The case

ARISTON is a well known Italian company which operates in the household heating apparatus industry.

ARISTON Thermo Group has around 20 plants around the world and distributes products in over 150 countries (household heating devices, water heaters for domestic use, burners, solar energy devices, air conditioners).The company has been in China for 30 years, with plants located in Wuxi, Jiangsu.

ARISTON trademarks were registered in China during the 1980s, and they protect the figurative part of the sign (the unmistakable logo that has been distinguishing the products for decades) and the word part ARISTON, both in the Italian version and in the Chinese transliteration 阿里斯顿.

While applying a trademark watch policy on a regular basis, in 2008 ARISTON discovered that a company headquartered in Foshan of Guangdong province, produced water heaters using a mark similar to ARISTON’s, claiming Italian origin.

 Further investigations into their plants showed that there was a considerable production of household water heaters identified by the mark “ARIZHU” in Chinese Ping-Yin pronunciation is “a li zhu”, phonetic imitation of ARISTON’s. Upon checking the Trademark register Ariston’s lawyers found out that the Chinese counterpart filed an application for registration of this sign before the Chinese Trademark Office and, for the sole purpose of running on Ariston’s goodwill in order to promote its products, opened a web page under the domain name “arisitun.com,” identical to the Chinese phonetic version of ARISTON.

Tackling the infringement

At first an administrative “raid” was undertaken with the assistance of the Foshan Administration for Industry and Commerce (AIC), which reacted very quickly (one day). Several water heaters and commercial materials were seized. However, the AIC action did not stop the infringing activity.

Then, in due respect of the Chinese Civil Procedure law, evidence of infringement was acquired and, with the presence of a local notary public, the website had been entirely notarized and some of the counterpart’s products were purchased; all these operations being officially recorded in order to allow further filing in Court.

In 2009, ARISTON brought ARIZHU company before the Shanghai Intermediate People’s Court (according to current practice and Supreme Court’s guidelines, disputes involving foreign parties are appointed at the Intermediate level), and filed a complaint for (1) counterfeiting, (2) unlawful use of the Italian trademark on the products, website, packaging and promoting materials, (3) also claiming unfair competition, consisting of using a company name similar to ARISTON on a way that was potentially deceiving the public of consumers.

The trademarks in conflict are shown below:

 

Aside from the comparison between the Latin versions where ARI is the common part, the Chinese characters bear two identical characters out of four, i.e. the first two, a very similar logo and overall appearance.

In the PRC trademark practice, as in the Community Trademark system, the first part of a mark plays a key role in the assessment of the similarity between the marks The same rule applies for the Chinese version.

ARISTON took to Court the producer and one of the distributors in Shanghai. By suing the distributor in Shanghai the plaintiff (Ariston) managed to avoid the “uncomfortable’ position of litigating at the counterfeiter’s place of business (Foshan, Guangdong) but, more importantly, the Shanghai Intermediate Court was likely to be more experienced Court in IP matters. In any case, according to PRC laws and regulations, disputes involving foreign parties are usually appointed at Intermediate rather District Court level.

Preparing the lawsuit was the most time consuming part of the whole procedure.

In addition, it is of key importance to provide the Court with evidence which is not subject to be formally challenged. For instance, any documents proceeding from abroad should be duly notarized, legalized and translated into Chinese in order to be even taken into consideration by the Court.

The hearing took a full day. More than 3,000 pages of documents (invoices, sales and advertising figures and samples, financial reviews, prizes) showing the presence of ARISTON’s branded products in China were cross-examined. The Court also reviewed the evidence of counterfeiting acquired in the pre-trial investigation phase.

The court’s decision

The Court, in the light of the judicial statements and of the evidence provided by ARISTON about the presence of its trademark in the Chinese market, ruled in favor of the plaintiff and apportioned full liability on the defendants.

