The development of WOWO

WOWO International Co., Ltd (WOWO) has been in business for nearly 8 years. However it is now facing the risk of losing its brand, currently valued at approximately 300 million yuan. When recalling the company’s development, Tang Yaohua, Chairman of WOWO, told China IP, “WOWO was the very first 24 hour convenience store in Chengdu city of Sichuan Province. It had to face a lot of objective difficulties at the initial stage. We once experienced 7 robberies in one single night, but I didn’t surrender at that time. Now we have lived through the most difficult times and are continuously improving. I will face any challenge and solve every problem in our development.”

Talking about the establishment of WOWO, Mr. Tang revealed that he decided to open 24-hour convenience stores in Chengdu after investigating the market of convenience stores. He found that, as a tourism city with a rich nightlife, Chengdu lacked round-the-clock convenience stores, and the large number of stores in Chengdu were different in brand and lacked a unified management. Therefore, the WOWO convenience store was established in October 2005 in Chengdu. As in the fast-moving consumer goods industry, a mark that is simple, bright and easy to recognize is one of the most important factors to success. According to Mr. Tang, because of the good visual effect, striped color collocation is widely used as store marks in the convenience store industry globally. In order to distinguish itself from the other stores in Chengdu that often use red and yellow as store marks. WOWO chose blue, white and orange; blue presents calm, white provides better visual effect at night and orange suggests warmness. Mr. Tang stated that this is why he used the 7 color bars when creating the WOWO trademark.

WOWO also registered this store mark as a trademark at the Trademark Office of the State Administration for Industry & Commerce of the People’s Republic of China (the Trademark Office) and was granted trademarks “No.4982344” and “No.5785094” on April 14th 2009 and on June 21st 2010 respectively.

Mr. Tang told China IP, “With the development of WOWO, the influence of its trademark was gradually obvious and it has become one of the most commonly known brands in Chengdu. Especially our No.4982344 trademark, which has been officially recognized as a well-known trademark in Chengdu by the Chengdu Administration for Industry & Commerce.” He also revealed that the commercial value of the trademark also accumulated greatly. The brand was evaluated to be worth 100 million yuan in 2009, and it had reached 300 million yuan in 2013.

However, WOWO was quite surprised when the trademark, which the company had been proudly using for 8 years, was revoked. WOWO received the trademark revocation notification letter issued by the approving authority on grounds of similarity with the national flag of Thailand.

In face of the revocation, WOWO felt wronged and expressed doubts over the validity of the revocation.

The adjudication of similarity

On July 7th 2012, according to the Resolution to Cancel Trademarks No.4982344 and No.5785094 delivered by the Trademark Office, “On February 27th 2012, the Department of Intellectual Property (DIP), Ministry of Commerce of Thailand, sent a letter of complaint to the Trademark Office of China. The DIP claimed that the striped color collocation as well as the appearance of trademarks No.4982344 and No.5785094, were similar to that of Thailand’s national flag, in violation of the provisions of Clause 2 and Clause 8 of Article 10.1 of the Trademark Law. The
Trademark office agreed and canceled trademarks No.4982344 and No.5785094.”

Dissatisfied with the ruling, WOWO applied for a review to the Trademark Appeal Board of the State Administration for Industry & Commerce of the People’s Republic of China (the Appeal Board). The Appeal Board delivered the Resolution of Review of the No.5785049 “Graphic” Trademark and upheld the Trademark Office’s decision to cancel trademark No.5785094.

In face of the results, WOWO stated that the Appeal Board’s decision was unacceptable and started an administrative litigation at Beijing First Intermediate People’s Court.

WOWO actively prepared for the litigation. According to Chen Chen, a staff member at the WOWO Planning Department, WOWO conducted a questionnaire survey over the course of two days in 100 WOWO chain stores to collect public opinion on whether the disputed trademark was similar to Thailand’s national flag. The company received 125 responses and none of those who responded thought the disputed trademark was similar to Thailand’s national flag or stated that they associated the trademark with Thailand’s national flag.
The litigation focuses on whether the striped color collocation and appearance of the disputed trademark are similar to the national flag of Thailand and fall within the scope of Clause 2 of Article 10 of the Trademark Law, which states: “those identical with or similar to the State names, national flags, national emblems or military flags of foreign countries shall not be used as trademarks, but except with consent of the country’s government.”

