GPHL V. JDB COMPANY ET AL. (2015) MSZZ No. 2 & (2015) MSZZ No. 3, SPC
Cause of action: Disputes over the
unauthorized use of special packaging and decoration of a well-known product
Collegial panel members: Song Xiaoming | Xia
Junli | Zhou Xiang | Qian Xiaohong | Tong Shu
Keywords:
ownership of rights and interests, special packaging and decoration,
unfair competition, well-known product
Relevant legal provisions: Law of the People’s Republic of China against
Unfair Competition (as published in 1993), article 5(2)
Basic facts: On July 6, 2012, Guangzhou
Pharmaceutical Holdings Limited (hereinafter “GPHL”) and Guangdong Jiaduobao
Beverage and Food Co., Ltd. (hereinafter “JDB Company”) respectively instituted
legal proceedings in a court on the same day, each asserting its rights and
interests of the special packaging and decoration of a well-known product, “Red-Canned
Wanglaoji Herbal Tea”, and alleging on this basis that the packaging and decoration
of the red-canned herbal tea produced and sold by the other party constituted
infringement.
Specifically, GPHL, as holder of the registered trademark “Wanglaoji”, asserted
that since “Wanglaoji” is an inseparable part of the packaging and decoration,
and distinctively indicates the source of the commodity, consumers would take
it for granted that the product “Red-Canned Wanglaoji Herbal Tea” originated
from the holder of the “Wanglaoji” trademark, and that recipe and taste would
not affect the consumers’ identification and judgment of the commodity. JDB
Company, as the former actual supplier of “Red-Canned Wanglaoji Herbal Tea”,
asserted that the rights and interests in the packaging and decoration and the
ownership of the rights in the “Wanglaoji” trademark were independent from, and
did not affect, each other. What consumers love is JDB Company’s “Red-Canned
Wanglaoji Herbal Tea”, produced using a particular recipe, and packaged and
decorated in a way that is both used by JDB Company and closely associated with
the commodity; hence, JDB Company asserted its ownership of the rights and interests
relating to the packaging and decoration.
Held: At first instance,
Guangdong Higher People’s Court held that the rights and interests of the packaging and decoration of
“Red-Canned Wanglaoji Herbal Tea” should belong to GPHL, and that the
production and sale of red-canned herbal tea by Guangzhou Wanglaoji Health
Industry Co., Ltd. (hereinafter “Health Company”), as authorized by GPHL, did
not constitute infringement. Since JDB Company did not own the rights and
interests in the packaging and decoration concerned, its production and sale of
both red-canned herbal tea labeled 王老吉 (“Wanglaoji”) and 加多宝 (“JDB”) on either side, and that
labeled 加多宝 (“JDB”)
on both sides, constituted infringement. The court therefore
ordered JDB Company to cease the infringement, to publish a statement to
mitigate its effect, and to compensate GPHL RMB150 million for economic losses
and more than RMB260,000 for reasonable enforcement costs.
JDB Company appealed the first instance judgment to the Supreme People’s
Court. The Supreme People’s Court delivered its judgment on July 7, 2017,
dismissing all of the claims of both GPHL and JDB Company.
Reasoning: The Court held, in
its effective judgment, that the distinctive nature of features of packaging
and decoration and their application to fairly well-known products are the two conditions
that must be met if rights and interests connected with the packaging and
decoration of commercial brands are to be protected under the Law of the People’s
Republic of China against Unfair Competition. The application of article 5(2)
of the Law defines the relationship between “special packaging and decoration”
and “well known products” as being mutually interdependent and inseparable.
Only a commodity that uses special packaging and decoration can be assessed
under the Law against Unfair Competition. In contrast, abstract commodity names
or commodity concepts without definitive connotations are detached from the
concrete commodities that the packaging and decoration envelop, absent any
evaluable conducts of actual usage, and thus cannot be assessed under article
5(2).
The dispute arose between the two parties because “Wanglaoji Herbal Tea”, as
a kind of commodity name, could refer to various packaged and decorated herbal
tea products, including the green boxed one produced by GPHL and the red-canned
one produced by JDB Company. The purpose of defining “well known product” is to
inform assessment of whether the special packaging and decoration attached to that commodity meet
the conditions under which the rights and interests in commercial branding are
to be protected under the Law against Unfair Competition; hence, such a “well-known
product” shall be clearly indicated on the packaging and decoration concerned.
The court of first instance had disregarded the required interdependence of
packaging and decoration and the commodity, and had found the commodity name “Wanglaoji
Herbal Tea”, which has non-specific references, to be the “well-known product”
in this case. This decision had no basis in fact or law and so was corrected.
This
dispute over the special packaging and decoration of the well-known product
arose from the failure of both parties to clearly define, when entering into
and performing a trademark license contract, how to allocate the derivative benefits
accruable during the term of license. Usually, once a trademark license
terminates, the licensee shall immediately stop using the trademark and the
goodwill accumulated in the licensed trademark shall be simultaneously returned
to the licensor. The dispute in this case occurred in an unusual way in the
sense that the special packaging and decoration introduced during the licensed
use not only closely related to the licensed trademark, but also created
features of goodwill that extended beyond trademark rights because of their
status as independent rights and interests under the Law against Unfair
Competition. Both parties’ claims entailed the general application of law on
the protection of rights and interests in branding, and reflected the complex historical and practical factors
involved in forming the rights and interests in the special packaging and decoration
in this case. The registered trademark system and the system of protection for
the rights and interests in the special packaging and decoration of well-known
products draw on different sources, even though they both belong to a legal
system that aims to protect the rights and interests in commercial branding.
Registered trademarks and packaging and decoration can each play an independent
role in brand recognition, and respectively belong to different right holders.
After “Red-Canned
Wanglaoji Herbal Tea” was launched into the market and marketed effectively by
JDB Company and its affiliates, its packaging and decoration generated
independent rights and interests relating to its commercial branding because of
its popularity and specificity. This case is exceptional because, in the course
of design, use and promotion, JDB Company, as the actual operator of the
packaging and decoration concerned, always highlighted the word “Wanglaoji”, a registered
trademark held by GPHL, on its packaging and decoration, and never intended to
break and clearly distinguish the relationship between the packaging and
decoration and the registered trademark contained therein, which objectively
caused the packaging and decoration to simultaneously refer to JDB Company and
GPHL. Consumers would not deliberately differentiate, in the legal sense, the
trademark rights and the rights and interests of the special packaging and decoration
of well-known products, but would naturally relate “Red-Canned Wanglaoji Herbal
Tea” to GPHL and JDB Company at the same time.
In fact,
on the one hand, the packaging and decoration at issue did bear the influence
of GPHL’s brand “Wanglaoji” and, on the other hand, the popularity of the
commodity and the remarkable brand recognition of the packaging and decoration
was the result of JDB Company’s efforts in producing, operating and promoting
the product for more than 10 years. In considering these factors as a whole, as
well as the evolution of “Red-canned Wanglaoji Herbal Tea”, the background of cooperation
between the parties, consumers’ brand recognition and the principle of equity,
given the positive role of GPHL and its predecessor and that of JDB Company and its affiliates in forming
and developing rights and interests in the packaging and decoration concerned and
establishing the goodwill attached to it, it would result in obvious unfairness
and might harm public interests if the rights and interests in the packaging
and decoration were to be wholly awarded to either party. Therefore, on the
premise of compliance with the principle of good faith and respect for
consumers’ brand recognition, and without prejudicing the lawful rights and
interests of others, the rights and interests in the special packaging and
decoration of the well-known product concerned were found to be jointly owned
by GPHL and JDB Company.