Case Summary

In November 2004, China National Cereals, Oils and Foodstuffs Imp. & Exp. Corp. ("COFCO") filed an action with Beijing High People's Court for an order requiring that Beijing Jiayu East Wine Co., Ltd. ("Jiayu Company") immediately cease its trademark infringement, and pay damages in the amount of 100 million yuan on account that the grape wines of Jiayu Company sold under the trademark of "嘉裕长城" had infringed upon COFCO's exclusive right to its registered "长城" trademark. COFCO also applied to the court for the preservation of evidence and property against the alleged infringing products worth 4 million yuan. 

On April 20, 2005, Beijing High People's Court rendered its judgment that Jiayu Company had infringed upon COFCO's exclusive right to "长城", its registered trademark, that Jiayu Company immediately cease producing and selling wines under the brand name of "嘉裕长城" and "嘉裕" upon the date that the judgment came into force, and that Jiayu Company compensate COFCO 15,527,479 yuan within 10 days from the date that the judgment became effective. Disagreeing with the judgment, Jiayu Company appealed to the Supreme People's Court.

On August 10, 2006, the Supreme People's Court issued its final judgment for the case: Jiayu Company had, without due permission from COFCO, used trademarks proximate to the registered trademark of COFCO, on commodities similar to those sold by COFCO. Therefore, the Court held that Jiayu Company had infringed COFCO's exclusive right to the registered trademark and should be subject to civil liabilities under law. Moreover, the Supreme People's Court reduced the amount of damages ordered in the first instance court's judgment from 15,527,479 yuan to 10,614,090 yuan. The first instance court's judgment requiring that "Jiayu Company shall immediately cease producing and selling wines under the brand name '嘉裕长城' and '嘉裕' upon the date that this judgment comes into force", was changed to "Jiayu Company should immediately cease producing and selling the infringing wine products under "嘉裕长城and graphic".

Background Information

Plaintiff of first instance trial:

China National Cereals, Oils and Foodstuffs Imp. & Exp. Corp. (COFCO); Legal representative: Ning Gaoning 

As a large state-owned enterprise ("SOE") under the State-owned Assets Supervision and Administration Commission of the State Council ("SASAC"), COFCO has established its business in trade, finance, information, R&D and services, with the industrial chain extending to agricultural products, foods, hotels and real estate. It has been designated as one of the world's Fortune 500 companies ever since 1994 and ranked 434 in 2005.

On July 20, 1974, COFCO's Tianjin Branch had "长城牌" (No. 70855) approved and registered with the Trademark Office of the State Administration for Industry and Commerce ("Trademark Office") and the registered trademark was for use on grape wine products in Commodity Category No. 33. On April 8, 1998, "长城牌" was transferred to COFCO, the defendant in the case herein. On September 21, 2001, COFCO had "长城" (No. 1447904) approved and registered with the Trademark Office for use on rice wine products in Commodity Category No. 33. The grape wine products were not included as a commodity approved for "长城".

First defendant in the first instance trial:

Nanchang Kaixin Candy, Beverage and Foods Co., Ltd ("KAIXIN Company"); Legal representative: Su Cheng

Established in July 18, 1996, KAIXIN Company was a distributor of China Great Wall Wine Co., Ltd, COFCO's affiliate under a distribution agreement. It was a long-standing distributor of the "长城牌" grape wines before a dispute ensued concerning the payment of goods. KAIXIN Company submitted an application for "嘉裕长城" (No. 1502431) to the Trademark Office on May 21, 1999 and the preliminary examination publication was issued on October 7, 2000. On January 6, 2001, COFCO started the opposition procedure with the Trademark Office against Kaixin Company's application. The application for "嘉裕长城" was stayed by the opposition procedure at the Trademark Office. 

On May 22, 2001, Su Cheng personally submitted designs (No. 01329181.5 and 01329182.3) for the "嘉裕长城" logo to the Patent Office and was granted two design patents in 2002. On March 28, 2001, Su Cheng applied to the Trademark Office for "JIAYUCHANGCHENG嘉裕长城" (No. 3127975). The application was rejected because of its similarity to COFCO's trademark No. 1447909. On June 21, 2002, KAIXIN Company's "嘉裕庄园" (No. 1792430) and "嘉裕" (No. 1792431) were registered with the Trademark Office.

Second defendant in the first instance trial:

Beijing Jiayu East Wine Co., Ltd. ("Jiayu Company"); Legal representative: Su Cheng

Jiayu Company was founded by Su Cheng, et al, in Beijing on February 16, 2001. Based on an agreement between KAIXIN Company and Jiayu Company on March 18, 2001, Jiayu Company was permitted to use "嘉裕长城" as its trademark. On October 22, 2001, Jiayu Company entered into an agreement with Changli County Tian's Wine Co., Ltd. for commission production of "嘉裕长城" wines, with the agreed annual production to be 500t or above. In November 2001, Jiayu Company commissioned Yantai Ouhua Wine Co., Ltd. to produce 192.03t of "嘉裕长城" wines.

