Chengdu Tongdefu Hechuan Peach Piece Co., Ltd. v. Chongqing Hechuan Tongdefu Peach Pieces Co., Ltd. and Yu Xiaohua (Trademark Infringement and Unfair Competition Dispute)
Resources from:2016 LexisNexis
  
Where any individual or business having no relation with a time-honored brand advertises his her its product by using the history of the time-honored brand after he she it has the time-honored brand or a similar name registered as a trademark, such advertising shall be deemed as "false ", thus constituting unfair competition
Where any individual or business having no relation with a time-honored brand advertises his/her/its product by using the history of the time-honored brand after he/she/it has the time-honored brand or a similar name registered as a trademark, such advertising shall be deemed as "false", thus constituting unfair competition.

Where, in compliance with the principle of good faith, any individual or business having any relation with a time-honored brand registers the time-honored brand as the name of an individual business or enterprise, and does not cause misidentification or prominent use of the name, such activity does not constitute unfair competition or infringement upon the exclusive right to use a registered trademark.

(Adopted upon discussion by the Judicial Committee of Supreme People's Court and released on May 20, 2016)
 
Relevant Regulations

Item 7 of Article 57 of the Trademark Law of the People's Republic of China
Articles 2 and 9 of the Anti-Unfair Competition Law of the People's Republic of China
 
Basic Case Facts

The plaintiff (defendant in the counterclaim) Chengdu Tongdefu Hechuan Peach Piece Co., Ltd. (hereinafter referred to as "Chengdu Tongdefu") claimed: Chengdu Tongdefu was the trademark owner of "TONGDEFU and the logo"; but Yu Xiaohua had successively set up an individual business and Chongqing Hechuan Tongdefu Peach Pieces Co., Ltd. (hereinafter referred to as "Chongqing Tongdefu"), and used "Tongdefu" conspicuously as its trademark and on the outer packages of the peach pieces it produced, which infringed the exclusive right of the plaintiff to use the registered "TONGDEFU and the logo" and constituted unfair competition. The plaintiff requested the court to order Chongqing Tongdefu and Yu Xiaohua to discontinue the use of, and cancel the business name containing "Tongdefu"; to stop the infringement upon the plaintiff's trademark rights; to publish an apology letter in the newspaper to eliminate the effects of such infringement; and to compensate the plaintiff for the financial losses and goodwill damages of CNY500,000 and reasonable expenses of CNY5,066.4.

The defendants (plaintiffs in the counterclaim) Chongqing Tongdefu and Yu Xiaohua defended their position and raised a counterclaim, claiming: Chongqing Tongdefu originated from the former Tongdefu Pastry Store, which was founded in 1898; although Tongdefu Pastry Store ceased production as a result of a public-private partnership, its unique techniques had been passed down the generations. Yu Xiaohua, the fourth-generation successor of "Tongdefu", had successively registered an individual business and a company and used its business name and trademark lawfully; the registration made by Chongqing Tongdefu and Yu Xiaohua was in good faith, which did not constitute an infringement. Chengdu Tongdefu had no direct relation with the time-honored brand "Tongdefu", but it advertised its products using the trademark "Tongdefu" in association with the time-honored brand, which constituted false advertising. In addition, Chengdu Tongdefu used the well-known trade name "Tongdefu" without any authorization, which constituted unfair competition. The court was requested to order Chengdu Tongdefu to cease the false advertising and publish a statement in a national paper to eliminate the effects thereof, and cease the infringement upon "Tongdefu", a specific name belonging to a well-known product.

