The American fashion brand, Michael Kors, is not unknown in China. China, the second largest economy, is one of the fastest moving markets for fashion, with an increasingly ‘digital everything’ and growing middle- and upper-middle class consumer base. As one of the earliest luxury players in China to see the potential of e-commerce, Michael Kors has achieved high public awareness for its brand, capitalising on omni-channel marketing, collaborating with local movie stars and ‘Gen Z’ celebrities, and establishing its presence on Chinese social media and retail platforms. Its Asian business which includes China is expected to grow to USD 1 billion in the coming years.

With this background and track record, it could be assumed that the Michael Kors brand, of which the MICHAEL KORS tag and the iconic  logo are the main elements, was considered ‘untouchable’ in China. A local company, Shantou Chenghai Jianfa Handbag Craft Factory, thought otherwise and pushed its infringement claim against Michael Kors for use of the MK logo through three court instances to the China Supreme People’s Court.

The final victory in the dispute for the American brand came on 30 March 2020 when the Supreme People’s Court (“SPC”) issued the retrial decision to deny the trade mark infringement claim based on reverse confusion filed by Shantou Jianfa against Michael Kors (Switzerland) International GmbH.

Shantou Jianfa operates in the fashion industry and had filed its application for the mark  with the Chinese Trade Mark Office on 5 November 1997, and had renewed its registration for the mark until 6 February 2029. The goods covered by the mark includes ‘travelling bags; travelling trunks; haversacks; handbags; handbags for sports; bags [bags, pouches] of leather, for packaging; shopping bags; briefcases; wallets; school bags’ in Class 18.

Michael Kors secured registration for the trade mark MK MICHAEL KORS for the goods ‘trunks [luggage]; travelling trunks; rucksacks; suitcases; umbrellas; handbags; wallets; leather wallets’ in China only in 2013, after it won an appeal against the Chinese Trade Marks Office which had initially refused the trade mark application originally filed in 2003. Determined to strike out against the Michael Kors brand, Shantou Jianfan filed an invalidation request against the registration for the mark, MK MICHAEL KORS; however, the final court judgment ruled that the Michael Kors’s mark was dissimilar to Shantou Jianfa’s  logo and maintained the Michael Kors’s trade mark registration. Michael Kors, however, did not succeed in obtaining a Chinese registration for its  logo, as the Chinese Trade Marks Office refused its application (presumably due to Shantou Jianfa’s earlier registration for ).

In its ‘all-out war’ against the American brand, Shantou Jianfa also brought a lawsuit against Michael Kors for the infringement of its  mark as Michael Kors had marketed and sold its goods under the  label. The first and second instance refuted these claims but Shantou Jianfa filed appeals.

The Supreme People’s Court, in its final judgment of 30 March 2020, held that, although Shantou Jianfa had obtained registrations for its trade mark  earlier, the Michael Kors brand did not infringe upon the Plaintiff’s marks.

In particular, Michael Kors’s marks , , , and  were different from Shantou Jianfa’s mark in design style, thus the respective marks did not constitute identical marks.

Through extensive and continuous promotion and use, Michael Kors’s marks obtained a certain reputation in China and the marks had established a connection with the brand, MICHAEL KORS. In particular, Michael Kors used its marks together with its house mark, ‘MICHAEL KORS’, which was sufficient to distinguish the origin of the respective goods of the parties. Michael Kors did not have the intent to free-ride on the goodwill of Shantou Jianfa’s mark, and in that regard, the evidence submitted by Shantou Jianfa was not sufficient to show that Shantou Jianfa’s mark  had obtained high distinctiveness and reputation through use. As Shantou Jianfa’s goods were of low price and mainly exported outside of China, its target consumers are quite different to Michael Kors. Overall, Michael Kors’ use of its marks were unlikely to cause customers to mistakenly believe that Shantou Jianfa’s goods had originated from Michael Kors.

According to the Supreme People’s Court, Shantou Jianfa began to use its mark in a non-standard manner to imitate Michael Kors’ marks after 2015, which showed that Shantou Jianfa aimed to take advantage of the goodwill in Michael Kors’s mark and cause confusion in the market.

Based on the above reasoning, the Supreme People’s Court reaffirmed the first and second instance courts’ judgment that Michael Kors did not infringe the trade mark rights of Shantou Jianfa.

Normally, infringement of trade mark rights is based on the risk of confusion that consumers would mistakenly believe that the infringer’s goods originate from the true owner, which had created the brand in the first place and registered its trade mark first to protect its rights.

In this case, the Court had to examine the claim put forward by Shantou Jianfa, that Michael Kors had caused a case of “reverse confusion”, when it adopted its line of MK marks identical to Shantou Jianfa’s own mark , which was registered in China earlier. Hence, according to Shantou Jianfa’s line of argument, when consumers were to purchase Shantou Jianfa’s goods they would mistakenly believe that these goods would originate from, or were associated with Michael Kors and under such circumstances, the presence of Michael Kors’ goods in the market infringed Shantou Jianfa’s trade mark rights.

The Court did not follow these arguments and found that Michael Kors had achieved a high level of popularity so that Chinese consumers would not erroneously identify Shantou Jianfa’s goods as originating from Michael Kors. The Court therefore denied the infringement of Shantou Jianfa’s trade mark rights, despite these being earlier than Michael Kors’s registrations in China.

Foreign companies face many challenges when operating in a market outside their own country. In the past, many claims had been made over the lack of fairness to foreign companies on account of favoritism shown by Chinese authorities to local companies. For Michael Kors, however, the outcome of this case marked the end of a long and drawn-out dispute brought on by a local competitor, which was proven to be opportunistic and unmeritorious.

Source: China Supreme People’s Court Civil Judgment (2019) Zui Gao Fa Min Shen No.6283 (http://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=c1d432e07caa47a4a953abba00c397ec)