Zippo Manufacturing Company (“ZMC”) registered its trademark ZIPPO in China, covering lighter and related goods. The limited scope of designated goods, unfortunately, was seen by infringers as an opportunity to free-ride on its significant brand power.
I. The facts of the case
In addition to lighters, ZMC also manufactures hand warmers, a device that has the shape of a pebble, and can be warmed and kept in the pocket. However, ZMC does not own a trademark registration for this kind of products.
A Mr. Sun Meng Lin, member of the staff of Fuhai Zhentian Plastic Factory (“Zhentian Factory”) in Zhejiang Province, left the company, established his own company called Cixi Fuhai Tangfeng Plastic Factory (“Tangfeng Factory”) and started to manufacture hand warmers, using the“ZIPPO” mark on the products.
Zhentian Factory was the supplier of ZMC’s subsidiary in Japan, who was using this factory under the OEM system. This explains how Sung Meng Lin knew the ZIPPO mark.
On April 21, 2006, he filed a trademark application for the “ZIPPO” mark with respect to hand-warmers and on November 27, 2006, his company Tangfeng Factory filed a design patent (with the same design as the trademark) with respect to packaging-boxes.
ZMC was faced with a difficult situation, due to its lack or registration of its mark for hand warmers. Several actions had to be considered: opposing the trademark application filed by Sun Meng Lin, attacking the design patent filed by Tangfeng Factory and putting a stop to the sales of these hand warmers.
This implied the launching of three distinct procedures: a trademark opposition, a civil action based on the infringement of the registered ZIPPO mark (for lighers), and another civil action concerning the use of the design patent on packagings.
III. The procedures
- The Design Patent
ZMC could have considered filing an invalidation action, with the Patent Reexamination Board (PRB) against the design patent, on the basis that it reproduced its registered trademark ZIPPO.
The reason why ZMC filed a civil action rather than a patent invalidation action was that, under Article 65 of the Implementing Rules of the 2000 PRC Patent Law, a design patent can only be invalidated on the basis of a conflict with another kind of intellectual property, if the plaintiff submits to the Patent Reexamination Board a court decision establishing the reality of such conflict.
In other words, it had to be decided, by a Court, that the design constituted, by itself, an act of infringement of the registered Zippo trademark, which was not obvious, because, after all, the design was not affixed on any of the products covered by the registered trademark (lighters).
The Beijing No.1 Intermediate Court, accepted the reasoning submitted by Zippo, that such patent application constituted an “imminent infringement”, since a packaging design as such, does not indicate which product it is meant to pack: hand warmers or lighters. On March 19, 2010, the Court ruled in favor of Zippo and ordered Tangfeng factory to stop using the design.
The judgment was confirmed by the Beijing Higher Court on November 9, 2010.
This was the first important break-through to the case.
(It is worth noting that, since the revision of PRC Patent Law in 2008, a design patent may no longer consist of a simple two-dimensional design. It must be a three dimensional shape. Therefore, under the new Patent Law, the Zippo design would not have been accepted by the Patent Office.)
- The Trademark Opposition
ZMC filed an opposition against the trademark application filed by Sun Meng Lin, when it was published by the Trademark Office, in 2009.
In principle, since ZMC had no trademark registration for hand warmers, and since hand warmers and lighters are not considered to be similar products, ZMC had to prove that its ZIPPO trademark was well-known in China, and thus deserved a “cross category” protection, or that, pursuant to article 31 of the Trademark Law, the trademark had been used before the filing date of the opposed trademark, had acquired a “certain influence”, and furthermore, had been applied by “improper means”.
ZMC knew that obtaining the recognition of the well-known status by the Trademark Office would be extremely difficult and time consuming. It is a fact that a very strict quota has been put in place with respect to foreign trademarks (approximately one percent of the applications is granted). Article 31 seemed better adapted. Indeed, ZMC was able to justify of its own use and reputation with the mark on hand warmers, but above all, it showed to the Trademark Office the personal relationship (ex-employee) between the applicant Sun Meng-Lin, and ZMC(Japan)’s supplier.
TMO adopted such evidence and found that the application had violated the principle of good faith, that the use of the mark would be likely to cause confusion among consumers, and therefore refused the application on February 7, 2012.
- The Civil action for trademark infringement
This action was facing a similar difficulty as regards the indispensable recognition of ZIPPO as a well-known trademark, but for different reasons than when the application is submitted to the Trademark Office.
According to statistics issued by Supreme Peoples’ Court, since the well-known mark recognition system has been introduced in China, the recognition of well-known marks has significantly increased which has caused unexpected issues, e.g. lured by the commercial benefits and advertising effect of such status, a large number of marks, which had only a relatively local reputation, were applied by local brands and recognized as well-known by local courts, who have the discretion to make the decision on case-by-case basis.
As a result, the Supreme People’s Court significantly constrained and limited the number of recognitions for well-known marks by local courts since 2008. One of the measures taken by the Supreme People’s Court was to concentrate the trial of well-known cases at the level of Intermediate Courts located in capitals of major provinces and prohibit other courts to accept those cases. Besides, Supreme People’s Court issued a number of Judicial Interpretations to regulate and control the recognition.
Chinese courts became increasingly reluctant to grant well-known recognition, even to marks that deserved the title.
Nevertheless, ZMC filed a civil action with the Ningbo Intermediate Court on August 14, 2009, requesting the court to find Sun Meng Lin and Tangfeng Factory’s use of the mark on their hand warmers to be an infringement against the registered ZIPPO mark for lighters, which implied that the trademark had to be recognized as well-known.
Due to aforementioned reasons, Ningbo court hesitated to make the decision to recognize the well-known status of the ZIPPO mark. In its first instance decision, it stated that the product of hand warmers belong to Class 11, while the plaintiff’s mark covers goods in Class 34. The Court said that even if the Zippo mark is very well-known, the function, usage, distribution channels and related consumers are substantially different, and therefore, the use of the mark on hand warmer products will not confuse consumers, and the protection scope of the plaintiff’s mark should not be extended to hand warmer products. Therefore, the well-known status was not necessarily examined and recognized.
ZMC appealed to the Zhejiang Higher Court on May 28, 2012 with additional explanation and analysis. On September 5, 2012, the Zhejiang Higher Court judged that the continuous use, huge investment and effective advertisement by ZMC had brought a high reputation and good-will to the ZIPPO mark, and that the value of the brand had been recognized by the relevant public. The mark bore a strong distinctiveness and high reputation. The unauthorized use by Sun Meng-Lin and Tang-feng Factory were causing confusion among consumers, diluting the famous ZIPPO and Zippo marks and causing substantial harm to ZMC.
Zhejiang Higher Court finally ordered defendants to cease the infringing use, make public apology to ZMC and compensate 500,000 RMB, the highest amount under the statutory compensation system of the PRC Trademark Law.
The case paved the way for administrative recognition: since then, the well-known status of the mark has also been recognized by the Beijing No.1 Intermediate Court in another two administrative litigation cases
This case reflects the variation of legal means that are available in China, when faced with a bad faith trademark application. It also illustrates the specific issues that recent legislative revisions (Trademark law, Patent Law) have addressed, or are addressing. For instance, since the Patent Law revision of 2008, there will be no more design/trademark applications for a simple drawing. Likewise, the latest draft of the revised Trademark law addresses the issue of bad faith trademark applications, in a way that would have perfectly corresponded to the facts of this case. Finally, the main difficulty remains the concept of well-known trademark, where the administrative or judicial authorities still view it in a context of “confusion of the consumers”, while it should be examined only in a context of “dilution” of the distinctive characters of a trademark. .