Malicious Acquisition and Exercise of Trademark Rights is not Protected by Law
——Wang Suiyong v. Ellassay
[Syllabus]
Where any party violates the principle of good faith, damages legitimate interests of others, disrupts fair market competition order, maliciously obtains and exercises trademark rights and claims infringement against others, the People’s court shall reject the claims on the ground of abuse of rights.
[Case No.] The Supreme People’s Court (2014) MTZ No.24
[Cause of Action] Dispute over trademark infringement
[Collegial Panel Members] Wang Yanfang Zhu Li TongShu
[Keywords] Intellectual Property Infringement, Trademark, Good Faith, Abuse of Rights
[Relevant Legal Provisions] Article 13, Civil Procedure Law of the People’s Republic of China; Article 52, Trademark Law of the People’s Republic of China
[Basic Facts]
Shenzhen Ellassay Garment Industrial Co., Ltd. was founded on June 8th, 1999. On December 18th, 2008, the company acquired the trademark No.1348583 “歌力思” by way of transfer, which was approved for use on Class 25 clothing products, and was approved for registration in December 1999. On November 19th, 2009, the trademark registration was renewed with its validity from December 28th, 2009 to December 27th, 2019. At the same time, Shenzhen Ellassay Garment Industrial Co., Ltd. was also the registrant of trademark No. 4225104 “ELLASSAY”, which was approved for use on Class 18 commodities such as (animal) leather, wallets, travelling bags and folders (leather products); leather belts, fur, umbrellas, canes and shopping bags, with validity from April 14th, 2008 to April 13th, 2018. On November 4th, 2011, Shenzhen Ellassay Garment Industrial Co., Ltd. changed its name to Shenzhen Ellassay Fashion Co., Ltd. (hereinafter “Ellassay”, the defendant in first-instance case). On March 1st, 2012, the registrant of the above-mentioned trademark “歌力思” was accordingly changed to Ellassay.
The plaintiff in the first-instance case Wang Suiyong registered trademark No. 7925873 “歌力思”, which was approved for use on Class 18 commodities such as wallets and handbags, in June 2011. Wang Suiyong also applied to register trademark No. 4157840 “歌力思/graphic” on July 7th, 2004. Later, the Beijing High People’s Court affirmed in the second-instance case on April 2nd, 2014 that the trademark infringed upon the prior trade name of Ellassay’s affiliate Ellassay Investment Management Co., Ltd. and thus, didn’t 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 7th, 2012, Wang Suiyong filed an action claiming that Ellassay and Intime Department Store (Group) Company Limited (hereinafter “Intime Department Store”) infringed upon the trademarks “歌力思” and “歌力思/graphic” by producing and selling the above leather bags.
Holding
On February 1st, 2013, the Hangzhou Intermediate People’s Court rendered the civil judgment (2012) Zhe-Hang-Zhi-Chu-Zi No. 362, holding that Ellassay’s and Intime Department Store’s production and sales of the allegedly infringing 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 for economic losses and reasonable expenses, and eliminate the impact of such infringement. Not satisfied with the decision, Ellassay filed an appeal. On June 7th, 2013, the Zhejiang High People’s Court passed the civil judgement (2013) Zhe-Zhi-Zhong-Zi No. 222, rejecting the appeal and upheld the original judgement. Still unsatisfied, Ellassay applied for retrial with the Supreme People’s Court. The Supreme People’s Court accepted the application and passed the judgment (2014) Min-Ti-Zi No. 24 on August 14th, 2014, reversing the first-instance and second-instance judgments and dismissing all Wang Suiyong’s claims.
[Reasoning]
The Supreme People’s Court’s opinions: Good faith is a basic principle that all market players should comply with. It encourages and supports people to accumulate social wealth and create social value through honest work, and protects property interests formed on this basis as well as the freedom and rights to dispose these interests for proper and legitimate purposes. However, it also requires people to be honest and faithful in market activities, and seek interests without prejudicing others’ legitimate interests, public benefits and market order. Principle of good faith should also be followed in civil proceedings. While it safeguards the parties’ right to exercise and dispose their civil and procedural rights to the extent permitted by law, it requires the parties to exercise their rights in good faith and with due care without harming others’ and public interests. Any malicious acquisition or exercise of rights or disruption of fair market competition order against the objective and spirit of law or for the purpose of damaging others’ legitimate rights is an abuse of rights, and relevant claims shall not be protected or supported by law. Registration of trademark No. 4157840 “歌力思/graphic” had not as yet been approved, hence Wang Suiyong had no right to sue others for infringement of trademark. Did Ellassay and Intime Department Store infringe upon Wang Suiyong’s trademark No. 792587 “歌力思”? First, Ellassay owns the legitimate prior rights. Ellassay and its affiliates used “ELLASSAY” as trade name as early as 1996 and obtained the registered trademark “ELLASSAY” on commodities such as garments in 1999. Through long-term use and extensive publicity, “ELLASSAY” now enjoys high visibility in the market as its trade name and registered trademark. Therefore, Ellassay owns prior rights of the aforementioned trademark. Second, Ellassay’s use in this case is based on legitimate rights, and both its methods of use and nature are legitimate. In terms of place of sales, Ellassay’s allegedly infringing products were displayed and sold in Ellassay’s counters in Intime Department Store, and the counters clearly indicated the provider of the allegedly infringing products by marking Ellassay’s trademark “ELLASSAY”. Given that Ellassay’s business marks such as trade name and trademark are highly visible in the market and Wang Suiyong failed to prove that “歌力思” enjoys the same visibility, Ellassay’s sales of allegedly infringing products at its counters will not make ordinary consumers falsely believe that these products are from Wang Suiyong. In terms of Ellassay’s specific methods of use, the trademark “ELLASSAY” was marked on conspicuous areas on the packaging and inside the allegedly infringing products, and only Chinese characters “品牌中文名(Chinese Brand Name)：歌力思” were printed on the product tags. As “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 didn’t intend to attach itself to Wang Suiyong’s trademark “歌力思” and wouldn’t 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 also not prohibited by law. Finally, Wang Suiyong obtaining the trademark “歌力思” and exercising the trademark right wasn’t justifiable or appropriate. The trademark “歌力思” comprises of Chinese characters “歌力思”, which are exactly the same as the Chinese characters of the trade name first used by Ellassay and the earlier registered trademark “ELLASSAY”. “歌力思” is an invented phrase without any intrinsic meaning. According to common sense, it is less likely to register the exact same trademark by coincidence without seeing or knowing the prior one. As a similar region business operator with similar business scope, it is unlikely that Wang Suiyong did not know about the trade name and trademark “ELLASSAY”. In such circumstances, it is difficult to say if it is appropriate for Wang Suiyong to apply for registering the trademark “歌力思” on handbags, wallets, etc. Accordingly, Wang Suiyong’s action against Ellassay’s fair use of a trademark, which Wang Suiyang had acquired maliciously, constitutes an abuse of rights.