The court heard the case and ascertained: founded in 1898, the former Tongdefu Pastry Store was, from 1916 to 1956, operated by Yu Hongchun, Yu Fuguang and Yu Yongzuo in three generations. From the 1920s to 1950s, the trade name "Tongdefu" was very well-known. In 1956, due to a public-private partnership, Tongdefu Pastry Store ceased operation. In 1998, the Wenjiang Branch of Hechuan Peach Piece Plant registered the No.1215206 trademark "TONGDEFU and the logo" upon approval, with its approved scope of application under Category 30, including cakes, peach slices (pastry), cocoa products, and artificial coffee. On November 7, 2000, the registrant of the said trademark was changed to Chengdu Tongdefu upon approval. Chengdu Tongdefu had placed on the outer packages of a variety of its products words such as "time-honored brand", "century-old" and a brief introduction to "Tongdefu" peach pieces: "Tongdefu" peach pieces, created during the reign of Emperor Qianlong in the Qing dynasty (or in 1840), have a long history". On the webpage of "About the Company" at the website of Chengdu Tongdefu, the history of Tongdefu Pastry Store as recorded in the Selections of Hechuan Cultural and Historical Research Materials (Volume II) was used for advertising its "Tongdefu" Hechuan peach pieces.

On January 4, 2002, Yu Xiaohua, the son of Yu Yongzuo, registered an individual business in the name "Hechuan Tongdefu Peach Piece Making Plant", with its scope of business being: self-production and sales of peach pieces and snacks. In 2007, the business name was changed to Chongqing Hechuan Peach Piece Making Plant, which was canceled later. On May 6, 2011, Chongqing Tongdefu was founded with Yu Xiaohua as the legal representative, and its scope of business was production of pastries (baked pastries and steamed or fried pastries). This company is the owner of the exclusive right to use the registered trademarks, namely No.6626473 "Yu Fuguang 1898" graphic trademark and No.7587928 "Yu Xiaohua" graphic trademark. Chongqing Tongdefu indicated on the outer packages of many of its products "Time-honored brand [Tongdefu], founded in 1898, has a long history" and information on the history of Tongdefu Pastry Store and its awards and titles, and on some products, it also added the following words: "The above content was an excerpt from the Annals of Hechuan County"; "Ode to [Tongdefu]: Tongdefu, located in Hechuan, has a good reputation known far and wide. Being century old, it has made peach pieces for four generations. Its peach pieces are cheap and of high quality. Tongdefu does business honestly and fairly with sincerity and warmness"; as well as other words like "Hechuan Peach Piece" and "Chongqing Hechuan Tongdefu Peach Pieces Co., Ltd.".
 
Results of Judgment

On July 3, 2013, the Chongqing No.1 Intermediate People's Court rendered the Civil Judgment (Yu Yi Zhong Fa Min Chu Zi [2013] No.00273) : 1. Chengdu Tongdefu shall immediately stop the false advertising involved in this case; 2. with respect to the false advertising, Chengdu Tongdefu shall publish a statement on its website for five consecutive days upon effectiveness of the judgment to eliminate the effects thereof; 3. all the claims filed by Chengdu Tongdefu shall be rejected; and 4. the other counterclaims submitted by Chongqing Tongdefu and Yu Xiaohua shall be rejected. After the judgment of first instance was pronounced, Chengdu Tongdefu refused to accept the results and filed an appeal. On December 17, 2013, the Chongqing Higher People's Court rendered the (2013) Yu Gao Fa Min Zhong Zi No.00292 Civil Judgment to reject the appeal and sustain the original judgment.
 
