Case Brief

In 1807, WU X Cai transformed the "Chengmingzhai Jewelry and Jade Shop" established in Shanghai in 1719, which also operated an eyeglasses business, into WU X Cai Eyeglasses Store specializing in the eyeglasses business. In 1926, the store was renamed WU X Cai Eyeglasses Company, and in October 1998, it was renamed Shanghai X Lian (Group) Co., Ltd. WU X Cai Eyeglasses Company (hereinafter referred to as Shanghai WU X Cai Company). In 1947, the WU X Cai Eyeglasses Company Nanjing Branch was registered and established. However, due to historical reasons, Shanghai WU X Cai Company and Nanjing WU X Cai Eyeglasses Co., Ltd. (hereinafter referred to as Nanjing WU X Cai Company) are no longer affiliated. Since 1989, the X Lian Group and Shanghai WU X Cai Company have successively registered multiple "吳良材" word trademarks, which have gained high market recognition after long-term use and were recognized as well-known trademarks in 2004. In 2015, X Lian Group and Shanghai WU X Cai Company discovered that Nanjing WU X Cai Company and its branches, authorized franchisees used the enterprise name and logo containing the words "吳良材" in their registration and operation and claimed that "Nanjing WU X Cai Eyeglasses was developed from the Nanjing branch of Shanghai WU X Cai Eyeglasses Company", and they conducted group buying on Dianping.com. The X Lian Group and Shanghai WU X Cai Company believe that Nanjing WU X Cai Company constitutes trademark infringement and unfair competition, and therefore request the court to order the cessation of infringement, elimination of impact, and compensation for losses and reasonable expenses.

Result of Ruling

The first instance court ruled that Nanjing WU X Cai Company shall cease trademark infringement and unfair competition, immediately cease using logos containing the words "吳良材" by authorizing franchisees in the franchise operations, immediately cease registering and using enterprise names containing the words "吳良材" outside of Nanjing, Jiangsu Province by its branches, eliminate the impact, and compensate for economic losses of RMB 2.6 million. With dissatisfaction, Nanjing WU X Cai Company appealed against the first instance judgment.

Shanghai Intellectual Property Court, taking into account factors such as history, current situation, and fairness, believes: Firstly, Nanjing WU X Cai Company has a particular historical connection with the historical WU X Cai Eyeglasses Company. Nanjing WU X Cai Company registered and used an enterprise name containing the words "吳良材" before the registration time of the involved trademark, so it does not constitute unfair competition. However, although Nanjing WU X Cai Company and Shanghai WU X Cai Company have a particular historical connection with the historical WU X Cai Eyeglasses Company, they have no affiliation with each other. In the case where the trademark "吳良材" of Shanghai WU X Cai Company has already gained high reputation and has been recognized as a well-known trademark, whereas Nanjing WU X Cai Company has no nationwide recognition, Nanjing WU X Cai Company extensively developed franchised stores nationwide from 2004 to 2015, authorized these franchise stores to use enterprise names containing the words "吳良材", claimed in external promotions that it was a "century-old store", concealed the fact that it was not associated with Shanghai WU X Cai Company, and falsely claimed to be the Nanjing branch of Shanghai WU X Cai Company. These behaviors intended to take advantage of the goodwill of Shanghai WU X Cai Company and mislead consumers. Without appropriate restrictions on the scope of use of its enterprise name, it would be difficult to prevent market confusion and insufficient to protect the interests of trademark owners. Therefore, it is reasonable to limit the geographical scope of Nanjing WU X Cai Company's branches registered with enterprise names containing the words "吳良材" to within the Nanjing area. Secondly, although Nanjing WU X Cai Company, as the prior user of the enterprise name, has the right to continue using its enterprise name itself, the corresponding scope of the subject should also be limited; that is, it should not permit others to register or use enterprise names and logos containing the words "吳良材". Therefore, Nanjing WU X Cai Company's authorization to franchisees to use enterprise names and logos containing the phrase "吳良材" constitutes trademark infringement and unfair competition; the use of the words "吳良材" by Nanjing WU X Cai Company, its branches, and franchisees also constitutes trademark infringement. Thirdly, by presenting a partial and incomplete narrative of being a "century-old store," Nanjing WU X Cai Company misled the relevant public through concealment and false statements into believing that it has an association with Shanghai WU X Cai Company, maliciously taking advantage of the goodwill of Shanghai WU X Cai Company. This behavior constitutes false advertising. In summary, the second instance judgment rejected the appeal and upheld the original ruling.

Typical Significance

The ruling in this case has appropriately addressed the issue of commercial identification conflicts left over by history. It provides specific ruling and guiding significance for regulating the use of "time-honored brands," promoting honest business practices among market entities, preventing market confusion, and safeguarding the legitimate interests of consumers.