As part of its continuous effort to develop better intellectual property (“IP”) right protection and enforcement practise, the China National Intellectual Property Administration (“CNIPA”) has, back in 24 April 2019, published a circular on “Providing Guidance on Administrative Law Enforcement Cases Related to Intellectual Property” (“Circular”). According to the Circular, the CNIPA shall select and publish guiding IP administrative enforcement cases (“Guiding Cases”) for the purpose of unifying and improving the law enforcement standard of administrative bodies. Administrative bodies may in the future refer to, but not solely rely on, the Guiding Cases when handling any relevant IP infringement matters.

 

Fast forwarding to 14 December 2020, the CNIPA has released the first batch of Guiding Cases under the Circular. The Guiding Cases contain five cases in total, and they all touch on different aspects of IP administrative enforcement issues.

 

In particular, we find two of the Guiding Cases especially relevant and interesting for foreign brand owners looking to enforce their IP rights against local infringers and hereby summarized them for their reference and consideration.

 

1.  Case No. 1 – Infringement of Dun & Bradstreet’s Registered Trade Marks by Shanghai Zhangyuan Information Technology Co., Ltd.

 

Key Issue – Unauthorized Keyword Advertising Constituted Trademark Infringement

 

(a) Background Facts

 

Dun & Bradstreet International, Ltd. (“Dun & Bradstreet”) is a global business that offers business decisioning data and analytical insights as service, and one of its products is named “D-U-N-S Number” (“邓白氏编码” in Chinese). Dun & Bradstreet has registered the trademarks “邓白氏”(i.e. Dun & Bradstreet’s Chinese brand name), “DUNS” and “邓白氏编码” (i.e. “D-U-N-S Number” in Chinese) in classes 35 and 36 in China (“Dun & Bradstreet Marks”).

 

In this case, Dun & Bradstreet’s former franchisee, Shanghai Zhangyuan Information Technology Co., Ltd. (“Shanghai Zhangyuan”) had been, after the termination of the franchise relationship, representing themselves to the public as an authorized representative to apply for the official “D-U-N-S Number” as one of their services.

 

Despite its clear knowledge of Dun & Bradstreet’s IP rights, Shanghai Zhangyuan had been engaging a third-party service provider to promote its above service on Baidu, a popular search engine in China, by using Dun & Bradstreet Marks as keywords for advertising. The Baidu search result of Shanghai Zhangyuan would also display the phrase – “[官] 邓百氏编码_国际认可的_全球通用企业编码系统” (i.e. “[Official] DUNS Numbering _ Internationally Recognized _ Universal Enterprise Numbering System” in Chinese).

 

As a result of Shanghai Zhangyuan’s above conduct, 8 enterprises found Shanghai Zhangyuan through Baidu search engine and used Shanghai Zhangyuan’s service believing that they were related to and/or authorized by Dun & Bradstreet to offer such service. Shanghai Zhangyuan altogether received about RMB 179,910 from the 8 misled enterprises as service fee.

 

(b) Administrative Findings

 

Upon receiving a complaint from Dun & Bradstreet’s licensee in China (“Shanghai Dun & Bradstreet”) in March 2019, the Market Supervision Bureau of Chongming District found Shanghai Zhangyuan’s conduct of (i) using Dun & Bradstreet Marks as keywords for online advertising as well as (ii) displaying Dun & Bradstreet Marks and misleading representations in the corresponding search result which links users to Shanghai Zhangyuan’s website, a “use” of trademark under Article 48 of the Trademark Law, and an infringement against Dun & Bradstreet Marks under Article 57(2) of the Trademark Law, as it confused and misled the general public regarding the origin of their services. Shanghai Zhangyuan was ordered to cease such infringing behaviour immediately and pay a penalty of RMB 539,730.

 

(c) Observation

 

This case certainly sets a positive precedent as online keyword advertising has become very popular among bad faith infringers as a way to misdirect online traffic to their websites. It will be a welcoming sight to see local Market Supervision Bureaus actively handling similar complaints going forward in view of the publication of this matter as a “guiding case”.    

