Wang Suiyong V. Ellassay(2014) MTZ No. 24, SPC

WANG SUIYONG V. ELLASSAY (2014) MTZ No. 24, SPC

Cause of action: Dispute over a trademark infringement

Collegial panel members: Wang Yanfang | Zhu Li | Tong Shu

Keywords: abuse of rights, good faith, trademark, trademark infringement

Relevant legal provisions: Civil Procedure Law of the People's Republic of China (as amended in 2012), article 13; Trademark Law of the People's Republic of China (as amended in 2001), article 52

Basic facts: Shenzhen Ellassay Garment Industrial Co., Ltd. was founded on June 8, 1999. On December 18, 2008, the company acquired Trademark No. 1348583 "歌力思" by way of transfer, which trademark was approved for use on clothing products under Class 25 of the International Classification of Goods and Services for the Purposes of the Registration of Marks (hereinafter the "Nice Classification") and had been approved for registration in December 1999. On November 19, 2009, the trademark registration was valid from December 28, 2009, to December 27, 2019. At the same time, Shenzhen Ellassay Garment Industrial Co., Ltd. registered Trademark No. 4225104"ELLASSAY", which was approved for use on Class 18 commodities – that is, (animal) leather, wallets, travelling bags and folders (leather products); leather belts, fur, umbrellas, walking sticks and shopping bags – and valid from April 14, 2008, to April 13, 2018. On November 4, 2011, Shenzhen Ellassay Garment Industrial Co., Ltd. changed its name to Shenzhen Ellassay Fashion Co., Ltd. (hereinafter "Ellassay", the defendant in the first-instance case). On March 1, 2012, the registrant of the trademark"歌力思" was accordingly updated to Ellassay under its new name. Wang Suiyong, the plaintiff in the first instance case, registered Trademark No. 7925873 "歌力思", which was approved in June 2011 for use on commodities such as wallets and handbags under Class 18 of the Nice Classification.

Wang Suiyong had also applied to register Trademark No. 4157840 "歌力思/graphic" on July 7, 2004. In the second-instance case on April 2, 2014, the Beijing Higher People's Court affirmed that this latter trademark infringed upon the prior trade name of Ellassay's affiliate Ellassay Investment Management Co., Ltd. and hence did not

approve the registration.

Since September 2011, Wang Suiyong had been buying leather bags with tags bearing "Chinese Brand Name: 歌力思, English Brand Name: ELLASSAY" at Ellassay counters in Hangzhou, Nanjing, Shanghai and Fuzhou, through notarial procedures. On March 7, 2012, Wang Suiyong filed an action claiming that Ellassay and Intime Department Store (Group) Company Limited (hereinafter "In time Department Store") had infringed upon the trademarks "歌力思" and"歌力思/graphic" by producing and selling these leather bags.

Held: On February 1, 2013, the Hangzhou Intermediate People's Court rendered its civil judgment ((2012) ZHZCZ No. 362), holding that Ellassay's and Intime Department Store's production and sales of the disputed commodities infringed upon Wang Suiyong's right to the registered trademark, and ruled that Ellassay and Intime Department Store should stop the infringement, compensate Wang Suiyong RMB100,000 or economic losses and reasonable expenses, and mitigate the impact of such infringement. Dissatisfied with the decision, Ellassay lodged an appeal. On June 7, 2013, the Zhejiang Higher People's Court passed a civil judgment ((2013) ZZZZ No. 222) dismissing the appeal and affirming the first-instance decision. Thereafter, Ellassay and Wang Suiyong respectively applied for permission to appeal to the Supreme People's Court. The Supreme People's Court granted permission and passed its judgment on August 14, 2014, overturning the first-instance and second-instance judgments, and dismissing all claims by Wang Suiyong.

