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Re-analysis of “PRETUL” retrial case in terms of infringement judgment criterion

Sep 6, 2016 By Xiaomeng Dong

[Brief introduction of “PRETUL” retrial case]   

The plaintiff (hereinafter “FOCKER”) was the owner of the registered mark “PRETUL” in China. It alleged that the defendant (hereinafter “YAHUAN”, a Chinese company) had infringed its trademark rights by using same or similar mark “PRETUL”. The “PRETUL” branded padlocks manufactured by YAHUAN were all entrusted by “TURPER” (a Mexican dealer) and all its manufactured padlocks were only for exportation to Mexico. On November 26, 2015, the China’s Supreme People’s Court (“SPC”) rendered a civil judgment on this retrial, affirming that the OEM manufacturer’s act of using the trademark in issue did not constitute trademark infringement because it did not qualify as trade mark use in the sense of article 48 of the Trademark Law (2013 version). The SPC overruled the finding of trademark infringement in the first instance (Intermediate Court of Ningbo) and in the second instance (High court of Zhejiang).

In the retrial, the SPC held that “The primary function of a trademark, which the Trademark Law intends to protect, is to be a source indicator. When determining whether the act of using an identical trademark on identical goods, or a similar trademark on identical goods or an identical or similar trademark on similar goods, is likely to cause confusion, the Court shall base its finding on the fulfillment or possible fulfillment of the source indicator function of the trademark. The Court should base its finding on whether trademark infringement is constituted on whether the source identifying function of the trademark is fulfilled or undermined. There is no practical significance in judging that there is a likelihood of confusion where the trademark involved fails to fulfill its identifying function and does not constitute trademark use in the sense of trademark law……Since the padlocks manufactured by YAHUAN were not for distribution in the Chinese market, the PRETUL marks did not fulfill the trademark function of ‘distinguishing the origin of the commodities’ in China. Therefore, such marks were unlikely to cause confusion and misidentification among the relevant public in China between the products to which they were affixed and the source of the goods manufactured by FOCKER”.

There is a voice in Chinese intellectual property circle that the PRETUL retrial case has great guiding significance to OEM infringement cases in China. Some people hold the view that “PRETUL” case has the function to confirm that “trademark use in the sense of trademark law” is the precondition of trademark infringement judgment in China. This article intends to re-analyze “PRETUL” retrial case in terms of Chinese infringement judgment criterion.

I. Is it rational to take “trademark use in the sense of trademark law” as the precondition of trademark infringement judgment in China?

Though in “PRETUL” retrial, the immediate ground for the SPC to deny the infringement complaint is “the trademark in issue did not qualify as trade mark use”, it is too early to simply draw a conclusion from this case that “trademark use in the sense of trademark law” is the precondition of trademark infringement judgment in China.

First, there is no provision in the laws under which “trademark use in the sense of trademark law” is an essential factor in determination of trademark infringement.

Second, currently in China, if a mark is used in OEM process, such use evidence will be regarded effective in maintenance of the mark against non-use cancellation request.

Third, whether “trademark use in the sense of trademark law” is a precondition in finding trademark infringement is controversial in theory and practice. Objectors such as Graeme B. Dinwoodie and Mark D. Janis hold that “trademark use in the sense of trademark law” lacks strong basics of law. Boosters such as Stacey L. Dogan and Mark A. Lemley hold that “trademark use in the sense of trademark law” sits at the heart of trademark law, which is a necessary tool to maintain integrity of trademark law. It is not fabrication by imagination.

II. Re-analysis of “PRETUL” retrial case in terms of infringement judgment criterion in China.

According to Art. 57 of the Trademark Law, any of the following constitutes an infringement of the exclusive right to use a registered trademark: 1) Using a trademark that is identical with a registered trademark in connection with the same goods without the authorization of the owner of the registered trademark; 2) Using a trademark that is similar to a registered trademark in connection with the same goods, or that is identical with or similar to a registered trademark in connection with the similar goods, without the authorization of the owner of the registered trademark, which may cause public confusion.

According to Art. 16 of TRIPS, the owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner’s consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. The rights described above shall not prejudice any existing prior rights, nor shall they affect the possibility of Members making available on the basis of use.

Like provisions of TRIPS, “likelihood of confusion” criterion is adopted in China on trademark infringement issues. Namely, in case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed, while in the other cases, whether infringement should be confirmed will depend on whether there is a likelihood of confusion.

For “likelihood of confusion” criterion, most countries use “Multi factor detection method”. Normally, four factors are considered in determining whether there is trademark infringement, i.e., trademark factor, goods/services factor, consumer factor and others. In “PRETUL” case, the four factors could be analyzed as below:  

Trademark factor: Though the mark used by the defendant and the plaintiff are similar, on the external packing and directions of the products in issue, the illustrations “Importer: TURPER” in Spanish could all be found. In addition, the contact channels of TURPER, including telephone numbers and website, were also shown on products. Hence, no matter for Mexican or Chinese consumers, they could quickly realize that the products in issue are from TURPER, not FOCKER.   

Goods/services factor: The products in issue by the defendant were 100% exported to Mexico, while, the goods of the plaintiff were used in mainland China since there was no contrary evidence proving its goods were exported out of China. The goods of both parties were used in completely different marketing channels and facing totally different consumers. The goods of the plaintiff and defendant are not similar considering the aforementioned.

Consumer factor: All the padlocks manufactured by YAHUAN were exported to Mexico. The consumers of these products are all foreign consumers. But, the plaintiff’s consumers are in mainland China. The two brands face different consumers.

Others:

First, the “PRETUL” branded padlocks manufactured by YAHUAN were all entrusted by “TURPER” (a Mexican dealer) and all the padlocks were exported to Mexico. “TURPER” had registered ‘PRETUL’ mark No. 770611 in class of 6 in Mexico on November 27, 2002

Second, YAHUAN submitted a lot of evidence proving TURPER company’s PRETUL mark had high reputation through wide use, but there’s no evidence proving the FOCKER company’s PRETUL mark had certain influence.

Third, what’s more, there are sufficient evidence to testify that the plaintiff’s PRETUL mark was filed in plagiarism of the defendant’s marks and the plaintiff’s mark was obtained against Honesty and Credibility Principle.

In conclusion, considering the trademark, goods, consumers and other factors, no confusion likelihood exists for use of the trademark in issue in this case. Based on “confusion likelihood criterion”, it is reasonable to affirm the OEM manufacturer’s act of using the trademark in issue did not constitute trademark infringement.

III. How to correctly treat the function of “trademark use in the sense of trademark law” in trademark infringement cases?

“Trademark use in the sense of trademark law” is not an independent factor. It is just one factor of possibility of confusion judgment. “Trademark use in the sense of trademark law” is internalized in judgment of infringement process. In “PRETUL” retrial case, the SPC cracked problem from the angle of “Trademark use in the sense of trademark law” based on case details, which has reflected its extreme high judicial wisdom. But in essence, the spirit of this retrial judgment has followed “likelihood of confusion principle criterion” and based on such criterion, the same conclusion could be achieved, that is, OEM manufacturer’s act of using the trademark in issue did not constitute trademark infringement.