The defendants’ rebuttal intended to challenge ARISTON trademarks’ reputation in China and to deny the infringement, but this defense was rejected. Chinese judges in fact applied law principles and standards quite similar to the ones of the European High Courts, therefore finding “a risk of confusion for the consumers, in the light of the similarity between the signs at stake and the products.”

The Judges concluded that ARISTON’s exclusive rights over its trademarks ARISTON and 阿里斯顿 (a li si dun), registered in the class 11 of the International Nice Classification, had been infringed, and this required just one discussion hearing (one whole day).

The first instance judgment was therefore given in favor of ARISTON: assuming the trademark infringement and the unfair competition as proven, the judges enjoined the defendants from using the counterfeiting trademark and from distributing the so branded products.

Moreover, the Chinese counterpart was ordered to pay damage compensation, to waive to its domain (www.arisitun.com) in favor of Ariston and to change its company name.

The decision was affirmed on appeal by the second instance Court.

The judges then ordered the distributor and the producer to publish, at their own expenses and in national newspapers, public apologies for the trademark’s rights infringement and for the unfair competition conduct.

This punishment, which is a peculiar kind of responsibility in the Chinese system, can particularly affect the reputation and respectability of a company in the eyes of the business community.

The Court also expressly stated that the ARISTON trademark is particularly well known (“enjoys a certain reputation”) among the Chinese consumers, and this circumstance will lead the State and Judicial Authorities to apply a much more severe approach in case of future infringement cases.

A fully favorable decision and reasonable award of attorney fees, Court expenses and damages in both first degree and appeal is not all that ARISTON received. Since the defendant initially refused to comply with the Court decision, the plaintiff had to enforce the judgment by filing an additional compliant with the Court in Shanghai. Also this complaint was granted by the Court.

Judges of the execution phase were very cooperative and even agreed to personally push things forward by officially visiting the defendant in Foshan and suspending the legal representative’s passport until compliance with the decision, which took place shortly thereafter.

 

Conclusions

ARISTON would not have been successful in this case if it had not registered its trademarks long ago when it first entered the Chinese market, both in Latin and Chinese (since the counterfeiting mark was phonetically closer to the Chinese version rather than to the Italian one). Secondly, constantly monitoring the registration of company names, intellectual property rights and the market as a whole helped the company promptly tackle the infringement.

The case confirmed that administrative actions before the AIC can be effective where small or early stage counterfeiting is involved while Court litigation is sometimes the last resort and remedy for larger counterfeiting businesses.

AIC “raids” provide for quick response to trademark infringement in clear-cut cases though trademark holder cannot be granted award of damages and the counterfeiter might be ready to shift the production somewhere else after the seizure and the fines are applied.

Court litigation is therefore the ultimate resort when the infringer is reluctant to stop the business or the legal grounds are somehow more complex. In the present case ARISTON also claimed unfair competition, since the counterpart was using a company name which included the word Ariston (in the Chinese version), while implying that the goods had Italian origin (an Italian flag was shown on the website), thus linking even closer to the genuine Ariston’s business.

In order to ensure a recovery of damages, it is usually advisable to request preservation of assets with the Court on the infringer (usually subject to a bond equal to the amount of claimed damages).

This litigation experience confirms that the Chinese Court proceeding can be quicker than many European countries, that the judicial system is efficient (judges tend to be more specialized in IP matters mostly in the bigger and more industrial developed cities) and that their decisions are neither partial nor approximate, even though a more consistent application of the Supreme Court’s interpretation of the law in the light of the guiding cases yearly published could bring more certainty to the whole judicial system.

Legal rules on the award of damages and legal expenses might be improved too. Currently, damages must be calculated on the basis of losses suffered by the plaintiff and profits illegally made by the defendant. Since it is extremely difficult to prove these elements on the basis of documentation (as company’s book can be unreliable), judges can award damages on an “equity” basis. Though relevant amounts currently applied provides for maximum caps which should be increased and put more in line with international standards.

Hopefully future implementations of the Trademark Law could also bring some light on these issues.