Tackling counterfeits can be frustrating and challenging at the best of times. Dealing with their trickier \u2013 and more \u201clawful\u201d \u2013 cousin, the parallel imported genuine product, can be even more so.<\/p>\n\n\n\n
In many countries, parallel importation is legal, and quite often, encouraged. This is particularly the case in developing countries where genuine goods from authorised distributors may be deemed prohibitively expensive by much of the local market. This is most certainly the case in China, where parallel importation is more than tacitly encouraged by authorities.<\/p>\n\n\n\n
The massive demand for lower cost parallel imports in China is fed by an overseas \u201cdaigou\u201d (\u4ee3\u8d2d) system, literally \u201csurrogate shopping\u201d. Through daigou networks, overseas purchasers scour foreign markets for cheaper or hard to obtain genuine goods for shipment back to China. This flood of parallel imports can make life very difficult for foreign brand owners\u2019 authorised People\u2019s Republic of China (\u201cPRC\u201d) distributors, who must compete against cheaper genuine imports available to any reseller that can source them through those daigou channels.<\/p>\n\n\n\n
If dealing with constant inflows of grey-market goods (often supported by authorised overseas distributors happy to supply product in breach of their own territorial restrictions) is not difficult enough, enterprising parallel traders in China often take things even further. In these cases, and relying on claims of \u201cfair use\u201d stemming from their sale of genuine wares, the traders make extensive use of other IP belonging to the brand owner to enhance their sales pitch, trying to create the false impression that they are authorised by the brand owner. In the worst cases, the parallel importers open up brick-and-mortar stores under the brand owner\u2019s trademark. These stores often adopt all the trappings of genuine outlets for the brand including stylised logos, branded packaging materials and shopping bags, identical colour schemes and shop fixtures, and copyright-protected marketing content.<\/p>\n\n\n\n
In most countries, a class 35 registration covering \u201cretailing services\u201d would be just the ticket to address fake outlets like these. In China, however, class 35 protection does not extend to \u201cretailing services\u201d, either generally, or in respect of particular goods (save for a few exceptions, including pharmaceuticals and medical supplies). Instead, class 35 in China only protects the provision of services to assist others in the operation or management of commercial or industrial enterprises, such as advertising and business management services. This is the generally accepted view in China to date and has been broadly adopted and advanced by the China National Intellectual Property Administration (\u201cCNIPA\u201d), courts, and administrative authorities.<\/p>\n\n\n\n
As a result, and due to their perceived limited utility, many brand owners choose to forego class 35 filings. Often, even where brand owners do have class 35 registrations in respect of such infringements, courts have been sympathetic to the \u201cfair use\u201d arguments noted above, finding that even unauthorised sales of genuine goods grant significant trademark use rights to resellers in advertising and selling those goods.<\/p>\n\n\n\n
As a result, brand owners have been forced to rely on other IP strategies in order to attack these types of aggressive infringers, none entirely satisfactory. For example, class 16 registrations, if they are in the brand owner\u2019s portfolio, could be used to address the packaging. Copyright registrations could perhaps be obtained to address marketing materials. Finally, claims of unfair competition could be brought to address the broader infringement.<\/p>\n\n\n\n
The primary concern with such claims, brought under article 6 of the PRC Anti-Unfair Competition Law<\/em> (\u201cAUCL\u201d), however, is that they are notoriously fact dependent. In respect of a parallel importer running a branded brick-and-mortar store, a brand owner would not only need to prove that the parallel trader\u2019s intent or the likely effect of its conduct was to mislead consumers to believe the trader was associated with the brand owner; it would also need to adduce sufficient evidence to demonstrate its brand had achieved a degree of \u201ccertain influence\u201d within the PRC market. All of that evidence would also need to be notarised \u2013 and in the case of English language materials, translated \u2013 in order to be deemed sufficiently reliable for Chinese courts.<\/p>\n\n\n\n The significant hoops required for an AUCL article 6 case stand in stark contrast to what would be required if class 35 registrations in China covered \u201cretail services\u201d. If they did, an infringement claim against a parallel trader running a brick-and-mortar store would merely require proof the trader was using a similar mark in respect of similar services, with liability assessed on a strict-liability basis.