On April 7, 2008, the Shanghai No. 2 Intermediate People’s Court heard the trademark infringement case of Ritz Hotel, Limited v. Shanghai Huangpu Lichi Leisure and Fitness Co., Ltd., which was, for the first time, broadcast live on the Internet from a Shanghai court, through people.com.cn and chinacourt.org. The 2- hour broadcast attracted approximately 10,000 viewers which promoted judicial transparency and introduced intellectual property rights protection by the judiciary in China.

This article discusses issues and questions raised in the case, such as similarity between a plaintiff’s mark and that of defendant, similarity or identicalness between plaintiff’s services and those of defendant, and plaintiff’s prior right.

Facts

Plaintiff: the Ritz Hotel, Limited

Defendant: Shanghai Huangpu Lichi Leisure and Fitness Co., Ltd.

Plaintiff contends that it’s registered trademark RITZ is highly reputable; that the use by defendant of a mark RITS, which is similar to that of plaintiff’s mark in services similar to those under plaintiff’s trademark registration, is likely to cause confusion or mistake among consumers as to the sources of services, thereby dilute the reputation of plaintiff’s mark in the relevant sectors of the consuming public, and lower the esteem of plaintiff’s mark; and that infringement has occurred upon plaintiff’s exclusive trademark right. Wherefore, it sought an injunction of the use of the RITS mark, and claimed damages in the amount of 300,000 Yuan.

Defendant responded by arguing that the mark RITZ has never been used independently in China; that the mark RITZ in and of itself is neither distinctive nor famous; that no confusion or mistake is likely to be created among relevant consuming public; that the services it provides are neither similar to nor identical with those under plaintiff’s trademark registration; that defendant is entitled to use of the disputed mark under prior user right; that said mark was independently created by defendant’s affiliated business associates, and that the mark was, and has been, used bona fide, without any intention for infringement.

Plaintiff, a UK company formed in 1896, obtained various trademark registrations at China’s Trademark Office for LE RITZ under No. G611405, RITZ under No. 3098933 and RITZ3098934, of which, No. G611405 was an international registration, extended territorially to China, under which the services cover hotels, restaurants, health care facilities, nursing homes, beauty parlors and hairdressing salons, effective between December 9, 1993 and December 9, 2013. The No. 3098933 mark covers the services in class 44 for beauty parlors, barber shops, nursing homes, and sanitariums with mineral water in Class, which was filed February 20, 2002, and is effective between May 21, 2005 and May 20, 2015. The No. 3098934 mark covers services in class 43 for hotels, restaurants, and hotels with barbecues, fast food shops, teahouses, cocktail party services, bars, and hotel reservations Class, which was filed February 20, 2002 and is effective between October 7, 2003 and October 6, 2013.

On November 9, 1998, plaintiff concluded with the RITZ-CARLTON HOTEL COMPANY, L.L.C. (RITZ-CARLTON HOTEL,” not a party to the present litigation, a Trademark Licensing Agreement which authorized the RITZ-CARLTON HOTEL to use the RITZ mark as part of RITZ-CARLTON for its own use or for further use by others. On August 7, 2007, the RITZ-CARLTON HOTEL registered the RITZ-CARLTON trademark. The services under the RITZ-CARLTON trademark include hotels, restaurants, fast food shops and bars. The Portman Ritz-Carlton, Shanghai, also not a party to the lawsuit, was created in 1998 and is now using RITZ-CARLTON for business operations. Others, including the Finance Street Ritz-Carlton, Beijing and Jianguo Road Ritz-Carlton, Beijing, also are using the RITZ CARLTON mark.

Plaintiff also secured registrations RITZ in Australia, Germany and other countries word mark RITZ or combinations of other words or designs. In Japan the RITZ trademarks, under registration in classes 23 and 42, was found by courts to be well-known Class.

