Docket No.: 4517, second instance (终), civil case (民), (2020) Dongguan Intermediate People's Court of Guangdong Province (粤19)

Lower Court Docket No.: 4196, first instance (初), civil case (民), (2019) the First People's Court of Dongguan City, Guangdong Province (粤1971)

SUMMARY OF THE ARGUMENT

When the right holder points out that the "parallel imported" goods do not have the relevant anti-counterfeiting mark, the goods can be deemed to infringe the exclusive right to use registered trademark, and the vendor of the goods shall prove the legal source of the goods.

If the logo used on the decoration of a "parallel import" store is a service mark that goes beyond what is necessary for the sale of goods, it will constitute an infringement of the exclusive right to use registered trademark.

Even if a warning letter is received, shopping malls will not be jointly and severally liable for the infringement act of the "parallel import" stores because shopping malls haven't committed any related intentional act.

STATEMENT OF THE CASE AND FACTS

MICHAEL KORS (SWITZERLAND) INTERNATIONAL GMBH,

Plaintiff-Appellee

v.

SHANGHAI YITENG BRAND MANAGEMENT CO., LTD. DONGGUAN GUOMAOCHENG BRANCH,

SHANGHAI YITENG BRAND MANAGEMENT CO., LTD.,

Defendants-Appellants

DONGGUAN MINYING REAL ESTATE DEVELOPMENT CO., LTD.,

DONGGUAN MINYING COMMERCIAL MANAGEMENT CO., LTD.,

Defendants

Michael Kors (Switzerland) International GmbH (“Michael Kors”) is the owner of the exclusive right to use registered trademark “MICHAEL KORS” for goods in Class 18 (including handbags, wallets, etc.) and the owner of the exclusive right to use registered trademark “MICHAEL KORS” for services in Class 35 (including advertising, marketing, selling for others, demonstration of goods, etc.). After Michael Kors failed in requesting Dongguan Minying Real Estate Development Co., Ltd. (“Minying Real Estate”) and Dongguan Minying Commercial Management Co., Ltd. (“Minying Management”) to prevent the unauthorized “MK exclusive shop” from being operated in the shopping mall, it purchased a “M K” handbag from the “MK” store operated by Shanghai Yiteng Brand Management Co., Ltd. Dongguan Guomaocheng Branch (“Yiteng Dongguan”), and filed a lawsuit against Yiteng Dongguan, Shanghai Yiteng Brand Management Co., Ltd. (“Yiteng”), Minying Real Estate and Minying Management on the ground that the handbags sold in the store and the decorative mark “MICHAEL KORS” of the store infringed its exclusive right to use registered trademark, and claimed for compensation of RMB 500,000.

Yiteng Dongguan and Yiteng argued that they were operating a "parallel import" store and that the alleged infringing "MK" handbag belonged to "parallel imported" genuine product. Minying Real Estate and Minying Management argued that they had checked the authorization materials and performed their duty of examination.

The First People's Court of Dongguan City, Guangdong Province held in the first instance that, Michael Kors, as the right holder, had the ability and qualification to identify whether the handbag in dispute was genuine, who also pointed out the difference between the handbag in dispute and the genuine product, so the handbag in dispute was an infringing product. Yiteng Dongguan and Yiteng failed to prove the legal source of the handbag in dispute and should be held liable for compensation. The "MICHAEL KORS" logo shown on the decoration of the store in dispute did not fall into any specific category of goods trademark, so it was a service mark; its use on the decoration was obviously unnecessary for the sale of goods and constituted trademark infringement act. Although Minying Real Estate and Minying Management had received the notice from the right holder, they had performed their duty to reasonably examine the "authorization information" submitted by Yiteng Dongguan, and there was no subjective intentional behavior, so they would not be jointly and severally liable. The court ruled at first instance that Yiteng Dongguan and Yiteng should stop selling the infringing handbags and using the infringing trademark on the store decoration, and should compensate Michael Kors RMB 300,000.

Yiteng Dongguan and Yiteng refused to accept the first instance judgment and appealed to Dongguan Intermediate People's Court of Guangdong Province. Michael Kors withdrew its claim that the decoration mark of the store in dispute infringed its exclusive right to use registered trademark because Yiteng Dongguan made corrections during the second instance. Based on the above-mentioned changes in the case, the court of second instance decided to abrogate that item of the first instance judgment and affirmed other items of the first instance judgment.

ANALYSIS

The rapid development of "parallel import" stores has brought consumers more choices but also increases the risk of intellectual property infringement. This case clarifies the burden of proof in determining whether the goods sold by "parallel import" stores constitute infringement, whether the logo used in their decoration is a trademark for goods or a service mark, as well as the responsibility of large shopping malls for examining the introduction of "parallel import" stores. Therefore, this case is conducive to regulating the "parallel import" industry.

In this case, although the goods sold in "parallel import" store was alleged to be genuine, the right holder had the ability and qualification to identify whether the goods were genuine and could point out that the infringing goods did not have the relevant anti-counterfeit mark, so the relevant goods could be considered as infringing ones. In this case, the right holder had performed its burden of proof, so the court affirmed that the goods in dispute were infringing goods, and ordered Yiteng Dongguan and Yiteng to bear the responsibility of compensation when they could not prove the legal source of the goods.

Whether the logo used on the decoration of a "parallel import" store is a service mark or a trademark depends on the category of goods or services to which the logo refers. In this case, although all of the goods sold in the "parallel import" store were produced by Michael Kors, there were many categories of goods involved, and the decoration mark did not fall into any specific category of commodity trademark. Before opening, the store in dispute also called itself "MK exclusive shop ", so the above-mentioned decoration mark was a service mark. The "parallel import" store placed the logo of Michael Kors on many conspicuous parts of its decoration, which went beyond what was necessary for the sale of goods, and therefore constituted trademark infringement.

The act of helping others to infringe the exclusive right to use registered trademark should be subject to at least the following conditions: 1. The act of infringing the exclusive right to use registered trademark does exist; 2. The actor objectively facilitates the trademark infringement; 3. There is a subjective intention on the part of the actor. In this case, although Minying Real Estate and Minying Management had received the notice from the right holder, they had timely required Yiteng Dongguan to submit its authorization materials and have performed their duty to reasonably examine the authorization materials submitted by Yiteng Dongguan. Therefore, there was no subjective intentional behavior on the part of Minying Real Estate and Minying Management and they would not be jointly and severally liable.