Chinese IP Law Updates
April 24, 2018

Administrative Dealing with Free-riding Trademarks

Administrative Dealing with Free-riding Trademarks
Confusing similarities of “CQVARTA”, “Chongqing VARTA”, “Josohnn Coslortn” with “VARTA”, “Johnson Controls” on storage batteries determined by the Wuxi AIC.

Source Materials:

AIC Raid Action against the Infringers on March 27th, 2018.

Concerned Parties:

Trademark Owner: Johnson Controls
First Infringer: Wuxi Ruixi Auto Parts Co., Ltd.
Second Infringer: Wuxi City Xueshi Auto Parts Co., Ltd.

Case Overview:

The Trademark Owner Johnson Controls owns trademark rights to “VARTA” and “Johnson Controls” registered in Class 9.

VARTA, the world famous brand of automotive batteries, was founded in Hagen, Germany in 1888. For a long time, the VARTA brand has been the first choice of the world’s most famous carmakers with its high quality and advanced technology. With nearly 130 years of history, the VARTA brand is the advanced model of world automotive battery industry. Johnson Controls’ total business volume reached $16billion in 1999 and $37.2 billion in 2015. In 2016, Johnson Controls ranked 70th on the Fortune 500 list.

The above-mentioned trademark is derived from the Chinese and English trade names of the trademark owner. The trademarks have acquired quite a reputation in batteries after being constantly and broadly promoted and used in China mainland. Under the development of more than a century, the above-mentioned trademarks have gradually accumulated a unique and classic brand image and reputation in the world. VARTA has also formed an inseparable and complementary connection with the trademark owner, not only as the identifier of the right holder but also as the manifestation of its history and future. The relevant public has become very familiar with VARTA.

On the other hand, the Infringers are respectively the distributor and manufacturer of the CQVARTA/重庆瓦尔塔 (“Chongqing VARTA”) batteries, on which both English and Chinese trademarks in question are used. They also used “Josohnn Coslortn” which was passed off by changing the letters of “Johnson Controls”.

Pursuant to Article 57.2 of the Trademark Law, “Using a trademark that is similar to a registered trademark on the same goods, or using a trademark that is identical with or similar to the registered trademark on similar goods without the licensing of the registrant of the registered trademark, which is likely to cause confusion” is deemed as an infringement of the exclusive right to use a registered trademark. In this provision, “likely to cause confusion” requires only the possibility of misleading the consuming public over the goods’ origins or their relevance with a Trademark Owner’s products on which a registered trademark is used.

In this case, HongFangLaw supported the Trademark Owner Johnson Controls in winning the support from Jiangsu AIC and Wuxi AIC. They have recognized that the trademarks “VARTA” and “Johnson Controls” among other trademarks are highly reputed on the battery products. The infringer’s using the similar logos of the registered trademark of the owner “VARTA” and “Johnson Controls” on the car batteries constituted trademark infringement and could cause confusion to the relevant public. This case is typical and offers a lot to be studied.

AIC’s Opinions:

Regarding the similarity between Infringer’s marks and Trademark Owner’s trademarks

In 2004, Johnson Controls officially opened its new car battery factory in Fuling District, Chongqing City. The infringers used the “CQVARTA” and “Chongqing VARTA” logo, which would cause the consumer to mistake that their products were produced by the Chongqing factory of Johnson Controls, causing confusion. For the mark “Josohnn Coslortn”, it is reproduced by just simply changing the letter order of “Johnson Controls”.

The Infringers also used the devices “X” and “Y”. After comparing the signs separately and together, the AIC found Infringer’s marks and Trademark Owner’s trademarks were similar without much difference.

Regarding the possibility of confusion of Infringer’s and Trademark Owner’s products
While the products do differ in how much they are priced, it is still possible for consumers to relate the Infringer’s commodities in some way to the Trademark Owner’s when seeing the similar signs, considering the popularity of the latter. Such capitalization of the Trademark Owner’s fame would contribute to an unfair comparative advantage to the Infringer’s offerings over products of their like. It is plain that the coexistence of Infringer’s and Trademark Owner’s products causes confusion among the consuming public.

On the other hand, regarding the overall appearance of the infringing products and the VARTA products, the infringers undoubtedly had bad faith Because the color, layout, and appearance were all similar.

On the above grounds, the AIC held that the Infringer’s use of signs similar to the Trademark Owner’s registered trademarks on the same or similar goods is an intentional act to capitalize on the Trademark Owner’s famous trademarks and is likely to confuse the relevant public. Hence, the Infringer’s conduct constitutes an infringement of the Trademark Owner’s exclusive trademark rights.

Raid Achievements:

Under the joint cooperation of many departments, 3 stores and 2 warehouses were checked at the same time. More than 500 batteries were seized and the related books and lists were temporarily held. The AIC has investigated the parties involved in the case according to law, and actively unveiled the distribution network of the parties.

Live news coverage followed throughout the whole raid and continued to turn out follow-up reports.

HFL Comments:

The advantage of administrative raid action on free-riding trademarks

For such trademarks, besides trademark opposition and evidence preservation via notarization against the target stores, trademark right owners may also consider a more effective and efficient approach and file the administrative complaint. The active period is shorter and could target the infringement directly. At the same time, the AIC raid action could provide good support and guarantee for the subsequent trademark opposition and civil proceedings.

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