Yongjian Lei Paul Ranjard December 6 2021 Two crocodiles before Supreme People's Court of China Wanhuida Intellectual Property | Intellectual Property - China Yongjian Lei, Paul Ranjard Intellectual Property FactsDecisionCommentThe battle between the French company Lacoste and the ex-Singaporean company Cartelo over their crocodile device trademarks has been going on in China for over two decades. In a retrial case on 19 October 2020 concerning the refusal of one of Cartelo's trademarks, the Supreme People's Court (SPC) fully reviewed and analysed some of the main aspects of the conflict.FactsIn the 1920s, the French tennis player René Lacoste, nicknamed "Le Crocodile", ranked as the world No. 1 player. After he retired from tennis, Lacoste invented a technique for knitting cotton thread called "petit piqué", which was used in 1933 to create the first Lacoste polo shirt, showing a little green crocodile on its chest. Thereafter, Lacoste developed, under the crocodile brand, a series of high-quality shirts and other clothing. Since then, the Lacoste brand has gradually become an international brand in many fields such as sportswear, sports equipment, outdoor travel goods and cosmetics.In 1979, the company Lacoste applied for the registration of the crocodile device trademark in China (Figure 1).Figure 1: crocodile device trademarkThe trademark was registered as Trademark No. 141103 in 1980 and the Lacoste brand started entering the Chinese market in 1984.However, in other parts of Asia, the crocodile image created in 1933 was already being imitated by others. When Lacoste entered these markets, it found that a reverse image (ie, a crocodile facing left) had already been registered by two companies:Crocodile Garments Limited (CGL) in Hong Kong; andLi Seng Ming (which later changed its name to Crocodile International (CI)) in Singapore.Coexistence agreements were signed. In 1980 in Hong Kong, CGL registered the Lacoste crocodile brand in its own name and became the distributor of Lacoste products. In 1983, Lacoste and CI agreed to have their respective trademarks coexist in the five countries and/or regions Singapore, Malaysia, Indonesia, Brunei and Taiwan.Nevertheless, in 1980, when Lacoste registered its trademark in China, neither of the two companies had envisaged the possibility of entering the mainland market. Their interest in the Chinese market came later.In the mid-1990s, CGL attempted to register, in China, the reverse image of the crocodile embroidered on the shirts. This dispute was finally settled in 2003 under the auspices of the Beijing High People's Court: CGL recognised the priority and high reputation of the Lacoste crocodile trademark and agreed to use a different representation.CI also attempted to register in China various representations of the crocodile device, which were refused. Thus, CI filed and obtained the registration of a new trademark (Figure 2), using the letters "CARTELO", with the crocodile hidden in the middle of the word.Figure 2: CARTELO trademarkAmong the trademark applications filed by CI was Trademark No. 2018250, which contained the crocodile device and Chinese characters (Figure 3) and covered the goods "clothing, etc" in Class 25 (the disputed trademark).Figure 3: the disputed trademarkThe disputed trademark was later assigned to a company called Cartelo Crocodile Pte Ltd (Cartelo).Both Lacoste and CGL opposed the disputed mark based on its similarity with their own trademarks. The Trademark Office and the Trademark Review and Adjudication Board ruled in their favour. However, in 2010, the Beijing First Intermediate People's Court overturned the administrative decisions and approved the registration. In 2018, the Beijing High People's Court confirmed the approval.Both Lacoste and CGL filed a retrial application with the SPC.DecisionOn 19 October 2020, the SPC issued its final judgment, holding that the disputed mark and Lacoste's prior cited marks constituted similar trademarks on identical or similar goods. It thus disapproved the registration of the disputed mark.The SPC could have limited its decision to stating that the disputed trademark was similar to the cited trademarks, designating identical goods. However, given the long and complex history between the two companies, the SPC decided to fully analyse the entire conflict, even re-examining and reassessing certain issues that had been adjudicated in a previous civil judgment issued in 2010 by the SPC itself.The 2010 SPC judgment had been rendered on appeal against a first-instance judgment of the Beijing High People's Court in 2008, after Lacoste had sued CI for infringement in 2000. The first-instance and appeal judgments had dismissed Lacoste's infringement claim, considering that, even though the trademarks in conflict had similarities, the following facts were sufficient to rule out the infringement claim:CI had been using its trademark together with the CARTELO registered trademark.Both trademarks had coexisted for some time and had established their reputations in different sectors of the market.They had agreed to coexist in other parts of Asia.CI had not been acting in bad faith.However, the SPC insisted, in its judgment, that given the similarity