The long-awaited retrial and final decision in the case Fendi v. Shanghai Yi Lang International Co., Ltd. (hereinafter referred to as "Yi Lang") has been finally issued on March 4th, 2021. The decision confirms the conclusions of the Second instance judgement which declared the infringement conducted via the unauthorized use of Fendi trademarks/tradename on the signboard of mono-brand store selling parallel imported goods.
A conflict between parallel importers and trademark owners exists in China from long time. Having China substantially adopted the principle of the international exhaustion of the trademark right, selling parallel imported goods is generally regarded as legitimate. However, parallel importers, trying to nobilitate their positioning, sometime cross the lines of the fair and descriptive use of the trademark.
As mentioned above, on Mar 4th, Shanghai High Court issued the final judgement of Fendi v. Yi Lang, concluding the 2nd instance judgement, and ruled that the parallel importer Yi Lang's unauthorized use of Fendi trademarks/tradename on the signboard constitutes trademark infringement and unfair competition. This decision is the last chapter of the judicial battle which until lasted for 5 years.
In 2015, Yi Lang started to operate a Fendi store in Capital Outlets in Kunshan city, where they provided parallel imported Fendi goods (original products) without having the authorization from Fendi, yet using "FENDI" trademarks on the signboard, shopping bags, advertising brochures and WeChat Official Account. In 2016, Fendi filed the litigation with the court claiming trademark infringement against its commodity trademark and service trademark and unfair competition against its tradename.
First Instance Judgement
The 1st instance judgment ruled that the use of trademark and tradename of Fendi is to indicate the source of goods and constitute fair use therefore non-infringement.
The court applied a 3 steps test to decide whether the use of mark constitutes fair use: 1. Whether such use is in good-faith and reasonable; 2. Whether such use is necessary; 3. Whether such use would cause confusion among relevant public.
For infringement on the service marks, the court quoted Reply to the Question of Whether Category 35 of the International Classification Includes Services of Shopping Malls and Supermarkets, where it indicated that Class 35 trademark refers to "providing advice, planning, publicity, consulting and other services for others to sell commodities (services)", which does not include "wholesale and retail of commodities", therefore Yi Lang's use of Fendi does not constitute an infringement on Fendi's class 35 trademark.
For unfair competition acts against Fendi's tradename, the court ruled that given use of FENDI logo is to indicate the source of goods, therefore does not constitute an infringing act.
Second Instance Judgment
The 2nd instance judgment reversed the 1st instance judgment, ruling that Yi Lang's use constitutes trademark infringement and unfair competition.
The 2nd instance court concurred on the test applied by the 1st instance Court, yet ruled that the use made by Yi Lang is suggesting to the consumer that they have certain connections with Fendi company, which exceeds the scope of fair use. Such use is the same as "Enterprise operation and management" in Fendi's class 35 trademark, therefore constitute trademark infringement.
The 2nd instance court also rules that the tradename "FENDI" has already acquired certain level of market awareness and being known with relevant publics, therefore can be protected as "tradename" regulated under Anti-unfair Competition Law.
Retrial and Final Judgement
Final judgment made by the high court concurred the judgment made by Second Instance Court, yet made clarification on below matters.
1. Whether the use of "FENDI" logo infringe upon Fendi's service mark
The final judgement ruled that the use of FENDI logo as signboard belongs to an act of sales of goods, does not belong to a sub-class of class 35 service mark. However, it does constitute a similar service of class 35 trademark based on: a. similarities on the purpose, content, method, subjects; b. relevant public would generally believe there would be certain connections and therefore would be easily misled.
Shanghai High Court ruled that Yi Lang is providing similar service with FENDI's class 35 trademark. In the meantime, using FENDI by itself on the signboard, though with certain distinguishing identifier in surrounding areas, shopping bags and shopwindow, would easily mislead relevant public. Therefore, such service is similar with FENDI's class 35 trademark, hence constitute trademark infringement.
2. Clarify the test for deciding fair use
Shanghai High Court reverses the test applied by the 1st and 2nd instance court, "whether the use of trademark would cause confusion among relevant publics" is not an element to decide fair use. Even if certain use would cause confusion, the court should decide such matter based on:
- Whether the purpose is in good-faith;
- Whether the method is reasonable;
- Whether the use fits the commercial customs with integrity.
Shanghai High Court ruled that the usage made by Yi Lang blurred the boundaries between the authorized stores and collection stores, therefore does not constitute fair use.
3. Yi Lang unauthorized use of FENDI logo would constitute an unfair competition act against FENDI's tradename.
Shanghai High Court ruled that tradename with certain level (instead of "relatively high level") of market awareness, being known (instead of "being familiar") with relevant publics can be protected as "tradename" regulated in Anti-unfair Competition Law.
Given Yi Lang is making sale of original products, such use would not cause confusion of goods among consumers. However, a signboard is used to indicate the store operator or indicate a certain connection between the store operator and the owners of relevant business identifiers. The store operated by Yi Lang is neither a direct operated store of Fendi, nor an authorized store of Fendi, there will be a high possibility of confusion using FENDI logo as the signboard. The distinguishing identifiers used by Yi Lang would only make things worse, misleading relevant publics to believe that there might be certain connections between Fendi and the store operator. Therefore, Shanghai High Court concurred that the use of FENDI logo constitute an act of unfair competition against Fendi's tradename.
The decision is welcome since it clarifies and hopefully says the final (for the moment) words on this debated topic. We note that several other cases are pending in front of the same and similar courts and were de facto slowed down expecting the high court to take the final stance on the issue. We now look forward to faster and consistent decisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
