For the first time, a colour combination trade dress, before being registered as a trademark, is granted judicial protection as a "specific trade dress of famous commodity", under the Anti-unfair Competition Law of China.

Legal and Regulatory Background

The relevant legal background is Article 5 of the Anti-unfair Competition Law:

A business operator shall not harm his competitors in market transactions by resorting to any of the following unfair means :

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(2) using without authorization a unique name, package or decoration of another person's famous commodity, or using a name, package or decoration similar to that of another person's famous commodity, thereby creating a confusion between its own commodity and that famous commodity and leading the consumers to mistake the former with the latter".

Case Summary

ANDREAS STIHL AG & CO. KG (STIHL) is the biggest manufacturer of chainsaws in the world. Since 1972, STIHL has been using the “orange and gray” colour combination as its trade dress on chainsaws and other garden power equipment around the world.

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As early as 1995, STIHL established a wholly-owned subsidiary company in China to explore the Chinese market, opening chain stores and providing after-sale service to consumers. STIHL’s products are sold in most of the cities and provinces in China, claiming more than half of the market share of high-end chainsaw products.

In 2013, STIHL became aware that a garden machinery company in Hangzhou was producing and selling STIHL chainsaw copies. This Company copied a series model of STIHL chainsaws, and used the specific colour combination of orange and gray, without however, using any STIHL trademark on the products.

In September 2013, STIHL filed a complaint against the infringer with the Hangzhou AIC, Yuhang Branch, on the ground of unfair competition. The local AIC inspected the premises of the company and located over 160 assembled chainsaws with “orange and gray” decoration along with a large number of spare parts. The AIC ordered the company to stop use of the orange and grey color decoration. In March and April of 2014, the AIC, upon STIHL’s complaints, inspected the company twice and found it was still producing and selling STIHL chainsaw copies with the orange and grey colors.

On April 23, 2014, STIHL lodged a lawsuit against the Hangzhou company before the Hangzhou Intermediate Court based on the ground of unfair competition (article 5 of the law).

On June 2, 2015, the Hangzhou Intermediate Court rendered its judgment as follows:

  1. the plaintiff’s orange and gray colour combination on chainsaw constitutes a unique trade dress of a famous commodity according to the Anti-unfair Competition Law;
  2. the unauthorized use of such colour combination constitutes an act of unfair competition.

The defendant appealed to the Zhejiang High Court, arguing that the colour combination should not be granted protection by the Anti-unfair Competition Law on the following grounds:

  1. the evidence furnished by STIHL was insufficient to prove the famous status of its chainsaw commodities;
  2. the orange and gray colour combination was neither distinctive nor specific.

On September 18, 2015, the Court of Appeal rendered the judgment rejecting the appeal.

The Court of Appeal affirmed that STIHL’s chainsaw products have been distributed in numerous provinces and cities in China, boasting substantial sales revenue and amount. Such products were highly reputable in the Chinese market and were widely known by the relevant consumers. The Court confirmed the aforementioned fact in the absence of any contrary evidence from the appellant. The Court further determined that STIHL’s chainsaw products were famous commodities by taking into account its sales volume and STIHL’s considerable input in promoting the same.

The Court finally concluded that STIHL’s long-term and extensive promotion and use of the orange and gray colour combination trade dress on its famous chainsaw products has enabled the relevant public to associate such trade dress with STIHL’s chainsaw products, which makes the trade dress distinctive enough to serve as a source identifier.

WAN HUI DA represented STIHL in the above unfair competition litigation and in its trademark refusal review proceedings.

Comments:

In addition to the above, it must be noted that STIHL had filed a trademark application for the above colour combination, and had been initially refused by the CTMO.

The Trademark Law (2001 version) allows colour combination to be registered as trademark. Nevertheless, since colour combination trade dress is normally deemed as inherently non-distinctive. It is an arduous task for the applicant to prove that such colour combination has acquired “Secondary Meaning” through massive use and advertisement.

Upon review of this refusal, STIHL provided a massive amount of evidence and finally, obtained, on August 13, 2015, the approval of its trademark.

Still, the civil litigation had to be based on the Anti-Unfair Competition Law, because in 2014, the trademark was not registered yet.

This case constitutes a first precedent in China that a colour combination trade dress is granted judicial protection as the "unique trade dress of a famous commodity".

In this case, STIHL furnished extensive evidence to prove the famous status of its chainsaw products and the distinctiveness of the orange and gray colour combination. The evidence included market survey report, constant advertisement and publicity, audit report on sales volume in China, ranking in the industry, testimony of industry insiders. This could serve as an example for similar cases.