Chinese IP Law Updates
March 27, 2018

Collective Trademark Protection Case

Collective Trademark Protection Case

Co-authors: Edmond Au, Shirley Lin

Case Docket

First-instance judgment: No. (2014) PMS (Z) CZ468

Second-instance judgment: No. (2016) H73MZZ468

Parties Concerned

Appellant (defendant at first instance): Qingdao Ma Ke Li Pu Alcohols Co. Ltd.

Appellee (plaintiff at first instance): Scotch Whisky Association

Defendant at first instance: Shanghai Ma Ke Li Pu Alcohols Co. Ltd.

Case Overview

In light of the joint infringement by Shanghai Ma Ke Li Pu Alcohols Co. Ltd. (“Shanghai MKLP”) and Qingdao Ma Ke Li Pu Alcohols Co. Ltd. (“QingdaoMKLP”) who had manufactured and distributed whiskies infringing upon the collective trademark “Scotch Whisky” owned by the Scotch Whisky Association (SWA), the authorities of China took both criminal and administrative action against the infringers. In July 2014, the competent offices for industry and commerce in Shanghai, Laixi, and Qingdao respectively imposed a trail of administrative penalties including fines on the companies. Subsequently, the SWA sued the two before the Shanghai Putuo People’s Court to pursue their civil liabilities for joint infringement.

Examination Opinion

1. Did the defendants’ products and websites concerned constitute an infringement upon the SWA’s collective trademark?

The sign “BLENDEDSCOTCHWHISKY” was used by the defendants on the packages of four products including “Imperial Prestige Sislay Whisky 12 Years”; “SCOTCH” and “WHISKY” were used on the front label (split into two ends with a lion-shaped graphic in the middle, as above) of two products including “Imperial Prestige Scotch Whisky 12 Years” which was outright labeled as “Scotch Whisky” in Chinese on the back. Meanwhile, the products were advertised by Shanghai MKLP on e-commerce platforms such as with the description “Scotch Whisky”. The court of first instance held that the defendants, though presented “SCOTCH WHISKY” in English and Chinese in stylized ways that are not commonly seen, they failed to erase the similarity of those signs to the SWA’s collective trademark. Even more confusing was the Britannic tint falsely splashed on the products on the advertising rhetoric they used, sufficient for the relevant public to relate the products to Scotland or the SWA in some way. The defendants’ acts were thus deemed infringing.

2. Was there joint infringement?

The court assumed joint infringement on the grounds that:

(1) The defendants cross-referenced each other on their official websites;

(2) Qingdao MKLP facilitated the sale of the products concerned;

(3) Qingdao MKLP manufactured the products, knowing they were not genuine Scotch Whiskies;

(4) The defendants purposely used the same exotic trade name to boost the false brand story they told about the products.

3. What civil liabilities should the defendants bear?

As the defendants’ infringement was likely to undermine the reputation of “Scotch Whisky” among the relevant public and thus cause damage to the SWA and its members, the court ordered the infringers to respectively publish statements on their official websites to reverse the ill effects, and jointly compensate for the SWA’s economic loss (reasonable expenses included) with a RMB 450,000 (USD 70,000) payment.

4. Should the infringing products be destroyed in the seizure as requested by the SWA?

The court ruled that destruction was applicable if the defendants failed to remove the infringing elements related to the SWA’s collective trademark from their products and packages within 60 days.

HFL Comments

Collective trademarks are in many ways different from individual ones in definition and registration. They contribute to a different set of criteria for trademark protection. Based on the applied subject, collective trademarks are roughly divided into what are and what are not geographical indications (GI), while the former accounts for the majority. The plaintiff’s trademark, in this case, is the perfect example. Regarding the management and use of collective trademarks as such, Article 4.2 of China’s Trademark Law Implementing Regulations provides: in the case of a GI-made collective registration, those who do not belong to the trademark-owning organization are still able to use the mark in a lawful way when certain requirements are met. As here the determination of infringement primarily comes down to whether legitimate trademark use exists, and the acceptable way of using a trademark to “certain requirements”, the focus of this case should be how the defendants behaved around the SWA’s trademark regulations.

In its Scotch Whisky Regulations, the SWA prescribes in Chapter 2 at great length for the origin, production, and quality of Scotch Whisky. Such provisions should be abided by if anyone was to use the collective trademark. It also states that a company which does not have a membership of the SWA or a distillery which does not produce Scotch Whisky may also use the collective trademark when it purchases the product from Scotch Whisky distilleries for its own brand as long as the regulations concerned are satisfied. This is a deciding factor to say whether the defendants, in this case, were allowed to use “Scotch Whisky” without the SWA’s authorization. However, their use of the collective trademark cannot be justified because they could not prove their products were imported from Scotland or made of Scotch Whisky, neither could the products be regarded as Scotch Whisky as they fell short of the criteria prescribed in Chapter 2 of the SWA’s regulations. Hence, the defendants who were not SWA’s members could not use “Scotch Whisky” without permission. Their acts constituted an infringement upon the SWA’s exclusive rights to use its collective trademark.

The courts made their decisions relying heavily on the aforementioned Article 4.2.The grounds for legitimate use of a collective trademark thereunder had been drawn for reference throughout the examination. However, there is yet another approach that can be found in Article 12 of the Procedures for the Registration and Administration of Collective Marks and Certification Marks but went unmentioned. It is a provision dedicated to protecting collective trademarks registered with GIs for wines and spirits, stating, “Where any party uses another party’s registered geographical indication for wines or spirits as a collective mark or certification mark to identify wines or spirits not originating in the place indicated by the geographical indication in question, even where the true origin of the goods is indicated…, Article 16 of the Trademark Law shall apply.” In this case, the defendants’ whiskeys count as a type of spirit and are self-made rather than from Scotland, making their use of the SWA’sGI-turned collective trademark a violation, not to mention that they did not honestly indicate their products’ origin. As an even more severe circumstance than provided in the Procedures, the defendants’ behavior could have been determined as illegitimate and infringing by simply citing Article 12 above.

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