Xiamen Lijing Entertainment Co., Ltd. (Xiamen Lijing Entertainment), not a party to this, was created in 1993 its corporate officer Zhou Tao. On September 11, 2000, it filed an application for the trademark 丽池RITS and Design, designating services “hotels to provide food and board, restaurants, beauty parlors, barber shops, and massage”. During the opposition period, plaintiff Ritz Hotel filed opposition against the 丽池RITS & Design mark on the basis of its LE RITZ” trademark under No. G611405, which was sustained by the Trademark Office, finding the opposer’s mark to consist of two parts – LE and RITZ, of which LE was a French preposition [sic] and the first three letters of RITZ were found in the RITS mark; the fourth letter, S, though different from the letter Z, is hard to distinguish by the average consumer. Moreover, the services under both marks were roughly the same in terms of contents and methods, which were identical or similar services. Therefore, the opposed trademark and the cited mark LE RITZ under No. G611405 constituted similar marks, and registration was denied. Xiamen Lijing Entertainment, dissatisfied with the decision, requested adjudication with the Trademark Review & Ajudication Board on December 8, 2005, which is still pending as of this writing. In another development in 2004,  Xiamen Lijing Entertainment obtained [registration of] the 丽池 word mark in Class 43 and the “Ripple Design” marks in Classes 43 and 44.

Defendant was formed on November 18, 2004, with a registered capital investment of 2,000,000 Yuan. The business scope covers public bath and podiatry services. As its place of business is near the Bund, Huangpu District, Shanghai, defendant calls itself “外滩81丽池会所” (which means “the Lichi Club, 81, the Bund”). According to the promotional materials in English and Chinese, the services offered by defendant include not only sauna, finger press, massage, beauty treatment, hairdressing and podiatry, but also “free accommodation” and “free breakfast, lunch, supper and midnight snacks at any time.” Defendant asserted that both Xiamen Lijing Entertainment and itself were directly or indirectly financed by Zhou Tao, both were affiliated companies, and both used 丽池会所 (“Lichi Huisuo”) in their business operations.

On October 18, 2007, plaintiff had the evidence certified on the use of RITS at the business location of defendant at 81-85, Dianchi Road, Shanghai. Use of RITS by defendant is divided into three types as follows: 1. RITS is used separately on the surface of slippers; 2. “丽池RITS and Design is used as a textual and graphic combination trademark on bathrobes, towels, tooth set packages, tissue boxes, and other things and wares; 3. the combination of RITS and “丽池”, RITS UNION and “丽池会所”, or RITS CLUB and “丽池会所” are used on the billboard outside the place of business, the inside directory, the menu, the  wine and beverage list, and wrist tags. During the trial, defendant claimed that the RITS UNION sign which had been previously used on the outside of the club had been changed to “RI-STAR SPA.”

On April 21, 2008, the Shanghai No. 2 Intermediate People’s Court rendered a first-instance judgment in accordance with the Trademark Law and the Supreme People’s Court Decree on the Several Issues in Solving Trademark Disputes, that 1. defendant is permanently enjoined from using the RITS mark in its business operations; 2. defendant is held liable for damages in the amount of 200,000 Yuan; and 3. the rest of plaintiff’s charges were dismissed. Disasfied with the decision, defendant appealed to the Shanghai Higher People’s Court, which on July 23, 2008, affirmed the decision below.

Judgment analysis

The main contentious issues in the case: 

I. Whether defendant’s mark is identical to or similar with that of plaintiff’s, and whether defendant’s business scope is identical to or similar with that of plaintiff.

Plaintiff contends that both the mark RITS used by defendant and the services provided by defendant, i.e., massage, finger press and catering, are identical to or similar with the services under the RITZ trademarks under No. 3098933 and 3098934.

Defendant counter argues that it has used “RITS” mostly in combination with “丽池” as “丽池RITS and Design.” When viewed in its entirety, its mark is not confusingly similar with that of the plaintiff’s; its services of such as sauna, finger press, etc., for entertainment or pastime” are apparently different from those under plaintiff’s mark registered in class 44 for “sanatoria” and other services focusing on “personal hygiene and beauty parlor.” Defendant is not in the restaurant’s business, and its services cannot be similar with the plaintiff’s as demonstrated in class 43 for “hotels and restaurants.”

The court was of the opinion, however, that the similarity of trademarks may be determined, in accordance with Paragraph 2, Article 9 of the Supreme People’s Court Decree on the Several Issues in Solving Trademark Disputes(“the Decree”), by comparing defendant’s mark with that of the plaintiff’s; and similarity may be found if the defendant’s mark, in its composition, pronunciation, connotation, combination of colors or design, or the general appearance of the individual elements combined, or its dimensional shapes, is likely to cause confusion or mistake by the relevant sectors of the consuming public as to the source of the products, or to cause mistaken belief of a certain nexus between the source and plaintiff’s mark. Article 10 of the Decree stipulates that such similarity is judged by the standard of the casual observation of the relevant public, viz, comparison must be made not only in the entirety of the marks, but also in the main portions of the marks, taking into consideration at the same time the distinctiveness and degree of fame of the mark sought to be protected.