<\/p>\n\n\n\n A recent decision from the Shanghai Higher People\u2019s Court may reflect a broader shift in protection for class 35 services and give brand owners good reason to rethink the role of class 35 in their filing and enforcement strategies in China.<\/p>\n\n\n\n The defendant in the case, Yilang Co. Ltd. (\u201cYilang\u201d), had been operating a number of stores in an outlet mall managed by Shouchuang Outlets. One of those shops was selling genuine \u201cFENDI\u201d products. Importantly, it was also prominently displaying the \u201cFENDI\u201d trademark in its signage.<\/p>\n\n\n\n In the first instance proceedings, the Shanghai Pudong New District People\u2019s Court (\u201cPudong Court\u201d) found that Yilang\u2019s retail sale of genuine goods trumped any of Fendi\u2019s rights, holding that its use of the \u201cFENDI\u201d in its signage and business was indeed \u201cfair use\u201d. It noted Fendi\u2019s class 35 service mark registration, but reiterated the usual view that in China, retail services are not protected by class 35 registrations.<\/p>\n\n\n\n The lower court\u2019s judgment was overturned in Fendi\u2019s appeal to the Shanghai IP Court, which considered that Yilang Co. had exceeded the scope of any fair use here through the nature of its conduct and use of the trademark.<\/p>\n\n\n\n In Yilang\u2019s appeal of that decision, and amongst other issues, the Shanghai Higher People\u2019s Court (\u201cShanghai HPC\u201d) reconsidered both lower courts\u2019 rejection of Fendi\u2019s infringement claims based on its class 35 registration. Interestingly, the Shanghai HPC concluded that Yilang\u2019s FENDI signage did indeed infringe Fendi\u2019s class 35 registration. That registration covered the following services:<\/p>\n\n\n\n \u201cAdvertising; business operations and business management<\/u>; the bringing together, for the benefit of others, of a variety of goods excluding the transport thereof, such as perfumery, cosmetics, eyeglasses, telephone equipment, computers, photographic apparatus, video cameras, jewellery, horological instruments, bags, wallets and other leather goods, furniture, mirrors, picture frames, bed and table covers, towels, clothing, footwear, headgear, personal accessories, enabling customers to conveniently view and purchase those goods; office functions.<\/em>\u201d [Emphasis added]<\/p>\n\n\n\n Practically speaking, a finding that Fendi\u2019s class 35 registration was infringed would have required the Shanghai HPC to conclude:<\/p>\n\n\n\n As to the first point, the Shanghai HPC maintained the status quo, taking the view that class 35 mainly covers services provided by individuals or organisations with the aim of providing assistance in the operation or management of commercial enterprises or in the management of business activities or commercial functions of industrial and commercial enterprises. Neither did the Shanghai HPC try to recharacterize the defendant\u2019s activities (e.g., using the mark on store signage) as some type of service provided for the benefit of others, either, as such a conclusion was not supported by the facts. Finally, it also confirmed its support of the CNIPA\u2019s view that class 35 services do not include services where the business operator itself is the sales entity engaged in the retailing of goods.<\/p>\n\n\n\n In spite of its unwillingness to decide in Fendi\u2019s favour on these two points, however, the Shanghai HPC nevertheless applied a more flexible, holistic view of what constitutes infringement to determine that Fendi\u2019s class 35 registration was indeed infringed by Yilang.<\/p>\n\n\n\n In reaching this relatively novel decision, the Court noted that Yilang had set up the store for the sale of goods, and that its use of the FENDI trademark on shop signage merely pointed to the sale of goods at its own store. In other words, its activities in that regard were ancillary to its underlying business of selling genuine Fendi products.<\/p>\n\n\n\n Next, the Court compared Yilang\u2019s retailing activities to the services covered by Fendi\u2019s class 35 registration to see if Yilang\u2019s use of Fendi\u2019s signage and other conduct would nonetheless give rise to confusion amongst the relevant public \u2013 and thus infringe Fendi\u2019s trademark \u2013 in spite of ancillary retail activities not falling squarely within class 35.