"Things are different in China", alleged trademark squatter claims after court win 25 Mar 16
In January, wine seller Castel Freres SAS lost the latest battle in a decade-long dispute with a Chinese company over the KA SI TE (卡斯特) trademark in China. The Supreme People’s Court upheld a lower court’s ruling that the French company had infringed the mark owned by Shanghai-based wine distributor Panati Wine. However, the nation’s top court also threw out the Rmb33 million damage award made against Castel, reducing it to Rmb500,000 and leading some observers to characterise the decision as a win for Castel. In subsequent comments made to World Trademark Review, a representative for Panati emphasised the court’s affirmation that it is the rightful owner of the KA SI TE name.
Castel’s wine has been present in the Chinese market since 1999, but the company did not file for a mark with the China Trademark Office. The dispute between Castel and Panati dates back to a year later, when Panati’s trademark registration for the Chinese transliteration of the brand name was granted. The parties have subsequently been engaged in multiple court battles in the intervening years, with Castel the defendant in the current dispute over its use of the mark between 2007 and 2008.
Castel is not the first wine brand to face such issues with Panati. Back in 2014, it was revealed that Panati was also in control of the Chinese name for popular Australian wine brand Penfolds (BEN FU 奔富). Treasury Wine Estates, owner of the Penfolds brand internationally, is reportedly still engaged in legal action to ensure the integrity of its brand in China. Castel, in contrast, has chosen to abandon the KA SI TE (卡斯特) name and rebrand itself as KA SI DAI LE (卡思黛乐) for the Chinese market.
Daniel Li, Panati’s owner, has been described as a “notorious trademark squatter” by Australian media and some Chinese legal experts (he did reportedly offer to sell the KA SI TE trademarks to Castel for one million Euros, but was rebuffed). Unlike many alleged “squatters”, Li has subsequently built a business around the brands and continues to sell both Castel and Penfolds wines under the Chinese names he secured.
When asked about both disputes, a spokesman for Panati Wines told World Trademark Review that the company rejected the charge that it is a trademark squatter, and notes that court rulings had repeatedly affirmed its ownership of the disputed marks: “Both Castel and Penfolds belong to Panati, in the Chinese way.” He says that everything associated with these trademarks is confidential in China and that the company does not want any publicity. “Things are different in China,” the spokesperson adds. “We let the lawyers talk about it.”
The dispute between Castel and Panati commenced before China adopted stronger protection for prior use and well-known brands in 2014. These changes to the trademark law were expected to strengthen the hand of international brand owners. Therefore, would the outcome have been different if this dispute had commenced now? Perhaps, according to a number of lawyers we spoke to.
“The chances of success for foreign brands with a certain reputation might be higher after the new law,” says Gloria Wu, a partner at Kangxin Partners, adding: “It mainly depends on the evidence showing the prior use and reputation in mainland China before the filing date of the other party’s trademark.” However, she notes that the new law does not protect new market entrants – regardless of their level of reputation - if their translated or transliterated Chinese brand names have already been registered by random or unknown SMEs in China. “It is still considered different from the original Latin mark,” Wu explains.
A natural question to ask after the introduction of stronger protection for well-known brands is whether it has deterred trademark squatters. According to commentators we spoke to the new law hasn't led to a decline in squatting in China, with the number of opposition and invalidation cases seeming to be on the up. Paolo Beconcini, a consultant at Squire Patton Boggs in Beijing observes that infringers in China are “professionally organised for the grabbing - they will know if a trademark is used already, but not yet filed in China, and you can be sure one of them will steal it”.
Despite the additional protection afforded by the 2014 legal revisions, prosecution strategies should remain largely unchanged – the rule of thumb being ‘register early’. Beconcini concludes: “Chinese transliterations should be conceived along with the conception of the Latin or English name. And both should be filed at the same time.”
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