The case came up for trial on April 1st at Beijing First Intermediate People’s Court. A journalist of China IP was invited to hear the case. During the hearing, the Chief Judge stated that the judgment of whether the disputed trademark was similar to the national flag of Thailand depended on subjective judgment. The defendant, the Appeal Board, did not provide evidence to prove the plaintiff violated Clause 2 and Clause 8 of Article 10.1, i.e. the Appeal Board failed to provide evidence to prove the disputed trademark was similar to the national flag of Thailand, was detrimental to socialist morals or customs, or produced any other unhealthy influences.

An attorney for WOWO stated, “No provision in administrative laws provides that the determination of similarity depends on subjective judgment. Decisions made on the basis of such criterion should be revoked. Decoration of WOWO store integrates with the trademark changes sometimes in practice, and the disputed trademark should be viewed as a whole rather than as the selected parts when judging the similarity.”

As for the criterion in the “similarity” determination, China IP interviewed Zhang Yun, another attorney for WOWO. He revealed that, “There is no specific provision on the criterion in ‘similarity’ determination in laws and regulations such as the Trademark Law, Implementing Regulations of the Trademark Law of the People’s Republic of China, and Interpretation of the Supreme People’s Court Concerning the Application of Laws in the Trial of Cases of Civil Disputes Arising from Trademarks. The internal normative document of the Appeal Board Trademark Examine Criteria stated that the trademark easily makes the public associate it with Thailand’s national flag, and we have determined that they are similar. However the roughly stated normative document cannot be applied directly when the concepts of public and scope of association have no specific definition. It reveals defects in the current Trademark Law.”

Should the original trademark examination party be responsible?
When met with such an unexpected strike for companies who have legally registered trademarks, they could not help but sigh and say “Who can protect us?”

Mr. Zhang also said the case reflects that the examiner did not notice the appearance and the striped color collocation of Thailand’s national flag during the examining process. Trademarks can be considered as the core manifestation of the brand. Enterprises will invest money and efforts to promote the brand after the trademark is validated. When the Trademark Office revokes its formerly approved trademark, the enterprise’s legitimate rights and interests are neglected. It would inevitably drive the enterprises and relevant publics to doubt the administrative credibility of the government, as well as the philosophies proclaimed by the government. Besides, the case also reflects that the Appeal Board examiners should improve their work in the future.

The applicable standards of laws in the process of trademark examination, review and proceeding also need to be further defined. According to Mr. Zhang, “The terms of absolutely prohibited uses provided in the Trademark Law are the common international principles with the intent to show respect and protect international organizations, sovereignty, public orders and morals. However, the problem lies in that there is no detailed elaboration on the legitimate application of laws in China, which endows the authorities more dominant force to use their subjective judgment during the process of examination, approval and law enforcement. Especially when encountered foreign affairs, Chinese authorities are more likely to take conservative actions, therefore they may sacrifice Chinese enterprises interests. This causes examiners to neglect the essence of the importance of trademark to indicate goods and services. When encountered infringements, misleads and confusions, comprehensive judgments are preferred rather than the doctrinal application of laws.

The WOWO trademark case is the first of its kind in China concerning the trademark cancellation on the ground of similarity with other country’s national flag. There is no judicial precedent. Li Shunde, professor of National Institute of Law of Chinese Academy of Social Sciences said, “First, the court ruling should not violate the fundamental principles of law and secondly it should consider the IP characteristics.” He also emphasized that when dealing with such cases, it should give full considerations to IPR as a private right. Without such considerations the balance among public interests, fundamental interests of the society and right holders’ legitimate interests cannot be reached.

The case is pending as of the publication of this article. WOWO appeared confident it would win the case. Mr. Tang told China IP, “I believe that after a storm there comes a rainbow, WOWO is never afraid of difficulties.” WOWO will continue to safeguard its legitimate rights and interests through legal channels.