Civil proceedings
Administrative proceedings


In 1886 Julius Maggi designed a brown, square-based sauce bottle, which later came to be used by Nestlé SA for its products.

In July 1995 Nestlé obtained international registration of a three-dimensional trademark in China. The application had initially been rejected by the Trademark Office for lack of distinctiveness. Nestlé appealed and the Trademark Review and Adjudication Board found that the trademark had obtained distinctiveness through use and could be approved for registration.

Therefore, Nestlé was the owner of the three-dimensional trademark representing this unusual bottle shape and was entitled to prohibit the use of such a shape by a third party. However, a Chinese company, Master Sauce Co Ltd, had been using a square-based bottle since 1983 for various products, including its Master Soya Sauce. In March 2008 the State Administration for Industry and Commerce recognised the word mark MASTER as a well-known trademark.

In October 2008 Nestlé sent a letter to Master Sauce, asking it to cease its use of the square-based bottle which, in Nestlé's view, constituted infringement of its three-dimensional trademark. Master Sauce denied infringement. In November 2008 Nestlé sent a more strongly worded warning letter. Two parallel procedures then began in which Nestlé was - perhaps surprisingly - the defendant.

Civil proceedings

First instance decision
On November 24 2008 Master Sauce filed an action for declaration of non-infringement with Jiangmen Intermediate People's Court, claiming that the brown and transparent square-based bottles that it used for its soy sauce and other products did not constitute infringement of Nestlé's trademark.

On July 9 2010 the court issued its judgment. It held that the focus of the case was whether Master Sauce used the brown, square-based bottles in bad faith and whether such use caused confusion and incorrect identification among the relevant public. It noted that the trademark had been registered in July 2005 - only five years previously - and that it had not established a relatively strong reputation. The court added that Nestlé had failed to prove that it had created a unique link between its company and the trademark.

Furthermore, the court observed that Master Sauce used its bottles for its Master Soya Sauce and that the bottles bore the trademark MASTER. As this trademark had been recognised as a well-known mark in 2008 and enjoyed a relatively strong reputation, the court considered that the use of a square bottle was unlikely to cause confusion among the public. Therefore, the court found that although Master Sauce was using a bottle similar to Nestlé's trademark, such use was unlikely to cause confusion among the relevant consumers and did not constitute trademark infringement.

Nestlé appealed. In November 2010 Guangdong High People's Court rejected the appeal and upheld the original decision.

The court noted that the three-dimensional mark for a "brown, square bottle with a yellow peaked cap", owned by Nestlé, was used as a container for certain Nestlé products. It noted that many soy sauce manufacturers had started using such containers before Nestlé's registration of the mark. Thus, the court considered that distinctiveness of the registered trademark for the designated goods (ie, food seasonings) was weak.

Moreover, the court considered that Master Sauce used its bottle as product packaging, not as a trademark. Therefore, it was necessary, when comparing it with Nestlé's registered trademark, to consider all elements of Master Sauce's product that were presented to the consumer, including the packaging, the decoration and the trademark. It was held that:

  • Master Sauce had not used the bottle as product packaging in bad faith and did not take advantage of Nestlé's registered trademark;
  • such use did not lead to confusion or incorrect identification among the relevant consumers; and
  • Master Sauce's actions did not constitute trademark infringement.

Administrative proceedings

On November 26 2008 Master Sauce filed an application with the Trademark Review and Adjudication Board to cancel Nestlé's trademark on the grounds of lack of distinctiveness. Confirming its previous decision on the issue, the board rejected Master Sauce's claim. Master Sauce appealed.

On December 10 2010 the Beijing First Intermediate People's Court found that the board had applied the procedure incorrectly (by appointing a panel of two examiners instead of three) and ordered it to reissue its decision.


Key conclusions
The main facts and findings of the dispute can be summarised as follows:

  • A three-dimensional trademark, constituted by the particular shape of a bottle, is registrable in China. The Trademark Office, after examination, concluded that such a shape may be sufficiently distinctive and non-functional to allow an excusive right to be granted.
  • If a party, without the trademark owner's consent, uses an identical or similar shape of bottle as a container for its own products, such use falls within the definition of 'infringement' under Article 53 of the Trademark Law.
  • However, the first instance and appellate courts, which both acknowledged that use of an identical or similar trademark without consent falls within the definition, held that Master Sauce's use did not constitute infringement in this case.

