Changsha Intermediate Court hands out the first trademark infringement decision against products with lot number removed in Hunan Province. The Court applies Article 57.7 of the 2013 Trademark Law as a fallback provision and finds the act of removal (lot number) and the unauthorized trademark use constitutes the circumstance of “causing, in other aspects, prejudice to the exclusive right of another person to use a registered trademark”, which infringes the plaintiff’s registered trademarks. 

Case Brief

Ballantine's is a blended Scotch whisky, the heritage of which can be traced back to 1827. Ballantine's is the world's second highest selling Scotch whisky brand owned by ALLIED DOMECQ SPIRITS & WINE LIMITED (ADSWL), an affiliate of Pernod Ricard. ADSWL is the owner of the registered trademarks “Ballantine's” (Device 1) and  “百龄坛(Ballantine's in Chinese)” (Device 2) in Class 33, covering the goods of “wines, spirits (beverage), liqueur, etc.” in China.

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Device 1        Device 2

In 2016, ADSWL suspected a retailer in Changsha, Hunan Province, of being engaged in selling parallel imported whisky. On June 6, 2016, ADSWL requested a local notary to proceed with a purchase of a sample suspicious product. The product was later identified as authentic Ballantine’s whisky, parallel imported, with the lot number removed and the original back label covered with a Chinese label using Ballantine’s Chinese trademark “百龄坛”, without ADSWL’s authorization.

A lot number is an identification number assigned to a particular quantity or lot of material from a single manufacturer. The lot number enables tracing of the constituent parts or ingredients as well as labor and equipment records involved in the manufacturing of the product. This enables manufacturers to perform quality control checks, calculate expiration dates, and issue corrections or recall information concerning their production. It also gives consumers an identifier that they can use in contacting the manufacturer and researching the production of goods received.

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Labels of Genuine Product

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Chinese Label Used on Parallel Imported Product

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Lot Number of Genuine Product

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Lot Number Removed from Parallel Imported Product

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On August 24, 2016, ADSWL brought a lawsuit against the retailer before the Changsha Intermediate Court for trademark infringement.

On January 22, 2017, the Changsha Intermediate Court holds that by removing the lot number from the product, the product origin is concealed. The act hurts both the consumer and the trademark owner since (1) it compromises the identifying function of the trademark, which is likely to lead to the consumers’ confusion and misidentification about the origin of such products; (2) it interferes with the trademark owner’s capacity to trace the product and control the quality, which results in damaging the trademark owner’s right.

Regarding the unauthorized use of the “百龄坛” trademark, the Court reasons that according to the Food Safety Law, imported prepackaged food, including wine and spirits, shall bear a Chinese label. However, it is not mandatory to translate the trademark of the imported good into Chinese, and therefore the defendant has no legal or reasonable ground to use the trademark “百龄坛” on the Chinese label. Although the said act does not sever the bond between the registered trademarks and the plaintiff’s goods, it interferes with ADSWL’s discretion to use, or not to use the trademark on the accused goods in China.

The Court, therefore, finds the act of removal and the unauthorized use of the “百龄坛” trademark constitutes an act of infringement as defined by Article 57.7 of the 2013 Trademark Law.

Furthermore, the Court rules that the defendant’s distribution of the accused products constitutes the circumstance of “causing, in other aspects, prejudice to the exclusive right of another person to use a registered trademark” as provided by Article 57.7 of the Trademark Law, which infringes the plaintiff’s registered trademarks.

The court grants an injunction and damages for an amount of RMB 20,000.

We represented ADSWL in this proceeding.

Comment:

This is not an easy case. Pursuant to current laws and regulations in China, the act of parallel import per se is not illegal. This has been confirmed by different Chinese courts in multiple judgments. However, the parallel import is often accompanied with other behaviours, which the courts accept to scrutinize and which may lead to finding that the activity was illegal, after all. For example, if label or other aspects of the goods are changed substantially, the court may consider that this is causing prejudice to the trademark owner or the relevant public. Such behaviors have not yet been categorized, but it seems that, based on the current practice, selling product with the lot number removed could constitute trademark infringement.

In addition, attaching irrelevant marks or labels may further destroy the integrity of the packaging of the goods, causing prejudice to the image of the genuine goods and the reputation of trademark owner. This may be considered as a violation of the principle of bona fide and business ethics, which is prohibited by the Anti-Unfair Competition Law.

This case illustrates how to overcome the "legal" parallel import issue, by finding other related illegal acts and using the corresponding legal ground.

The case is listed as one of the Top 10 Exemplary Cases of IPR Judicial Protection in Hunan.