Infringement of a shape of goods in China - Chanel defeated

Goods in the form of the famous logo with the double C of Chanel were sold by the Chinese jeweler. The IP court had to decide in this trademark dispute whether the infringement of a shape of goods in China is a trademark infringement – and ruled against Chanel.

In an investigation initiated in 2016, Chinese officials found goods in a Ye Meng-Zong jewelry store in the form of Chanel’s double “C” logo. Chanel saw this as an unlawful counterfeiting of products and brought an action before the Guangzhou Haizhu District People’s Court (Haizhu Court) for trademark infringement. The court upheld the claim and awarded Chanel damages from Ye in the judgment.

Dissatisfied with the court’s decision, Ye Meng-Zong appealed the decision to the Guangzhou Intellectual Property Court, one of three courts that China has recently created exclusively for intellectual property (IP) judgments.

The IP Court therefore dealt with the question of whether the shape of Yes’s products can be regarded as infringing. Was the double C form used and perceived decoratively or were the pieces of jewellery perceived by the double C as a Chanel brand?
Ultimately, the IP court in Guangzhou had to identify the shape of goods that violate the rights of a registered trademark. The current legal framework through IP judgements in China does not yet provide a clear answer.

A Short Look at Chinese Trademark Law

Article 57 of the Chinese Trade Mark Law provides for trade mark infringement where identical or very similar goods are used. Moreover, under Article 58 of the Chinese Trade Mark Law, it is even possible to invoke unregistered trade marks which are, however, well known as trade mark. Infringements in the sense of trademark infringement can be asserted in such a case. But there is no equivalent in Chinese trademark law for the infringement of a shape.

Read more about Chinese trademark law in our articles “Trademark act reform in China against trademark squatting” and “Trademark infringement in China: what to do?”

Is the shape of a product part of the product decoration?

Ye Meng-Zong argued that its business is only a franchise shop of Zhoubaifu, ZhouBaifu Jewelry International Group Co, Ltd (Zhoubaifu Ltd) from Hong Kong. All his products had been approved by the franchisor prior to sale. In addition, all products sold in Yes Shop carry the registered trademark of “Zhoubaifu”. Therefore, its goods must not be confused in any way with the Chanel goods.

Chanel, on the other hand, argued that brand confusion does not only include the direct confusion of the origin of the products, but also a fundamental associative confusion, which occurs quasi post-sales. The shape of the product is used as a trade mark. Chanel invoked Article 76 of the Chinese Trademark Law, according to which similar goods may be infringing if the logo and manufacturer’s name of another trade mark or the decoration of the goods are used. Irrespective of shape and packaging, Chanel goods are associated with the double C, was stated by the French high fashion house. The shape of the product therefore must belong to the category of product decoration.

However, there is no clear definition of decoration in China, not even in the Chinese dictionary.

Chanel loses in Chinese IP court

The Chinese Court therefore rejected Chanel’s arguments and held that Article 76 of the Chinese Trade Mark Law did not apply to that case. In its judgment, the IP Court confirmed that under Article 57 of the Chinese Trademark Law, trade mark confusion refers only to direct confusion caused by misleading producers or traders. However, Chanel has provided no evidence that ordinary consumers with a general understanding would assume that they would buy Chanel products in Ye Zong’s shop. The Guangzhou court also stressed that the judgment was a case-by-case decision and that questions of shape will continue to be assessed on a case-by-case basis.

View beyond the horizon

The judgment is all the more astonishing because the Chinese courts have already twice recognized 3D shapes as trademarks and subject matter of a trademark infringement – we reported. It was only last year that Dior won the trademark dispute in the Chinese Supreme Court over its perfume bottle design.

It therefore remains exciting to follow the further judgments in trademark infringement proceedings in China. Chanel, on the other hand, would still have the possibility to bring a new action under Chinese trade mark law, referring to unfair competition.

One consolation remains for Chanel: in Europe, Chanel successfully defended its famous double C against Chinese imitators in 2017 – we reported.