The case of Louis Vuitton Malletier v.s. Shanghai XinGui Real Estate Development Co., Ltd. and Shanghai International Lidu Real Estate Investment Co., Ltd is a new type of IPR case involving both trademark infringement and unfair competition claims. The plaintiff (Louis Vuitton Malletier) is a French company that registered the "LV" and "LV Pattern" trademarks. The legal question presented is whether the defendants' (Shanghai XinGui Real Estate Development Co., Ltd. and Shanghai International Lidu Real Estate Investment Co., Ltd.) use of the plaintiff's trademarks in their real estate advertisements constitutes trademark infringement or unfair competition? Upon hearing, Shanghai No.2 Intermediate People's Court ruled that the behavior of the two defendants in using an "LV" bag in their advertisement was malicious and thus constituted unfair competition, violating the principles of equality, justice, and good faith as well as generally accepted commercial ethics. Meanwhile, the Court did not admit that the defendants' behavior constituted trademark infringement.  

I. Case Summary

Plaintiff: Louis Vuitton Malletier ("LV Company")

Defendant: Shanghai Xingui Property Development Co., Ltd. ("Xingui Company")
Defendant: Shanghai International Lidu Real Estate Investment Co., Ltd. ("Lidu Company")

The Plaintiff claimed that it was the registrant of trademark No. 241081 " " (hereinafter referred to as "LV") and of trademark No. 241012 " " (hereinafter referred to as "LV Pattern"). These trademarks are registered worldwide, and enjoy high popularity around the world. However, the two defendants, without due permission from the plaintiff, used the registered mark "LV" in their large outdoor advertising boards. The handbag with the "LV" mark is in the most conspicuous place of the advertisement. The plaintiff ascerted that the two defendants took advantage of the registered mark of "LV" and its popularity to attract relevant consumers and highlight the profile of their real estate projects. This infringed the Plaintiff's trademark rights, and meanwhile constituted unfair competition. On this basis, the plaintiff requested the court to: 1. recognize the Plaintiff's "LV" trademark as a well-known trademark; 2. order both defendants to immediately stop their infringement upon the Plaintiff's right to the exclusive use of the trademark and eliminate all ill effects; 3. order both defendants to compensate the Plaintiff RMB 50,000 for economic losses, and RMB 137,050 for the plaintiff's expense in stopping the infringing actions.    

The Plaintiff claimed that its "LV" trademark was a well-known trademark. Yet, the defendant used it in its advertising as a trademark and commodity design, and the picture of a model carrying a handbag of "LV" brand made a strong visual impact on consumers. The "LV" handbag was a highlight of the whole advertisement, misleading consumers to think that this was an advertisement involving the "LV" brand, or that LV Company was an investor in this building. This fact would weaken the influence of the "LV" trademark. According to the Trademark Law and the Anti-unfair Competition Law, the defendants' actions constitute both trademark infringement and unfair competition through false advertising. Meanwhile, the defendants relied on the popularity of "LV" to better its real estate image, which was a form of "hitchhiking", and violated the principle of good faith and also constituted unfair competition. 

To prove that the trademark was "well-known", the Plaintiff submitted to the Court duplicate documentation of its domestic registration certification for the "LV" serial marks, the original documents contained in the trademark files, the brochure from "LV" franchise shops on the using condition of the "LV" mark in China, articles in newspapers and periodicals concerning the promotion of "LV" in China, the investigation report proving the "LV" mark's popularity in China, evidence on plaintiff's anti-counterfeiting activity in China, and evidence on the worldwide registration, use and publicity of "LV" serial marks. Among these materials, the plaintiff provided the originals of the "LV" trademark files in Classes No.3, No.14, No.16, No.18, No.25 and No.28 of the Nice Classification, the report by City Life, ELLE, China Fashion at the 150th anniversary of " Louis Vuitton" on the parties and celebratory activities that took place in various locations, information on its franchise shops, the investigation report on the "Study of Recognition Degree of Middle and High Grade Brands" made by Research International (Guangzhou) China, the special report on "LV" in Issue 4 of Business Weekly in 2004, and the article titled "Top 100 Brands in the World" in Issue 9 of Business Weekly in 2004, in which the "LV" brand is included. In addition, the plaintiff provided an article titled "Foreign Trademarks Favored by the Chinese People" publicized by sina.com, where "LV" is mentioned. The website of the World Intellectual Property Organization has published the information on the international registration of the "LV" trademark. All the above materials were notarized.

