhou Intermediate Court found out after hearing that the trademark "百伦" had been registered in 1996, and the information could be easily inquired through public channels. Moreover, an affiliated company of Xinbailun Co. (Xinpingheng Co.) had requested the Trademark Office of the State Administration for Industry & Commerce in December 2007 to reject the registration application of Mr. Zhou for the trademark "新百伦", which was not adopted. It indicates that Xinbailun Co. had known the registration of the trademarks "百伦" and "新百伦", but still chose to use "新百伦" to mark and promote its products. The Court also found out that, after Mr. Zhou successfully registered the trademark "新百伦", the defendant still continued to widely use the mark "新百伦" in its sales and promotion, so the use of the wording "新百伦" by the defendant cannot be determined as bona fide use.

"Reverse confusion" constitutes infringement

    The Court held that Xinbailun Co. neither used its company name in a standard manner nor initiatively avoided to use the mark that was identical or similar to the registered trademark of others in good faith to prevent the confusion and misunderstanding by the relevant public and the market disorder, and its use of the wording "新百伦" constituted an infringement on the plaintiff's registered trademarks, "百伦" and "新百伦", and its defense opinions for its reasonable use and earlier use were not adequately grounded. According to the defendant's financial evidence preserved by the Court, Xinbailun Co. earned over CNY100 million from operation during the infringement period, and considering from the way and scope of its use of the mark "新百伦", Xinbailun Co. had acquired substantial profits through the infringement acts, and shall bear the corresponding liability for tort.

    On April 23, the Guangzhou Intermediate Court made the first instance judgment that Xinbailun Co. had constituted an infringement on the exclusive right of others to use the registered trademarks, and ordered it to stop the infringement and pay CNY99.8 million to Mr. Zhou in compensation.

(Source: Yangcheng Evening News)

【Comments】

Fiona Cui: In this case, the plaintiff, Mr. Zhou, had applied for the registration of the trademark "百伦" for commodities like "shoes" as early as in 1994, and the registration was approved in 1996. Mr. Zhou applied for the registration of  "新百伦" for commodities like "shoes" in 2004, and the registration was approved in 2008.

    The plaintiff's registered trademarks "百伦" and "新百伦" do not have specific meanings and have the distinguishing features in terms of the Trademark Law, and the plaintiff shall enjoy the exclusive right to use the registered trademarks "百伦" and "新百伦". According to the information reported, the plaintiff, Mr. Zhou, had applied for the registration of the trademark "百伦" for commodities like "shoes" as early as in 1994; the defendant was founded in China in 2006, and its affiliated company had proposed an objection request against the trademark "新百伦", which was not supported by the Trademark Office of the State Administration for Industry & Commerce. Therefore, it can be inferred that the plaintiff did not have subjective act of bad faith in applying for the registration of the trademark "新百伦", and the defendant had been fully and subjectively aware that the plaintiff had registered the trademark "新百伦" earlier.

    As regards to the use by the defendant, it had not use "新百伦" on its commodities or outer packages, but had used the same in sales and promotion, such as using the expression of "Official website of  新百伦 NewBalance China" at its official website and printing "Thank you for your purchasing 新百伦 products" on shopping receipts, and the defendant also defended that it did not highlight "新百伦" on products as the company name, and its use shall be defined as bona fide use. Hence, the case involves whether the use of "新百伦" by the defendant is within the use defined in the Trademark Law.

    According to Article 57 of the Trademark Law: "Any of the following acts shall constitute an infringement of the exclusive right to use a registered trademark: 5. to cause, in other respects, prejudice to others' exclusive right to use the registered trademark thereof."

    I think, first of all, the affiliated company of the defendant, Xinbailun Co., proposed an objection request against the trademark "新百伦" in December 2007, indicating Xinbailun Co. had been fully aware of the registration of the trademarks "百伦" and "新百伦", but it still chose to use "新百伦" to mark and promote its products, so it is hard to justify its subjective good faith. Second, though the defendant did not use "新百伦" on its commodities directly, it did use "新百伦" during sales and promotion with the aim to promote its commodity brand to consumers, and consumers had considered it as a trademark to distinguish the commodity sources. Finally, the acts of the defendant had in fact caused the confusion and misunderstanding by consumers on commodity sources, namely reverse confusion, which would cause the reduction or even loss of discrimination of the plaintiff's registered trademarks, and had caused losses to the exclusive right of the plaintiff to use the registered trademarks. Therefore, the acts of the defendant were determined as infringement acts by the Court.

Yu Hu: First, NewBalance lost the case for its obvious infringement acts -- it continued to use the Chinese characters "新百伦" in promotion after being fully aware of the existence of the trademark "新百伦" in the Chinese mainland.

    Second, the confusion in this case is opposite to the confusion indicated in traditional Trademark law, and is reverse confusion. Reverse confusion generally happens when the registered trademark of the plaintiff is not as popular as that of the defendant, in which case consumers probably will not consider the commodities or services provided by the trademark user are from the owner of the registered trademark, but probably will mistake the commodities or services provided by the owner of the registered trademark for those provided by the trademark user, leading to the occurrence of reverse confusion. If the Trademark Law does not prevent reverse confusion, famous companies could use the registered trademarks of others without scruple, leading to the consequence of unfair competition as a result of law of jungle.

    This reverse confusion will substantially weaken the objectives of the plaintiff to build business reputation and expand the market with the involved trademark, leading to distortion or shadowing of the discrimination of the plaintiff's registered trademark. The defendant, Xinbailun Co., has hundreds of franchise stores nationwide, and could slowly encroach the plaintiff's registered trademark through its operation, and relevant consumers might think it was the plaintiff who were infringing on the trademark right of the defendant, causing substantial damages to the registered trademark.

    Finally, just like NewBalance lost its Chinese name twice, why foreign companies frequently encounter trademark right disputes when entering the Chinese market? Before entering the Chinese market, many foreign companies were not optimistic about the market prospect, and neglected the trademark right related matters. Though many of them have gained popularity in China and had their Chinese marks, but often changed their names because they were in an indefensible position for the existing registered trademarks. Changing the name from "凌志" to "雷克萨斯" (Lexus) and changing the name from "陆虎" to "路虎"  (Land Rover) are similar cases. Moreover, even if the Chinese marks used by foreign companies were not registered by others at the time they entered the Chinese market, after their brands got popularity, they might find others have registered the marks. If wishing to take back the use right of the Chinese marks, they have to prove they are the earliest users of the Chinese marks, but the process of proving is generally difficult. If foreign companies do not correct their awareness on trademark right in the Chinese market, they may, just like NewBalance, pay a high cost in the future.