Third defendant in the first instance trial:

Qinhuangdao Hongsheng Wine Co., Ltd.; Legal representative: Chang Hongsheng 

On August 1, 2003, Jiayu Company entered into an agreement with Hongsheng Wine Co., Ltd. for commission production of "嘉裕长城" wines and the latter produced 609.6t for Jiayu Company.

On August 10, 2006, the Supreme People's Court rendered its final judgment for the trademark dispute of China National Cereals, Oils and Foodstuffs Imp. & Exp. Corp. ("COFCO") vs. Jiayu East Wine Co., Ltd. ("Jiayu Company"), deciding that Jiayu Company's unregistered trademark "嘉裕长城(Jiayu Changcheng) and graphic", meaning "Jiayu Great Wall" in English, was proximate to "长城牌" （Changcheng Pai）, meaning "Great Wall Brand" in English, a famous registered trademark of COFCO, and that Jiayu Company's use of "嘉裕长城and graphic" constituted an infringement upon COFCO's to the exclusive right of "长城牌".

This nearly 2-year-old case has caught our attention since its very inception and was regarded as the No.1 IP case of 2005. COFCO is specially designated as one of the world's Fortune 500 companies, and its "Changcheng" （Great Wall） wines have enjoyed a good reputation in the market. COFCO sought damages in the sum of 100 million yuan and the Supreme People's Court, for the first time, ruled to preserve property in a trademark infringement case. All these factors have made this case anything but typical. Despite the fact that the final judgment granted only 10 million yuan in damages, it represents the highest recorded damages amount granted in China.
Although the lawsuit has ended and Jiayu Company, the main defendant, has gone bankrupt and shut down, it will take a long time for the controversies arising from this case to die down due to its focus on the determination of proximate trademarks. In terms of design alone, the two trademarks involved are very different in terms of their texts, "长城牌" and "嘉裕长城"; and in their graphics (see graphics below), as one is round-shaped, with "GREATWALL" and "BRAND" written below and the other has four Chinese characters printed over a black oblong background of battlements. The pronunciations are also different, as one is pronounced as "Changcheng Pai Great Wall", while the other is pronounced as "Jiayu Changcheng". 

Trademark "长城牌"（Changcheng Pai）
 
Trademark "嘉裕长城"（Jiayu Changcheng）

The two trademark designs seem quite dissimilar by the above analysis. However, it never suffices to determine trademark proximity by design alone. Article 9 of the Interpretation of the Supreme People's Court about Several Issues in the Application of Law in Hearing Civil Disputes of Trademark ("the Interpretation") provides clearly that " 'Trademark Proximity', in Article 52.1 of the Trademark Law, means that the alleged infringing trademark is similar to the registered trademark with regard to the shape, pronunciation or meaning of the words, or the composition or color of the graphic, or the whole structure of all the constructive elements combined, or the 3-D shape or the color composition of the trademark, which may easily lead the relevant public to mistakenly believe that the origin of the commodities under the infringing trademark is the same as or specially related to that of the commodities under the registered trademark".

Article 10 of the Interpretation defines the following three principles to determine the proximity between trademarks; "the criterion is the general perception of the relevant public; the comparison shall be done on both the whole and the major part of the trademarks while they are separate; to determine trademark proximity, the distinctiveness and fame of the trademark shall be considered for which a request for protection has been filed". 

As every trademark infringement case is complex, the Interpretation seems to be an insufficient basis for a court to apply, and the judge is thus granted certain discretion. However, the final judgment from the Supreme People's Court, which is the most notable, is apparently a further interpretation and application of the Interpretation. 

The following is an excerpt from the final judgment, which explains why "嘉裕长城and graphic" and "长城牌" are proximate. 

The issue herein is whether Jiayu Company's use of "嘉裕长城and graphic" has infringed upon COFCO's right to the exclusive use of its "长城牌" (Registered Trademark No. 70855) and "长城" trademarks (Registered Trademark No. 1447904).

COFCO, the owner of "长城牌" (Registered Trademark No. 70855) and "长城" (Registered Trademark No. 1447904), is protected by the law as to its right to the exclusive use of the two trademarks. According to Article 52.1 of the Trademark Law, any use of trademarks which are identical or proximate to a registered trademark, on commodities which are the same or similar to the commodity under the registered trademark, constitutes an infringement upon the exclusive use right to the registered trademark. Considering the focus of the dispute in this case, the determination of infringement upon the exclusive users' right to the registered trademarks depends essentially upon whether "嘉裕长城 and graphic", as Jiayu Company uses it, is proximate to the two registered trademarks of COFCO. 

According to Article 9 and 10 of the Interpretation of the Supreme People's Court about Several Issues in the Application of Law in Hearing Civil Disputes of Trademark, to determine the proximity between an alleged infringing trademark and a registered trademark in a trademark infringement case, comprehensive analysis and judgment shall be done on the possible confusion in the market of the whole or the major parts of the trademarks concerned, the distinctiveness and the market reputation of the trademarks or their elements, the shape, pronunciation and meaning of the texts, or the composition and color of the graphics, or the combination of the constructive elements. The two trademarks are proximate if their whole or major parts may possibly cause confusion in the market; otherwise, they are not. In other words, trademark proximity shall also be the proximityabout the major parts besides the whole body.