In the case at hand, when RITS mark is compared with RITZ, both consist of four letters and are identical except the fourth letter; both are in block letters and are similar appearance; and they share similar pronunciation. Therefore, the RITS mark of defendant is so similar with the RITZ trademark as to be likely to cause confusion among the relevant public as to the sources of products or services, or to cause mistaken belief that a certain nexus exists with plaintiff’s mark.

For the distinctiveness and popularity of the trademarks, as previously discovered, the plaintiff, created in 1896, has been using the RITZ mark for over 100 years. The RITZ mark and other trademarks containing RITZ have been registered in many countries around the world. Also, the RITZ marks have been judged in Japan as famous trademarks.

In China, the RITZ-CARLTON mark has been used by the Portman Ritz-Carlton, Shanghai and other hotels in their operations. The plaintiff told the court that those hotels’ using the RITZ-CARLTON mark was based on the Trademark Licensing Agreement between the plaintiff and the RITZ-CARLTON HOTEL and had been authorized by the RITZ-CARLTON HOTEL. According to the Trademark Licensing Agreement, the plaintiff authorized the RITZ-CARLTON HOTEL to use RITZ, as part of RITZ-CARLTON, by itself or sublicense its use to others. As authorized by the plaintiff, the RITZ-CARLTON HOTEL registered the RITZ-CARLTON trademark in China. Later on, the Portman Ritz-Carlton, Shanghai and other hotels used the trademark RITZ-CARLTON in their operations. The court considered that from the above facts, the contention of the plaintiff about the authorizations could be established. The court held that the use of RITZ-CARLTON by the Portman Ritz-Carlton, Shanghai; the Finance Street Ritz-Carlton, Beijing; and Jianguo Road Ritz-Carlton, Beijing has originated from the authorizations of the plaintiff and the RITZ-CARLTON HOTEL. The court held also that, because of the relatively high popularity that those hotels enjoy in the hotel industry, RITZ, as part of their trade marks, is also highly popular and distinctive in China.

The court considered that, as shown by the business location and in promotional materials, the defendand targets “high-end” personages, including Chinese and foreigners; RITS, in the combination mark of the defendant, likely catches more attention from the relevant public and causes confusion or mistake in them. Therefore, the “RITS” combination mark of the defendant is similar to the RITZ trademark of the plaintiff.

According to Paragraph 2, Article 11 of the Interpretation, the similar services are services that are identical in purpose, content, method or target, or services that are generally believed to be specially connected or likely confused by the relevant public.
The business scope of the defendant covers public baths and foot care, and what the defendant actually operates are sauna, finger press, massage, beauty treatment, hairdressing and foot treatment. The approved services under Trademark No. 3098933 of the plaintiff are beauty parlors, barber shops, nursing homes, and sanitariums with mineral water in Class 44. The court considered that on the general knowledge of the relevant public, the above services of the defendant and the approved services under Trademark No. 3098933 of the plaintiff are basically the same in content and method, and are identical or similar services.

According to the promotional materials and the statement at the court, the defendant provides food, drink and accommodation in its operations. The approved services under Trademark No. 3098934 of the plaintiff are hotels, restaurants and fast food shops in Class 43. Obviously the services of the defendant and the approved services of the plaintiff are identical services. The defendant contended that as currently all sauna businesses provide food and drink, food and drink do not constitute the major business of the defendant and therefore, cannot be used to judge the character of the defendant’s services. Regarding this, the court considered that it is an objective fact that the defendant provides food, drink and accommodation, that such services do not constitute the major services of the defendant does not influence the court’s judgment on identical or similar services.

In summation, the court held that the defendant has used a mark that is confusingly similar to the trademarks No. 3098933 and 3098934 of the plaintiff, on services that are identical or similar to the approved services under the two trademarks of the plaintiff.

II. The prior right of the defendant

The plaintiff contended that the defendant had not formed any prior right, because the plaintiff registered the “LE RITZ” trademark as early as 1993 and began to use the RITZ trademark in China since 1998.

