In 2013 world-renowned innovative technology company 3M registered the trademark 3M in Class 11 for water filter and purification devices. The 3M mark had been used in China for a long time and was already known among the relevant public.
On July 1 2013 Qingyu Mao filed an application for the trademark ?M – comprising the Chinese character '?' (which is pronounced 'liao' or 'le') and the letter 'M' – in Class 11 for the same goods, including water purification equipment and machines. The trademark was registered on January 14 2015. On April 2 2015 Mao established the company Zhongshan San En Meng Electronic Appliance Co, Ltd and authorised it to use the?M trademark.
However, in practice, the '?' element of San En Meng's trademark had been subtly modified. The mark (see below) was now visually extremely similar to the 3M mark.
3M filed a civil suit against both Mao and San En Meng before the Zhongshan Intermediate Court, seeking cessation of the infringement and damages.
The defendants argued that they were using their registered trademark ?M.
The court ruled in favour of 3M and held as follows:
- The registered trademark ?M comprised the Chinese character '?' and the uppercase letter 'M', while the disputed trademark was a combination of the Arabic numeral '3' with the letter 'M'. The pronunciation and meaning of the two marks were clearly different. The modified mark was not merely a nuance, as the distinctive features of ?M had been changed. Thus, its use did not constitute standard use of the registered trademark.
- Given the strong distinctiveness of the 3M mark and the reputation of 3M products among the relevant public, the disputed mark constituted trademark infringement.
- The ?M trademark owner, Mao, and San En Meng, which was established to conduct the industrial activity, were jointly liable. 3M had submitted notarised websites and recordings to the court, proving that Mao and San En Meng were both aware of the 3M mark's high reputation in the water purification industry, and that Mao was aware that San En Meng had transformed his?M mark into the infringing mark.
The court calculated the damages by referring to the full statutory amount provided by law.
As it was difficult to assess San En Meng's illegal profits and 3M's actual loss, the court determined the amount of compensation by considering:
- the large-scale production and sale of the infringing products (30 to 40 models were on sale across various e-commerce platforms);
- the long duration of the infringement (which had been ongoing since the establishment of San En Meng and continued throughout the court proceedings);
- San En Meng's refusal to provide financial documents reflecting the production and sales quantity of the infringing products and its profit (the court determined that the company should bear unfavourable legal consequences and had significantly benefited from the infringement);
- the fact that San En Meng and Mao had acted in bad faith by free-riding on the reputation of the 3M trademark; and
- the reasonable cost paid by 3M to stop the infringement.
On October 30 2017 the court ruled that Mao and San En Meng must bear joint and several liability for the compensation of Rmb3 million.
The transformation of registered trademarks into infringing trademarks in actual use is a growing concern. These subtle transformations cannot be easily anticipated and, even if they are, the China Trademark Office may not refuse the registration of a mark on the grounds that it could be transformed and become infringing. Where this happens, the State Administration for Industry and Commerce will often refuse to take action because the defendant will likely claim that it is simply using a variant of its registered trademark. Civil litigation is therefore necessary. According to a 2009 Supreme People's Court interpretation, where a registered trademark is transformed in actual use, the disputed mark need not be cancelled before initiating a suit.
In such cases, the difficulty lies in proving the liability of the trademark owner, which can easily claim that the act of licensing its registered mark is legal and that it cannot be held responsible for what the licensee does with the mark. In the case at hand, 3M paid special attention to searching and submitting the evidence to prove the defendants' intentional behaviour.
The case shows the courts' determination to penalise such behaviour, particularly where a defendant is reluctant to disclose its accounts.