Why did the courts decide not to apply the law in this case? Or, rather, how did the courts interpret Article 53?

First instance decision
Cease and desist letters - of which Nestlé sent two - are not without risk. They give the would-be defendant an opportunity to take the initiative by choosing its own forum and bringing an action for non-infringement. The first instance decision might have been different if Nestlé had sued Master Sauce before a court in Beijing.

The first instance court stated that:

  • Master Sauce had not acted in bad faith;
  • the plaintiff's three-dimensional trademark had not achieved a relatively strong reputation;
  • the owner of the three-dimensional trademark had not established a "unique relationship" with the trademark; and
  • the defendant used its own word mark on the bottle and the mark had a relatively strong reputation.

Therefore, even though the defendant used an identical or similar trademark without the consent of the prior registered owner, such use was unlikely to cause confusion and did not constitute an act of infringement.

The appellate court found that:

  • Nestlé's bottle was used as a container for its products;
  • other manufacturers were using a square-shaped bottle as a container for their products before the three-dimensional mark was registered - therefore, the square shape was not very distinctive;
  • the defendant used its bottle as a container, not as a trademark; and
  • the defendant had not acted in bad faith.

Therefore, it was held that the use of the three-dimensional trademark was unlikely to cause confusion and did not constitute an act of infringement.

The courts did not take Article 53 as an absolute rule, but reserved the right to add additional conditions. It was considered insufficient to prove that a trademark had been registered and that an identical or similar trademark was being used without consent. Rather, the courts found it necessary for the trademark owner to prove that the act of infringement was likely to cause confusion in the minds of consumers.

Although there was little debate about whether the defendant's bottle was identical to the thee-dimensional trademark, Nestlé's evidence of its registered trademark and the use without consent (ie, the two conditions identified in the law) was insufficient. Rather, it was held that Nestlé should have established that:

  • its trademark was strongly distinctive;
  • the trademark had achieved a relatively strong reputation;
  • the defendant had acted in bad faith; and
  • the defendant used the bottle not as a container, but as a trademark.

However, even if Nestlé had met these additional requirements, it appears that this would not have been enough, since the courts noted in their grounds that the defendant used its own registered trademark on the bottle.

Devaluing the three-dimensional mark?
The courts of Guandgong Province appear to consider that in a civil trademark infringement suit, the defendant may argue its good faith, challenge the level of distinctiveness of the registered trademark and - in any case - may escape liability by using its own trademark together with the infringed registered trademark.

The decisions raise doubts about the usefulness of a registered three-dimensional trademark for the shape of a bottle. It is obvious that a bottle is a container for a product. If the fact that a bottle is deemed to be used as a container, not a trademark, is considered reason enough not to grant protection, there seems little point in obtaining such a registration. Furthermore, the purpose of registration is to protect a shape against any form of use by a third party. However, if printing anything on the bottle is enough to avoid liability for infringement, what protection does the trademark provide? The analysis appears to stray from both the letter of the law and the common understanding of registered trademark protection.

Moreover, the decisions in this case contradict the spirit of the Supreme People's Court decision in Ferrero in 2008, in which the court indicated that:

"considering that the overall image of the packaging and decoration of the Ferrero Rocher chocolate is distinctive enough to distinguish the source, [and] that Mengtesha... uses a packaging and decoration that is visually very similar to Ferrero's, although these two products use different trademarks and trade names, and have differences in price, quality, taste, etc, consumers will easily consider there is a certain economic connection between Ferrero and Mengtesha chocolate. Therefore, the similarity of the packaging and decoration will cause confusion and misidentification among consumers. Unfair competition is found to exist."

Nonetheless, the Supreme People's Court recently listed the Guangdong High Court decision among the 50 most influential IP cases of 2010. This is a clear sign that the Supreme Court approves of the arguments raised by the Guangdong judges and is shifting its opinion in this regard.

For further information on this topic please contact Zhu Zhigang or Paul Ranjard at Wan Hui Da Law Firm & Intellectual Property Agency by telephone (+86 10 6892 1000), fax (+86 10 6894 8030) or email ([email protected] or [email protected]).