The defendant argued that Xiamen Lijing Entertainment, an affiliate of the defendant and one of the third parties to the case, began to use the “丽池RITS and graphics” mark since 2000, and the plaintiff applied for the trademarks No. 3098933 and 3098934 in 2002, which was after the defendant began to use the “丽池RITS and graphics” mark. Thanks to the efforts of the defendant and the affiliate, “丽池会所” (“Lichi Huisuo”) has managed to distinguish itself for the sauna and finger press. It has won wide acclaim from media and public, with a relatively high popularity. Therefore, the defendant enjoys the prior right to the disputed mark.

The court considered that on the facts,, the plaintiff obtained the exclusive right to the “LE RITZ” trademark No. G611405 in China in 1993, as the trademark had been internationally registered and the registration was extended territorially to China. The Portman Ritz-Carlton, Shanghai, one of the third parties, was created in 1998 and began to use the RITZ-CARLTON” mark in its name and operations since 1998. Such use of RITZ-CARLTON” by the Portman Ritz-Carlton, Shanghai originated from the authorizations of the plaintiff and the RITZ-CARLTON HOTEL. Therefore, although the plaintiff has not used the RITZ trademark separately in China, the use of RITZ, as part of RITZ-CARLTON” in China, by the third parties to the case at hand, as authorized by the plaintiff, is also a use of the RITZ trademark by the plaintiff. Xiamen Lijing Entertainment, one of the third parties to the case at hand, applied for the “丽池RITS and graphics” trademark in 2000, which was later than the plaintiff registered the “LE RITZ” trademark and used the RITZ trademark.

III. The factual and legal bases for the damages to the plaintiff

The plaintiff sought 300,000 Yuan in damages against the defendant. However, it requested the court to determine the sum according to the circumstances, because it could prove neither the loss that it has suffered nor the income that the defendant had obtained illegally.

The defendant argued that no infringement has occurred and therefore it should not be subjected to any compensation. The plaintiff has never used the RITZ trademark separately in China and therefore, incurred no losses. The disputed mark of the defendant was created by the defendant itself and has been used by the defendant with good will. Thanks to the efforts of the defendant, “丽池会所” has become highly popular for the sauna and finger press. The use of “RITS” in the disputed mark has contributed very little to the profits of the defendant. The plaintiff knew the above, but waited until 2008 to file the lawsuit. It obviously contains bad faith. Even if the infringement were decided, the plaintiff could only claim damages for the period of two years prior to the filing of the lawsuit.

The court considered that as the registrant of the RITZ trademarks No. 3098933 and 3098934, the plaintiff enjoys legally the exclusive right to the two trademarks. According to the Trademark Law of China, the exclusive right is limited to the trademark that has been approved and registered and the goods that have been approved to use the trademark. Without the permission of the registrant, it constitutes an infringement upon the registered trademark to use an identical or similar trademark on the identical or similar goods. For the case at hand, the defendant used a mark that is similar to the registered RITZ trademark of the plaintiff, on the services that are identical or similar to the services approved under RITZ. The defendant’s behavior constitutes an infringement upon the registered RITZ trademark.

Since it is hard to determine the loss the plaintiff has suffered or the income that the defendant has obtained, as a result of the infringement, the court considered the popularity and distinctiveness of the trademarks of the plaintiff, the use of and expenses on the trademarks of the plaintiff in China, and the character and consequences of the infringement by the defendant, and determined the sum of compensation should be 200,000 Yuan. What the court considered specially are: the defendant used “RITS” mostly by combining “RITS” and “丽池” or in the manner of “丽池RITS and graphics”; the defendant used the “RITS” mark mostly inside the business place, except for the billboard; the defendant had already changed the foreign language name on the billboard outside, to no longer use “RITS UNION”; and, as the plaintiff had known the infringement since the incorporation of the defendant, but waited until March 13, 2008, to file the civil lawsuit, the sum of compensation for the infringement shall be calculated, as provided in Article 18 of the Interpretation, against the two years prior to the date of filing the lawsuit by the plaintiff, i.e., from March 13, 2006, until March 13, 2008, for the case at hand.

About the author:
Lv Guoqiang is a judge from the Shanghai No. 2 Intermediate People’s Court.

（Translated by Ren Qingtao）