Brother Industries, Ltd. (a Japanese company - hereafter referred to as “Japanese Brother Company”); Brother (China) Commerce Co., Ltd. (a WFOE set up by the Japanese Brother Company) vs. Japan Brother International Industries Limited (actually registered in Hong Kong, although “Japan” is referred to in the company name – hereafter referred to as “HK Brother Company”); Shenzhen Da Di Li Industry Co., Ltd. (Da Di Li)

The Japanese Brother Company, established early on 15 January 1934, engaged in manufacturing and sales of sewing machines, parts and machine tools. It established its WFOE in China on 23 March 2005. One of the defendants – Da Di Li was established on 11 August 1999 by four Chinese persons and its business included production, processing and sales of industrial sewing machines. The other defendant – HK Brother Company was registered in HK on 11 February 2002 by two of Da Di Li’s shareholders.  

On 24 September 2009, the plaintiffs’ attorney bought one sewing machine from Da Di Li at China International Sewing Equipment Exhibition held in Shanghai. Da Di Li and HK Brother Company’s name were showing in the labels. The plaintiffs’ attorney got both the purchase and the defendants’ company website showing “Da Di Li” and “Japanese Brother Company” notarized for evidence preservation. And then the plaintiffs sued the defendants for their unfair competition in Shanghai No.1 Intermediate People’s Court.  

In the first instance, the Shanghai No.1 Intermediate People’s Court concluded that the business name “Brother” had a certain reputation and was known by the relevant public, so it should be protected under the PRC Law Against Unfair Competition. Da Di Li was established after the Japanese Brother Company and their business scope were basically the same, so it should have known the reputation of the business name – “Brother”. However, Da Di Li did not reasonably avoid the confusion; instead, it registered Japan Brother International Industries Limited in Hong Kong and marked the enterprise name on the sewing machines produced by it in China. Thus, the Intermediate Court ordered the defendants to immediately stop using the enterprise name including “Brother”, publish a statement in an industry journal regarding its acts of unfair competition so as to eliminate the effects, and to compensate the plaintiffs RMB300,000 in total for their economic losses and reasonable expenses.  

The defendants appealed to the Shanghai Higher People’s Court. The Higher Court issued its decision on 19 June 2013 and concluded that the defendants’ acts had violated the business ethics of good faith and constituted unfair competition. The court noted that even if the enterprise name of Japan Brother International Industries Limited was registered in Hong Kong, its use of its enterprise name beyond Hong Kong and in China would still constitute infringement, since this enterprise name conflicted with other’s earlier enterprise name. A design patent infringement involving one of the plaintiff’s China registered design patents was dealt with at the same time as this matter, but by a different court – in that case, differences between the products being sold by the defendants and the design patent, were enough for the court to find that no patent infringement was occurring.