The two defendants argued that the plaintiff's well-known trademark claim should only be made with regard to the marks in Class No. 241081. They further argued that the evidentiary material provided by the plaintiff was not sufficient for the determination that the plaintiff was the rightful owner of this trademark, nor was it sufficient to prove that this trademark was "well-known". The defendants' actions constitute neither trademark infringement, nor unfair competition. Therefore, the two defendants requested the Court to reject the plaintiff's argument.   

The two defendants held: firstly, the evidence provided by the plaintiff was insufficient to prove that "LV" was a well-known trademark; secondly, what was contained in the advertisement was not the "LV" trademark, but the "LV" brand handbag, which was only a prop in the model's hand, rather than any identification for the building; thirdly, that the advertisement would not mislead consumers because in the full breadth of the picture, the LV" logo on the handbag was far smaller than the characters in the picture, such as "International Lidu City", "Lidu, the New Nobility" and the full names of the developers. No consumers will be confused as to the owner and operator of the buildings; fourthly, there was no evidence that this advertisement had resulted in any damage to the plaintiff; fifthly, no matter whether the LV" trademark was an ordinary trademark or a well-known one, the alleged behavior by the defendants did not constitute trademark infringement as governed by the present legal rules of China; sixthly, the plaintiff and the defendants were not business competitors since they had a totally different business scope and there was no competition between them. The charge of "Hitchhiking" on the plaintiff's trademark was also groundless. Thus the defendants' behavior should not be held to constitute unfair competition.   

The defendant Lidu Company argued that the advertisement design and its publicity were both conducted by Xingui Company and that Lidu Company was ignorant of the situation. Therefore it should not be liable for Xingui Company's actions. 

The Court found upon hearing that the business scope of LV Company involves the trading and marketing of boxes, bags, travel articles, leather goods, dress, perfume, adornments and such luxury goods; while Lidu Company is mainly engaged in real estate development and Xingui Company mainly deals with real estate development and operation.

From July 23, 2004 to October 31, 2004, a big outdoor billboard was set up on a building at the crossing of Middle Yan'an Road and Shanxi Road. The background color of the billboard was blue-purple. The whole picture was divided into three parts: on the left, the advertising messages translated into English are "International Lidu City", "Lidu, the New Nobility", "Different Lidu the New Nobility in the same International Lidu City", "Luxurious Star Hotel-like Commercial Residence in the Business Circle of West Nanjing Road", "6287-5055 Shimen Er Road, Xinzha Road", etc. The bottom left side contained "Shanghai XinGui Property Development Co., Ltd." and "Shanghai International Lidu Real Estate Investment Co., Ltd."; the right side also had advertising messages, such as "Being the Master of the World", "The Business Circle of West Nanjing Road in Your Left Hand" and "An 80,000 Square Meters of Green Park in Your Right Hand"; in the middle part of the billboard was a picture of a model with a handbag in one hand with the "LV Pattern", including the pictorial LV" trademark. In the advertisement, the words are white, and the main color of the model and handbag is orange red. Its corresponding registration certificate for outdoor advertising was recorded as the following Advertisement type: Operating outdoor advertisement; Place of release: Yan'an Road (crossing of Shanxi Road); Content: International Lidu City; Specification: 300m (H) ×60m (W), etc.  

The Court decided that the two defendants' behavior constituted unfair competition, and was in violation of the principles of equality, justice and good faith, as well as generally accepted commercial ethics. Both defendants were found civilly liable. In the public advertisement, the full names of the two defendants were explicitly listed, while no further explanations were given as to their identities. Associated with the business scope of the two defendants and the content advertised, it could be seen that the two defendants had direct interests in the content of the advertisement. Both defendants were responsible to examine the content in advance, and should be liable for the content. Therefore, Lidu Company's argument that it should not bear the responsibility for this advertisement was unsupported.

The behavior of the two defendants did not constitute trademark infringement. Considering the actual situation of the dispute in this case, the Court deemed it unnecessary to make a judgment and determination on whether the plaintiff's "LV" mark was well-known or not, and dismissed plaintiff's claim of "recognizing the trademark 'LV' as a well-known trademark". Additionally, the plaintiff alleged that the defendants' actions involved false advertising prone to cause misunderstandings. But it did not prove that the contents of the advertisement were false, nor did it prove that it misled consumers. Therefore the Court dismissed the plaintiff's claim in this regard. The plaintiff requested the defendants to eliminate the ill effects, but it did not provide any evidence that the defendants' infringing acts had brought negative consequences to its business reputation in any respect. Therefore the Court decided that this request was untenable.   

