Chinese IP Law Updates
June 5, 2020

Analysis of Trademark Infringement for Unauthorized Replacement of Packaging

Co-Author: Angie Pan, Steven Dong

It is not uncommon for commodities manufactured for circulation ultimately into the hands of customers, to have the packaging replaced a number of times. There are several types of commodity packaging replacement, some of which are at risk of getting into trademark infringement. A signature type of such infringement is “reverse passing-off” when changing trademark in replacement of packaging without authorization, as specified in Article 57.5 of the Trademark Law of the PRC (the “Trademark Law”). But provided that the trademark is reserved, will unauthorized replacement of the packaging still constitute trademark infringement? The author will analyze two separate circumstances.

Circumstance n’1: Unauthorized replacement of packaging of different products under identical brands.

The specific scenario under this circumstance refers to the practice of replacing the product’s “A” packaging with the product’s “B” packaging under the same brand. Contrary to passing-off, this scenario does not divert the designation of good’s origin as a function of a trademark, in light of the unchanged trademark. Toward pursuing maximized proceeds, however, it is usually discovered that disguised cheap or inferior products are replaced instead of valuable high-end products to make profits from the differences between lower cost and higher pricing.

Under article 1 of the Trademark Law, “…… urging producers and dealers to guarantee the quality of goods and services, maintaining the reputation of trademarks, protecting the interests of consumers, producers and dealers”. And under Article 7 of the Trademark Law, “The user of a trademark shall be responsible for the quality of the goods on which the trademark is used.” It is indicated that, in addition to the designation of goods’ origin, the trademark boasts another substantial function of quality assurance.

Where a trademark is branded stably on high-quality goods or services for a long time, it will be the embodiment and condensation of quality of those goods and the publicity reached by word of mouth, which becomes the fundamental way for a trademark to accrue goodwill. In the meantime, with regards to function and after-sale services, etc., the qualities of different goods or services are so varied that goods or services of assorted qualities are even correspondents to different classes of customers. Therefore, packaging may have an additional function of status symbol.

Products in different classes usually have differential qualities, which is undermined by bypassing inferior products off as high-end products to the detriment of the trademark’s function of quality assurance, though without prejudice to the function of origin designation. Moreover, disguising inferior products as high-end products can either concern user experience, or even give rise to accidents being devoid of unique function in high-end products.

To summarize, unauthorized replacement of packaging of different products under an identical brand will lead to confusion on products in different classes under the same brand and to impair the trademark’s function of quality assurance, which takes a toll on the goodwill attached to the trademark and may constitute trademark infringement. Meanwhile, in accordance with Article 8 of the Anti-Unfair Competition Law, “A business shall not conduct any false or misleading commercial publicity in respect of the performance, functions, quality, sales, user reviews, and honors received of its commodities, in order to defraud or mislead consumers”, this conduct may also constitute unfair competition as a false promotion.

Circumstance n’2: Sub packaging and selling genuine products without authorization

In practice, a dealer may sell sub packaged genuine products for the purposes of catering to the needs of customers, making an illegal profit, etc. The most common instance is, for example, repackaging perfume into smaller sample bottles for sales.

As a precedent against this kind of sub packaging conduct, there was a leading case in 2015 in judicial practice —— the “BU ER JIA” trademark infringement case. In this case, the defendant purchased genuine “BU ER JIA” candies in bulk and sub packaged them into iron boxes printed with “BU ER JIA” trademark, trade name, address, contact information, etc., omitting the information relating to the facts that the defendant sub packaged them by itself. At the same time, the texture and quality of the iron box purchased by the defendant separately bore manifest differences with those of the original iron box of “BU ER JIA” candies, though each candy had its own individual package.

The court rendered that the conduct of the defendant constituted trademark infringement mainly by reasoning that in addition to the packaging’s fundamental function to protects and hold up goods, packaging also plays an important role in beautifying commodities, publicizing commodities, and promoting the value of commodities. On the contrary, unauthorized sub packaging by the defendant had tarnished the goodwill among the relevant public and impaired the trademark’s reputation bearing function.

From the above cases, we can see that trademark infringement of unauthorized sub packaging is also on the basis of a trademark’s quality assurance function. The reputation of a trademark is not only in association with the quality of products, but also with the commodities’ packaging, which implies commodities need packaging in line with their quality, and better packaging tends to be used on commodities with superior quality. Besides, via beautifying commodities, packaging can also delight consumers, enhance consumers’ trust, and even become a special mark of goods, which plays the same designation function as the trademark itself, such as packaging and decorations specific to well-known goods.

Other parties are prone to repack with packaging which does not meet the standard of the original packaging. In the case of unqualified packaging, it even directly has an adverse effect on or damages the quality of products. Even if repackaging is exactly the same as original packaging, due to sub packaging parties are not brand owners, they have no demand to and will not maintain the reputation of trademark and will post a potential threat to the goodwill of the trademark.

In a nutshell, using self-produced, unqualified packaging, or packaging which does not identify packers, though being under original trademark, they all will constitute trademark infringement, due to damage on trademark’s quality assurance function. Naturally, with respect to inherent virtues of commodities or business customs, without prejudice to the quality of commodities, provided that they explicitly demonstrate information relating to sub packaging facts and packers, etc., dealers can subpackage commodities, such as products relating to building materials, to a reasonable extent in normal commercial activities.

From the above two circumstances, we can see that trademark not only has the basic function of designating the origin of goods but also has derivative functions of quality assurance and goodwill bearing. Although the original trademark remains unchanged, the unauthorized change of product packaging often damages the quality assurance function of the trademark and thus undermines the goodwill of the trademark. The functions of the trademark are the basic connotation of trademark and the foundation of the existence of a trademark. Even though it does not cause confusion in the market, unauthorized changes in the packaging of commodities that can also damage the function of a trademark will constitute trademark infringement.