The plaintiff, Martell, is the oldest of the great cognac houses, having created cognacs for three centuries. Martell offers a plethora of spirits, including Martell XO, L'or de Jean Martell, Martell Noblige, Martell Cordon Bleu and Martell Creation, which feature unique bottle designs and are known to the public in China. Martell has registered all of these bottle shapes as trademarks in China in class 33.(1)
In 2018, it came to Martell's attention that company A and company B jointly produced and distributed five brandy products – Sdegree Xo, Mansie Xo, Huang Vsop, Dingyi VSOP and Dingyi Xo – with shapes quasi-identical to Martell's trademarks and trade dresses (collectively, the "infringing products"). Mr Gan, the legal representative and controlling shareholder of the two companies, owned design patents for the infringing products and had been using his personal bank account in his daily business operations – specifically, as a beneficiary account to receive payments from the buyers of the infringing products.
The following table showcases the infringing products and the corresponding Martell spirits.
Figure 1: comparison table
Martell filed five civil lawsuits against the three infringers before the Huadu District People's Court of Guangzhou on the ground of 3D trademark infringement and unfair competition.
On 31 December 2019, the Court ruled in favour of Martell, affirming trademark infringement and unfair competition (ie, the infringing products infringed the famous decorations/trade dress of the five Martell spirits). Gan used the design patents as a non-infringement defence, which was dismissed by the Court. Regarding the damages, the Court fully supported Martell's claim for an amount totalling 5 million yuan in the five cases. The Court also ruled that Gan shall bear joint and several liabilities with the companies.
The defendants appealed the five cases to the Guangzhou IP Court. The Court also sided with Martell, found trademark infringement and affirmed the damages awarded by the trial court.
In the case concerning Martell XO, the opinions of the trial court and the court of appeal diverged. Rather than following the same logic applied in the other four cases, where trademark infringement and unfair competition were simultaneously established, the Guangzhou IP Court opined that Martell could not argue trademark infringement and unfair competition (ie, decoration of famous products) in this one case at the same time.
The inconsistency in the findings of the Guangzhou IP Court seems to substantiate the complex and murky judicial landscape as to whether 3D trademark infringement and trade dress infringement (ie, unfair competition) can be concurrently applied to protect the same product design in China.
Still, it is extremely welcome that the controlling shareholder was found jointly and severally liable with the accused companies. China's Company Law exempts the shareholder of a limited liability company (LLC) from assuming joint and several liabilities in connection with the company's activities, unless the former is a shareholder of a one-person LLC (ie, an LLC with only one natural person shareholder or legal person) and is unable to prove that the property of such one-person LLC is independent from their own property. In the five cases, both courts ascertained that the controlling shareholder not only held a share in the accused companies but also jointly committed infringing acts with these entities. The evidence collected by Martell proving that Gan had been using his personal bank account to receive payments from the buyers of the infringing products played a decisive role.
For further information on this topic please contact Yongming Fan at Wanhuida Intellectual Property by telephone (+86 10 6892 1000) or email ([email protected]). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.
(1) Including the following trademarks:
- No. 4831519 (since 14 April 2008);
- No. 7107227 (since 21 December 2011);
- No. 5667880 (since 28 August 2009);
- No. 6956698 (since 21 June 2010); and
- No. 5707932 (since 14 December 2009).