In view of the incalculable damages to the plaintiff and the undetermined benefits to the defendants, the Court decided the amount of compensation by taking into consideration the nature of the defendants' infringing acts, the duration of infringement, and the reasonable expenses paid by the plaintiff for stopping the infringement. In accordance with the pertinent rules in the Trademark Law and the Anti-unfair Competition Law, the Court rendered the judgment requiring that (1) the defendants Shanghai XinGui Property Development Co., Ltd. and Shanghai International Lidu Real Estate Investment Co., Ltd. compensate the plaintiff Louis Vuitton Malletier for a total of RMB 50,000 for its economic losses; (2) and dismissed the other claims made by the plaintiff.

II. Case Analysis

The disputes of this case are focused on (1) the plaintiff's rights claim, (2) whether the defendants' actions constitute unfair competition, and (3) whether the defendants' actions constitute trademark infringement.

1. About the Right Claim

The plaintiff alleged that it was the registrant of "LV" trademark No. 241081 and "LV Pattern" trademark No. 241012. The plaintiff applied these two trademarks to claim its rights. To prove its ownership, the plaintiff submitted to the court the duplicate trademark registration certificate for "LV" trademark No. 241081, the original No. 241081 "LV" trademark files stamped with "the seal of Trademark Office of SAIC ", and the original trademark files for "LV Pattern"No.241012. The content of the trademark registration certificate was identical with the information in the original trademark files. They both recorded LV Company as the registrant of the above two trademarks.   

The two defendants argued that the plaintiff's pleadings and the proof submitted within the time limit for providing evidence revealed that the plaintiff's claim of right should only deal with trademark No.241081, and that trademark No.241012 was beyond the scope. Further, for trademark No.241081, as the plaintiff failed to provide the original trademark registration certificate, it was unable to prove its ownership of this trademark. As a result, the plaintiff had no right to claim the trademark right for it. 

The court held that from either the plaintiff's claim, or from the facts or reasons on which the claim was based, the plaintiff only protested the "LV" trademark right for No. 241081 within the time limit for submission of proof. When the court hearing was held, the plaintiff included the "LV Pattern trademark No.241012 in its right to protest, which resulted in the change of its litigious claims. This change exceeded the time limit for proof, and the defendant did not approve it. The court also dismissed the supplemental claim. Although the plaintiff failed to provide the original trademark registration certificate for "LV", besides the duplicate certificate, it also provided the original trademark files issued by the Trademark Office of SAIC. The two materials were proven to be identical. Since the defendants could not produce proof to the contrary, the Court recognized that the plaintiff was the registrant of "LV trademark No. 241081. In this case, this trademark might be considered as the basis for plaintiff to claim its rights. 

The plaintiff is a French company, and France and China are both the members of the Paris Convention for the Protection of Industrial Property. This Convention prescribes "that all member countries must ensure the effective protection for citizens in the country to suppress unfair competition." Therefore, the plaintiff is entitled to raise an unfair competition claim according to Chinese law. The plaintiff has legally registered the "LV trademark" in China, and enjoys the right to the exclusive use of the trademark. On this basis, it also has the right to make a claim based on its trademark rights as governed by Chinese law. Therefore, the plaintiff is entitled to make an unfair competition claim, as well as a trademark rights claim.

2. Concerning the Unfair Competition Claim

There are two viewpoints regarding whether the defendants' actions constitute unfair competition.

The first view is opposed to such a finding based on the following reasons:  

(1) The defendants' actions are without prejudice to the legal rights of the plaintiff. The handbag in the model's hand is merely a prop. The " "logo still indicates that it is the plaintiff's product. There is no reason to believe that the " "trademark will be defaced or its influence will be weakened due to this advertisement, or that the plaintiff has any relationship with this building. Nor will this advertisement cause ill effects to the plaintiff's prestige. 

(2) The defendants' actions are without prejudice to the interests of the public. The advisement has clearly indicated the name of the building, its geographic location, the developers, and the contact information. No person will be confused with the source of the building, thinking that it is related to the " " trademark or the right owner of " " simply by the picture of a model with a " " bag in her hand.  

(3) The defendants' use of the " " trademark is rational. It is a fact that the plaintiff's " "trademark and its "LV" bag enjoy high popularity. But when a commodity or a label has become a symbol of top grade fashion, this commodity or label shall be assumed to reflect its conceptual nature, which is the representation of top grade fashion. This case is just an example of using this nature.

(4) Judicial determinations shall not hamper the development of art. From the perspective of encouraging originality, we shall take a more tolerant attitude towards advertisement design and creativity. Nowadays, many advertisements contain a multi-element structure, in which others' trademarks will be inevitably involved. When the use of such marks accords with what the marks right owner expresses to the public, we shall not prohibit such use. To a certain degree, such bona fide use by others recognizes the right owner's work, and even enhances the right.  