Reasons for Judgment

In the effective judgment, the court held: as the individual business owner Yu Xiaohua and Chongqing Tongdefu operated a business similar to that of Chengdu Tongdefu, there was competition between the two companies; and Chongqing Tongdefu used the characters for "Tongdefu" in its trademark, which was identical to the text part of Chengdu Tongdefu's registered trademark "TONGDEFU and the logo", and thus there was similarity between the two trademarks. As to whether Chongqing Tongdefu's trademark registration constitutes unfair competition, the key is whether such act was in violation of good faith. Chengdu Tongdefu did not provide sufficient evidence to prove that its trademark "TONGDEFU and the logo" had been fairly well-known; so even if any other party registers "Tongdefu" as a trademark and uses it lawfully, this will not cause misidentification among the relevant consumers; and therefore, the act that Yu Xiaohua registered his individual business in the name "Tongdefu" could not be explained as with a malicious intention of a "free rider". Moreover, from the 1920s to 1950s, the trade name "Tongdefu" enjoyed a high reputation. Tongdefu Pastry Store was operated by Yu Hongchun, Yu Fuguang and Yu Yongzuo in three generations, and under Yu Fuguang's operation especially, the peach pieces produced by the Store gained many honors. Yu Xiaohua is the grandson of Yu Fuguang and the son of Yu Yongzuo, and in view of the reputation gained by the trade name of Tongdefu Pastry Store and the direct family relationships between Yu Xiaohua and the former operators of the Store, his behavior of registering his individual business in the name of "Tongdefu" should be deemed reasonable. Yu Xiaohua's registration behavior is well-intentioned and does not violate the principle of good faith, nor does it constitute unfair competition. Considering business continuity, his behavior of changing the individual business name and Chongqing Tongdefu's registration of company name does not constitute unfair competition, either.

With respect to the outer packages of its products, Chongqing Tongdefu used its full company name, which was indicated at the bottom of the front side of the outer package; the characters for "Tongdefu" were used as part of the full company name and aligned with other characters, and they were not used alone or highlighted in forms such as abbreviation, and there was no change to them adopted for highlighted display; in addition, in terms of the size, font, and color, the three characters did not stand out from other parts of the full company name. Therefore, Chongqing Tongdefu' act of indicating its company name on the outer packages of its products should be deemed as lawful, and did not constitute a highlighted use of trade names or trademark infringement. With respect to Chongqing Tongdefu's act of indicating the "Ode to Tongdefu" on some of its products, the four title characters for "Ode to Tongdefu", were in a larger size compared to its specific content (a few three-character verses containing36 characters), but the four characters and the specific content formed a whole visually. The specific content was based on the adaptation of a similar paragraph historically used on the outer packages of its products by Tongdefu Pastry Store, which was used by Chongqing Tongdefu with the intention to show the history of the trade name "Tongdefu" and its operating philosophy, rather than highlighting the three characters for "Tongdefu". In addition, Chongqing Tongdefu used several commercial identifiers on the outer packages of its products. Specifically, the collective trademark "Hechuan Peach Pieces" was particularly prominent; its own trademark was also distinct, and the geographic indication of "Hechuan Peach Pieces" and that of they being an intangible cultural heritage of Chongqing Municipality were also indicated. Compared to those identifiers, the "Ode to Tongdefu" and its specific content were common descriptive texts and not in the form of commercial identifiers evidently; they were not prominent or eye-catching. Objectively, the "Ode to Tongdefu" and its specific content would not cause the consumers to misidentify the origin of the products easily, nor could they function as a substitute for trademark. Therefore, Chongqing Tongdefu's act of indicating the "Ode to Tongdefu" on some of its products should not be deemed as a "highlighted use" in the sense of trademark infringement, thus not constituting a trademark infringement.

Some of the information on the history and honors relating to "Tongdefu Peach Pieces" published on the website of Chengdu Tongdefu was identical to the history and honors of Tongdefu Pastry Store recorded in the historical literature, and the source of the said information was also indicated on the said website; however, Chengdu Tongdefu did not produce any evidence to prove that it has any relation with Tongdefu Pastry Store. In addition, Chengdu Tongdefu indicated on the outer packages of its products "time-honored brand", "century-old", "created during the reign of Emperor Qianlong in the Qing dynasty" and other words. As the approved registration of its trademark "TONGDEFU and the logo" was in 1998, with respect to the basis for its adoption of the aforesaid words as indicated, it did not produce any evidence, either. The said indications by Chengdu Tongdefu were inconsistent with the facts, which would be likely to mislead consumers in respect of the origin and history of its brand as well as its relationship with Tongdefu Pastry Store and thus give it an advantage in competition, which should be deemed as false advertising. Chengdu Tongdefu should bear the corresponding civil liability in the effect that it shall cease the infringement and eliminate the effects of such false advertising.
 
(Resources from 2016 LexisNexis)