between the two trademarks, CI was to "keep using its [trademarks] in a way that is obviously distinguishable from LACOSTE marks, and [shall] try its best to shun LACOSTE trademarks".Visual similarityThe disputed mark was composed of a single crocodile device and the Chinese characters "卡帝乐鳄鱼" (meaning "Cartelo crocodile"). Despite the addition of the Chinese characters, the predominant part of the disputed mark remained the crocodile device. As the Chinese characters "卡帝乐" ("Cartelo") do not have a specific meaning, it was thought that the relevant public could refer to the disputed mark as "鳄鱼" alone ("crocodile"). Lacoste's cited marks constituted a single crocodile device and could also be referred to as "鳄鱼" ("crocodile") by the relevant public. Besides, the predominant part of the disputed mark – namely, the crocodile device – shared an open mouth and an upturned tail with Lacoste's cited marks. Therefore, the disputed mark was highly similar to Lacoste's cited marks.Distinctiveness and reputation of Lacoste's crocodile device marksThe crocodile device enjoyed a high level of distinctiveness on clothing products despite the fact that a crocodile is an animal. Besides, according to the evidence on record, Lacoste's crocodile device trademarks had acquired a certain influence in China before the application date of the disputed mark. Moreover, Lacoste had spared no efforts in maintaining the distinctiveness and reputation of its crocodile device through legal proceedings. In 2016, the cited mark received well-known trademark recognition, reflecting the long-lasting reputation of Lacoste's crocodile device trademarks.Cartelo's intentionDuring the retrial procedure, which spanned two years, Cartelo started opening boutiques in the vicinity of Lacoste's boutiques and on Alibaba, using a large range of visual elements that created obvious references to Lacoste (eg, a reference to tennis, the use of the colours of the French flag and identical bags and products).The SPC thus stated in its judgment that these facts proved that Cartelo had intended to confuse its crocodile device mark with the Lacoste crocodile device marks or create a certain connection with Lacoste.Settlement agreementThe SPC extended its analysis to the settlement agreement signed in 1983 between Lacoste and Li Seng Min (CI's predecessor), which, according to Cartelo, should have applied to China. The SPC noted that the scope of the agreement had been the object of an arbitration award made by the Singapore International Arbitration Center and that it was clear that the agreement applied only to the five countries and/or regions listed therein, expressly excluding mainland China. Therefore, the 1983 settlement agreement could not be used to judge whether the disputed mark, in this case, was similar to the cited marks or whether the disputed mark should be registered. The SPC added that, even if there was a trademark coexistence agreement applicable to China, it would still be necessary to determine whether the disputed mark and the cited marks constituted similar trademarks used on identical or similar goods, as provided by the relevant provisions of the Trademark Law and its judicial interpretations.CommentApart from the impact that it may have on the continuing conflict between Lacoste and Cartelo, this SPC judgment sheds light on several key issues in cases relating to the assessment of trademark similarity, the perpetual crux in trademark casesReputation of marksThe SPC clarified that, even if a prior mark does not enjoy a high reputation, if the visual similarity is undeniable, the prior trademark rights shall nevertheless be protected. Therefore, the reputation of a trademark acquired before the application date of the disputed trademark is only an additional element that the court shall take into consideration when assessing whether there is a likelihood of confusion.Trademark applicant intentionThe evidence submitted by Lacoste in the new infringement case pending against Cartelo, which was shown to the SPC in the retrial proceeding, was considered to prove the bad faith and intention of Cartelo to take advantage of Lacoste's high reputation. This intention, even if it concerned a device other than the disputed trademark, was taken into consideration by the SPC as a general fact when assessing the likelihood of confusion between the Lacoste trademarks and the disputed trademark.Extraterritoriality of trademarksThe SPC also took the opportunity in this case to clarify its views about the territoriality of trademark rights.The SPC, in its ruling, clarified that the agreement, since it did not apply to mainland China, could not serve as a basis for coexistence in China. The SPC added that, even if mainland China had been one of the five jurisdictions listed in the agreement, the SPC would still have adjudicated the case based on whether the marks were similar instead of directly acknowledging the effectiveness of the agreement.For further information on this topic please contact Yongjian Lei or Paul Ranjard at Wanhuida Intellectual Property by telephone (+86 10 6892 1000) or email ([email protected] or [email protected]). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.