The second opinion supports the finding of unfair competition for the following reasons:

(1) A competitive relationship exists between the plaintiff and the defendants. Despite the different business scopes of the parties, the operating costs, operating style and business opportunities all influence the operator's competitiveness in the market. Therefore, competition may result among the operators in the same industry, and among the operators in different industries. And if the operator, in an illegal manner, directly or indirectly contends for business with his competitor or other operators, damages their legal rights, and disrupts the fair competition order, he is engaging in unfair competition. 

(2) The two defendants' actions of using the "LV" bag in the advertisement are malicious, and are a way of unlawfully obtaining benefits. As we have stated above, in order to prove the popularity of its trademark and commodity, the plaintiff has submitted to the court such evidence as its trademark registration, its use of the trademark and commodity, its promotional activities, and its protection of the mark and the public's familiarity with it. The court accepts as essential evidence the "LV" serial trademarks files, the report by City Life and other magazines at the 150th anniversary parties and celebrations of " Louis Vuitton", the information about the franchise shops, the special report on "LV" and the top brand list by Business Weekly, the "Study of Recognition Degree of Middle and High Grade Brands" made by Research International (Guangzhou) China, and the information and articles released by the certified websites. These materials are sufficient to prove the high popularity of the "LV" handbag. It has become a symbol of top grade fashion.  

Fully aware of the great popularity of the "LV" handbag, the two defendants, on a billboard of 300 meters in height and 60 meters in width, highlighted the model and the "LV" bag in her hand with a one-third proportion and dazzling orange, to attract consumers, thereby improving the standard of the advertised building by utilizing "LV" handbag's popularity. The defendants' aim was to inform people that their potential consumers are those fashionable and noble persons with an "LV" handbag. Thus their building is also fashionable and noble. The two defendants' advertisement's reliance on the plaintiff's commodity is a willful use of the plaintiff's product to illegally obtain economic benefits.  

(3) The actions by the two defendants damage the plaintiff's legal rights and disrupt the fair competition order.

It is through the investment of enormous funds and long-standing business dealings that the plaintiff has achieved its current success, and as such its trademark and commodity become a symbol of fashion and nobility. The two defendants, for commercial purposes, willfully used the plaintiff's business fruits to put themselves at a competitively advantageous position. Their actions damaged the plaintiff's legal rights. By "hitchhiking", the two defendants occupied an undue position of prominence among all other competitors, and broke the competitive order of equality, justice and good faith.

The Court adopted the second opinion to decide the case, and found that the defendants' actions constitute unfair competition.

3. Concerning the Trademark Infringement Claim

There are mainly two viewpoints regarding whether the defendants' actions constitute trademark infringement. 

The first viewpoint supports a finding of trademark infringement for the reasons that:   

(1) The plaintiff's trademark enjoys high popularity and "LV" symbolizes top grade fashion. The defendants' malicious use will definitely weaken the influence of the plaintiff's well-known trademark, and mislead the relevant public to think that this is an advertisement for the "LV" brand, or that LV Company is an investor in this building. This misunderstanding causes confusion to consumers concerning the plaintiff's trademark.

(2) Although the defendants' behavior does not "use a trademark that is identical with or similar to the plaintiff's registered trademark in respect to the same or similar goods", Article 52.5 of the Trademark Law may be applicable in this case, which says "to cause, in other respects, prejudice to the exclusive right of another person to use a registered trademark is an infringement upon the exclusive right to use a registered trademark".

The second viewpoint is opposed to a finding of trademark infringement by the reasons that:

(1) In the advertisement, the "LV" logo has no trademark relationship to the building advertised. From the perspective of its application, it is a fact that the "LV" logo appears in the advertisement. But this logo is a part of the "LV" handbag, while the latter is a prop in the model's hand. Additionally, the "LV" logo does not appear in other parts of the advertisement, nor has it any relationship with the name and the advertising message shown in the advertisement. Therefore this logo is not the trademark, name or decorative pattern of the commodity advertised. It has no trademark relationship to the commodity.  

(2) The "LV" logo in the advertisement will not cause confusion to consumers. Considering the advertisement's effectiveness, one-third of the picture contains the model and handbag, and the remaining two-thirds contain the advertising message. The white Chinese characters on the blue-purple background clearly show that the commodity advertised is the building, the name of the building is "International Lidu City", and the subjects related to the building are "Lidu Company" and "Xingui Company". No consumer will think that the plaintiff is the developer of this building, or that it has any interest in the building. That is, no consumer will be confused as to the identity of the building's developers because of the advertisement.  

The Court adopted the second viewpoint to determine the case: that is, the defendants' actions did not constitute trademark infringement.

The author is the vice president of Shanghai No.2 Intermediate People's Court