In terms of the Trademark Law, the major parts of a trademark mean such constructive elements of the trademark that are most distinguishing about the origin of the commodity or most possibly make the relevant public relate the trademark to the commodity under it. In the dispute, both "嘉裕长城and graphic" and "长城牌" are combined trademarks which comprise texts and graphics, and the two trademarks are different somewhat with regard to the whole design. However, "长城牌" (Registered Trademark No. 70855) is a famous trademark as appraised by the State Administration for Industry and Commerce as it was registered a long time ago and enjoys a good reputation and fame in the market. The grape wines of COFCO under the "长城牌" trademark are also very famous in the domestic market. According to the specific features and the usual pronunciation, such a constructive element as "Changcheng" or "长城牌"'s text, as it is used more frequently and more identifiably, has witnessed a fixed relationship established between these constructive elements and the grape wines of COFCO in the wine market. The relevant public, as long as they see or hear "Changcheng" or "Changcheng Pai", would usually associate it with COFCO's grape wines and brands. Therefore, the text "长城" or "长城", is the major part of the trademarks as it is obviously a distinctive feature for identifying the COFCO's grape wines.

Although "Jiayu Changcheng and graphic" is a combination of text and graphic and contains the characters of "嘉裕", the fame and distinctiveness of "长城" and "长城牌"'s text in COFCO's "长城牌" trademark (Registered Trademark No. 70855) are sufficient for the relevant public in the wine market to confuse the wine under the trademark of "Jiayu Changcheng and graphic" with those under the trademark of "长城牌", as both of them contain the"长城" text, or at least believe there is a certain connection between the two in origin.

Therefore, "长城牌and graphic", the trademark of Jiayu Company, has used the most distinctive textual components of COFCO's "长城牌", registered trademark (Registered Trademark No. 70855) and may easily lead to confusion among the relevant public in the market. Moreover, as stronger legal protection is given to famous registered trademarks in specific markets, it helps to stimulate the market winners, encourage fair competition and guarantee the market order, and prevents others from unfairly seeking connections with the business reputation of the winners, so as to effectively promote the orderly and healthy growth of market economy.

Although in modern Chinese, "长城" originally means the Great Wall, a great military work of ancient times in China, the "长城" text, as in COFCO's "长城牌" trademark (Registered Trademark No. 70855), has obtained a strong distinctiveness on account of its commercial reputation. This distinctiveness strongly excludes other trademarks containing the "长城" text in the wine market and should be given stronger protection.

For the reason given above, "嘉裕长城 and graphic", as used by Jiayu Company, is proximate to "长城牌" (Registered Trademark No. 70855), the registered trademark of COFCO. The argument of Jiayu Company is not tenable that the "长城" text, in COFCO's "长城牌"trademark (Registered Trademark No. 70855), is not distinctive in the context of the trademark and that "嘉裕长城" and "长城牌" (Registered Trademark No. 70855) are not proximate. Without due permission from COFCO, Jiayu Company has used "嘉裕长城and graphic", a trademark proximate to COFCO's "长城牌i" (Registered Trademark No. 70855), on commodities similar to those approved for "长城牌" (Registered Trademark No. 70855); Kaixin Company has allowed Jiayu Company to use "嘉裕长城and graphic"; and Hongsheng Company has produced grape wines under "嘉裕长城and graphic". These acts constitute an infringement upon COFCO's exclusive right to"长城牌" (Registered Trademark No. 70855) and thus these companies shall be subject to relevant civil liability.

It can be concluded from the above judgment that trademark proximity is not restricted to proximity of the whole trademark; it can be determined as long as the major parts of the trademarks involved are proximate. This can be regarded as a further expansion of the Interpretation. Further, proximity can be decided on account of the possibility of market confusion with regard to the whole or the major parts of the trademarks. The Supreme People's Court accepts in its ruling that "confusion" is a possibility, but not necessarily a firmly established fact. 

Unfortunately, in its judgment, the Supreme People's Court does not provide any clear evidential support as to how to determine the perception of the relevant public. Thus, the judge has discretionary power to determine whether the "relevant public" may confuse one trademark with another, i.e. to judge the possibility of confusion that may occur among the relevant public.

It is obvious that the above judgment is a further interpretation and application of the Interpretation. Although China is not a case law country, judgments from the Supreme People's Court will still affect and offer some guidance to subordinate law courts when they hear similar cases.

In this case, the focus of the dispute is on the criteria to determine trademark proximity and the doctrines for trademark comparison. Probably the opinion of the attorney for the plaintiff better explains the theoretical basis for the final judgment. The attorney for the defendant, however, still disputes several few issues contained in the judgment. The hot dispute has also interested experts in the field. Their analysis and distinctive ideas have made the dispute on trademark proximity unusually illuminating.  This case is more important for its legal ramifications than any ordinary case, as it is theoretically significant for the determination of trademark proximity. Therefore, the opinions of the parties are specially grouped hereunder and this special report is offered for all those interested in China's Trademark Law. We hope that you can learn from the focus on the disputes in this case and gain insight into the criteria and principles used to determine trademark proximity in China's judicial practice.