 

2. Case No. 2 – Infringement of Asics Corporation’s Registered Trade Marks by Beijing Hongyuan Lide Trading Co., Ltd

 

Key Issue – The Three Requirements a Seller Must Satisfy to Rely on the Article 60 Exemption (i.e. No Knowledge of Trademark and/or Infringement)

 

The brand owner involved, Asics Corporation, is a world famous sport equipment producer and well-known for selling shoes under the “Onitsuka Tiger” label.

 

This case was considered one of the largest trademark infringement cases the Beijing Municipal Administration for Industry and Commerce (“Beijing AIC”) had dealt with in two decades. In the end, the authorities confiscated 6,687 pairs of infringing shoes and handed down a fine of RMB55 million (i.e. about USD 8.5 million).

 

(a) Background Facts

 

The seller, Beijing Hongyuan Lide Trading Co. (“Seller”), had entered into a franchise agreement with Quanzhou Aishikeshi Sports Goods Co., Ltd, the supplier (“Supplier”), selling shoes (“Subject Shoes”):

 

(i) bearing the device  “” (which is similar to Asics Corporation’s trademark “”); and

(ii) bearing the patterns “” or “” on the sides of the shoes (which is similar to a number of Asics Corporation’s trademarks, e.g. “”, “” and “”).

 

When the Fengtai Branch of the Beijing AIC took action against the Seller in 1 September 2018, the Seller claimed it had no knowledge that the Subject Shoes were infringing products and sought to rely on the exemption of paragraph 2 of Article 60 of the Trademark Law, under which it should only be ordered to cease selling the subject products without paying any penalty.

 

(b) Administrative Findings

 

Upon investigation, it was discovered that the Seller and the Supplier were heavily associated since their shareholders held positions at each other’s company, and further, the Supplier was found to have applied for trademark registrations (but failed) for marks that are similar to those of Asics Corporation.

 

In light of the above key facts, the authorities stated that for sellers to rely on the exemption under Article 60, a seller must be able to show that: (i) it did not or ought not to know the subject products were infringing products, (ii) it obtained the subject products through legal and legitimate means, and (iii) it can provide the identity of the supplier.

 

In this case, considering the Seller’s heavy association with the Supplier and the Supplier’s earlier failed attempts to apply for trademark registrations that are similar to those of the original brand owner, the Seller failed to show that it did not or ought not to know that the Subject Shoes were infringing products.

 

Pursuant to Article 60 of the Trademark Law, the enforcing administrative body may impose a fine up to 5 times the revenue in relation to the dealing with the infringing articles if such revenue amounts over RMB 50,000. In this case, the Seller was found to have received over RMB 6.1 million (about USD 0.95 million) from selling the infringing shoes and had in stock over RMB 5 million (about USD 0.77 million) worth of infringing stock (i.e. a total of RMB 11.1 million (about USD 1.7 million)). The Seller was ultimately imposed a heavy penalty of about RMB 55 million (about USD 8.5 million).

 

(c) Observation

 

This case is worth noting for brand owners that wish to enforce against infringing seller or resellers in Mainland China as the infringers would almost every time claim they have no knowledge of the subject brand or that the subject products are infringing products. 

 

Further, though there is always great urgency in taking all enforcement actions possible and necessary against large scale infringers, this case demonstrates the importance of conducting thorough investigations and obtaining as much background information about the target infringer as possible before taking any enforcement actions as large scale bad faith infringers are now mostly sophisticated, and brand owners will need all the evidence that there is to assist the administrative authorities and/or the Court to enforce against them as well as hand down heavy penalty or damages against the infringer.

 

Lastly, it should be noted that the administrative bodies are increasingly robust when enforcing against large scale infringement, and administrative enforcement is certainly a very attractive option for brand owners to enforce their IP rights in Mainland China.

 

Conclusion

 

It is not uncommon that administrative bodies across Mainland China adopt different approaches or standards against various IP infringement cases. With the regular publication of more Guiding Cases in the future, it appears there is a strong likelihood that the authorities across China may finally be able to implement a more uniform standard when taking administrative actions against infringers (at least for the areas that the Guiding Cases cover).

 

If you would like to know more about this topic, please contact our Senior Associate, Mr James Choi (email: [email protected]), or our Trainee Solicitor, Ms Lily Leung (email: [email protected]).