Member Article

A Chinese court recently ordered a Chinese company that had blatantly infringed one of the world’s better known trade marks to pay significant damages to the trade mark owner. African companies that have heeded their lawyers’ advice and registered their trade marks in China should take heart from this.

The facts in this case are simple. The 3M Company has two Chinese trade mark registrations for the trade mark 3M. These registrations are in class 17 and they cover “thin sheets or strips made from retro-reflective materials” and “retro-reflective plastic film other than for packing (to improve and boost visibility and safety)”. A subsidiary, 3M China Ltd, is a licensed user of the trade marks, and it has been manufacturing and distributing 3M vehicle retro-reflective marking products in China since 2004.

A local company, Changzhou Huawei Advanced Material Co Ltd (“Huawei”), filed an application to register the less-than-original trade mark 3N in class 19 for a range of goods. 3M opposed this application but the trade mark authorities accepted the application for a limited specification. 3M took this decision on appeal to the Trademark Review and Adjudication Board which upheld the opposition. That put paid to the trade mark application.

3M also launched trade mark infringement proceedings in the Hangzhou Intermediate Court. It sought all the usual relief – an injunction, damages and legal costs. Huawei defended this action by raising some interesting defences. It said that the trade marks 3M and 3N were not similar and, even if they were, they wouldn’t be confused. This is because it had been using the trade mark 3N for a number of years on goods that were cheaper than 3M’s, and that it had, in the process, built up a stable market. Finally, it said that it had never intended to infringe the trade mark 3M – as part of this argument, it claimed that 3N comprised the initials of the company’s corporate philosophy or slogan, which was “New Concept, New Technologies, New Products”.

The court of first instance found for 3M. It made the point that the 3M mark was distinctive and well known. It said that as the trade marks were visually similar, there was a likelihood of confusion or, at very least, association. Further, it said that the infringement was clearly intentional because the company had never promoted its apparent slogan.

The court issued an injunction ordering the company to stop selling goods under the trade mark 3N and it ordered Huawei to pay 3M’s legal costs. However, most noticeably, the court ordered Huawei to pay damages of RMB3.5-million, despite the fact that there was apparently a statutory limit of RMB500 000 under the 2001 legislation that applied to this case. In coming to its finding, the court took account of the long duration and the large scale of Huawei’s infringing activity, as well as the considerable profit that it had made through its infringing activity. The court also expressed its disapproval at Huawei’s refusal to submit financial records.

Huawei took this decision on appeal, but the Zhejiang High Court upheld the decision. It said that it would be quite wrong for a court to recognise the defence that there would be no confusion because of the considerable market share and client base that the alleged infringer company had acquired through its unlawful conduct. Recognising this would simply be sending this message to other potential infringers – go big or go home!

As stated at the outset, this is an encouraging decision for companies with business interests in China – one that shows that Chinese courts understand trade marks and takes them seriously. ENSafrica assists clients with the protection, maintenance and enforcement of their IP rights around the world, including in China.

PRAVIN BARTHIA: Senior Associate in ENSafrica’s IP Department ([email protected])