<\/p>\n\n\n\n In that regard, the Shanghai HPC cited article 11(2) of the Supreme People\u2019s Court Interpretations on Several Issues Concerning the Application of Law to the Trial of Civil Trademark Disputes <\/em>(\u201cSupreme People\u2019s Court Interpretations<\/em>\u201d), which provides that \u201csimilar services\u201d refer to services whose purpose, content, method of provision, target users, etc., are identical, or services that the relevant public would normally consider to have a certain connection and therefore easily cause confusion.<\/p>\n\n\n\n The Court held that Yilang\u2019s use of the FENDI trademark on store signage indeed was enough to cause the relevant public to believe, incorrectly, that there were control, licensing, or other types of connections between its store and Fendi and such activities would easily give rise to the type of confusion discussed by the Supreme People\u2019s Court Interpretations<\/em>. The Shanghai HPC ruled that there was infringement of Fendi\u2019s class 35 registration on this basis.<\/p>\n\n\n\n The Shanghai HPC also found that Yilang had engaged in acts of unfair competition on similar grounds regarding likely confusion (also soundly rejecting Yilang\u2019s ludicrous assertion that Fendi had \u201cno reputation\u201d in China). In the end, Fendi was awarded around US$55,000 for the infringement and its expenses in halting the same, and Yilang was enjoined from making further use of the FENDI mark in this fashion.<\/p>\n\n\n\n Although the Shanghai HPC court\u2019s decision is not binding precedent on any other courts, the decision in the case \u2013 and the fairly widespread phenomena of parallel traders opening unauthorised online and physical shops festooned with the brands they are importing \u2013 should at least prompt brand owners to rethink the role class 35 should play in their filing strategy in China, even to the extent they themselves do not have immediate plans to open retails outlets in the PRC.<\/p>\n\n\n\n As shown by the Fendi case, a class 35 registration covering retail-like services may provide a basis to attack parallel traders that try to expand the use of a brand to retailing activities. The CNIPA permits only standardised goods in national applications, so careful crafting of services specifications under local rules in conjunction with local counsel will be important. There may be more flexibility in developing a services description in an international registration, but brand owners should seek the advice of local counsel to ensure descriptions will not be rejected by the CNIPA and coverage is adequate.<\/p>\n\n\n\n In general, the following service descriptions could potentially be considered quasi-retail services that would be worth considering in a PRC-specific specification:<\/p>\n\n\n\n Retailers who sell pharmaceutical, veterinary and sanitary preparations or medical supplies can obtain direct protection under \u201cretail or wholesale services for pharmaceutical, veterinary and sanitary preparations and medical supplies\u201d. However, this item only helps a small number of retail business for obvious reasons as most retail businesses are not focused on such products.<\/p>\n\n\n\n In light of the Fendi decision, and given the rampant trademark piracy and infringement in China and the huge flow of daigou-sourced parallel goods into the market, applications for trademark rights in class 35 \u2013 in spite of the fact that specific coverage for retail and wholesale services is not expressly permitted in China \u2013 are an increasingly important part of a strategy to combat piracy and parallel goods in China.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" Tackling counterfeits can be frustrating and challenging at the best of times. Dealing with their trickier \u2013 and more \u201clawful\u201d \u2013 cousin, the parallel imported genuine product, can be even more so.<\/p>","protected":false},"author":4,"featured_media":1005,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21,15],"tags":[38],"class_list":["post-3537","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-enforcement","category-insights","tag-anti-counterfeiting"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/posts\/3537","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/comments?post=3537"}],"version-history":[{"count":1,"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/posts\/3537\/revisions"}],"predecessor-version":[{"id":3538,"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/posts\/3537\/revisions\/3538"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/media\/1005"}],"wp:attachment":[{"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/media?parent=3537"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/categories?post=3537"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.east-ip.com\/zh\/wp-json\/wp\/v2\/tags?post=3537"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}The Fendi Decision \u2013 a Positive Change in the Role of Class 35 Registrations<\/h2>\n\n\n\n
\n
Analysis<\/h2>\n\n\n\n
Filing Strategy for Class 35 Trademark Applications<\/h2>\n\n\n\n
\n