China Practice/Shanghai Office Advisory Bulletin
Chinese Courts Consider "Prior Use" in Trademark Infringement Cases
By R.Z. Margaret Lu and Ron Cai
[November 2005]
In August 2005, for the first time ever, Chinese courts gave decisive weight to complex facts supporting “prior use” of a trademark under China’s “first register, first serve” system. This important ruling means greater intellectual property protection for U.S. companies doing business in China, if trademarks are registered in accordance with Chinese law.
The case behind this recent decision originated in 1986, when the International Paper Company created and registered in Taiwan the trademark “Fresh House” for use on its gable-top paper packaging for milk, yogurt, juice and other beverages. Quickly after it was introduced to the market the gable-top paper packaging became popular and was widely used by world famous beverage brands such as “Sunkist” and “Nestle.”
Seven years later, a subsidiary of International Paper Company took this product bearing the trademark “Fresh House” to mainland China. Again it quickly became a hit, and was used by 78 or more Chinese companies throughout China for their beverage products. To ensure better protection, International Paper Company caused the registration of the trademark “Fresh House” in China under the category for packaging materials. The company also submitted applications for trademark registration under several other categories which were loosely worded to cover the use of the trademark on packaging for beverages and food.
Before these applications were completed, however, a Chinese pesticide manufacturer registered a trademark using the same words “Fresh House” with a slightly altered graphic design in a category covering the use on beverage products. The pesticide manufacturer never was able to put the trademark to use, because it does not have the requisite license to produce beverage products. Instead, it sold the registered trademark to a Chinese dairy company (“Dairy Company”). Being a long time user of International Paper Company’s packaging products bearing the registered trademark “Fresh House” itself, the Dairy Company harassed International Paper Company and its customers by asserting that the “Fresh House” trademark infringed upon its registered trademark for milk and beverage products and sought assistance from local government regulatory authorities to take trademark enforcement actions against International Paper Company’s subsidiary in Shanghai.
Assisted by Davis Wright Tremaine's Shanghai Office, International Paper Company fought back and succeeded in defending itself in the regulatory processes and went further to win a ruling in its favor from the State Administration of Industry and Commerce Trademark Review & Approval Board (TRAB) to cancel the registration of the Dairy Company’s trademark. The Dairy Company objected to TRAB’s ruling and filed an administrative lawsuit against TRAB with the Administrative Division of Beijing First Intermediate People’s Court (the “Court”). After another year and more of trial and deliberation, the Court rendered a judgment against the Dairy Company. The Court ruled, among others, that an application for trademark shall neither infringe upon the right of an existing registered trademark, nor use improper means to “race” to the registration of a trademark which is already in use by another, particularly when prior use has established a name-recognition among ordinary consumers.
This ruling demonstrates the Court’s heightened level of legal sophistication and helps to boost foreign investors’ confidence in the Chinese judicial system for intellectual property protection. The case also shows that U.S. companies doing business in China must not neglect the importance of prompt and proper registration of their trademarks in China.
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This China Practice Advisory is a publication of the China Practice/Shanghai Office of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent legal developments in China. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.
Copyright © 2005, Davis Wright Tremaine LLP.
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