Reasoning: The Supreme People's Court opined that good faith is a basic principle with which all market players should comply. On the one hand, it encourages people to accumulate social wealth and supports the creation of social value through honest work, and it protects property interests formed on this basis, as well as the freedom and right to dispose of these interests for proper and legitimate purposes. On the other hand, it also requires people to be honest and faithful in market activities, and to seek interests without prejudicing others' legitimate interests, public benefits and market position. The principle of good faith should also be followed in civil proceedings. While it safeguards the parties' rights to exercise and dispose of their civil and procedural rights to the extent permitted by law, it requires that the parties exercise their rights in good faith and with due care without harming others' and public interests. Any malicious acquisition or exercise of rights that disrupts fair market competition and which goes against the letter and the spirit of the law, with the intention of damaging others' legitimate interests, is an abuse of rights and related claims brought in those circumstances shall not be protected or supported by law. Registration of Trademark No. 4157840 "歌力思/graphic" had not yet been approved at the time of the claim; hence Wang Suiyong had no right to use it as a basis for suing others for trademark infringement. But did Ellassay and In time Department Store infringe upon Wang Suiyong's Trademark No. 7925873"歌力思"? The Court found as follows.

First, Ellassay owns the legitimate existing prior rights to the trademark. Ellassay and its affiliates had used "ELLASSAY" as a trade name as early as 1996 and obtained the registered trademark "ELLASSAY" on commodities such as garments in 1999. As a result of long-term use and extensive publicity, "ELLASSAY" now enjoys high visibility in the market as Ellassay's trade nameand registered trademark. Thus Ellassay owns the existing prior rights to the trademark "ELLASSAY".

Secondly, Ellassay's use in this case was based on legitimate rights, and both its methods of use and the nature of that use are legitimate. In terms of venue of sales, Ellassay's allegedly infringing products were displayed and sold at Ellassay counters within Intime Department Store, and the counters clearly indicated the provider of the allegedly infringing products by displaying Ellassay's trademark "ELLASSAY". Given that Ellassay's business marks, including its trade name and trademark, are highly visible in the market and that Wang Suiyong failed to prove that the mark "歌力思" enjoys the same level of visibility, Ellassay's sales of allegedly infringing products at its counters were unlikely to lead ordinary consumers to falsely believe that these products were supplied by Wang Suiyong. In terms of Ellassay's specific methods of use, the trademark "ELLASSAY" was marked both on conspicuous areas of the packaging and inside the allegedly infringing products, and only the characters"品牌中文名 (Chinese Brand Name)：歌力思" were printed on the product tags.Because "歌力思" is Ellassay's trade name and is used as the substitute for the trademark "ELLASSAY", there is nothing obviously wrong with Ellassay using the Chinese characters 歌力思 on the tags of the allegedly infringing products to indicate the product manufacturer. It did not intend to attach itself to Wang Suiyong's trademark "歌力思" and the label would not prevent ordinary consumers from differentiating the correct source of the allegedly infringing products. On this basis, Intime Department Store's sales of the allegedly infringing products is not prohibited under law.

Finally, Wang Suiyong's obtaining of the trademark "歌力思" and exercising of the trademark right was neither justifiable nor appropriate. The trademark "歌力思" comprises the Chinese characters 歌力思, which are exactly the same as the Chinese characters of the trade name first used by Ellassay and in the earlier registered trademark "ELLASSAY". 歌力思 is an invented phrase without any intrinsic meaning, but with a considerable degree of distinctiveness. Common sense dictates that it is unlikely that a company will register the exact same trademark by coincidence without seeing or knowing of the prior existing one. As a business operating in a similar area and with a similar business scope, it is even less likely that Wang Suiyong did not know about the existing trade name and trademark "ELLASSAY". In such circumstances, it is difficult to say that it would be appropriate for Wang Suiyong to apply for the registration of a trademark "歌力思" on handbags and wallets, among other things.

Accordingly, the Supreme People's Court found that Wang Suiyong's claim against Ellassay's fair use of a trademark that Wang Suiyang had acquired maliciously constituted an abuse of rights.