Designation for health food held to be common name

Japan
The IP High Court has affirmed a decision of the Hamamatsu branch of the Shizuoka District Court in which the latter had denied protection under the Unfair Competition Prevention Law (47/1993, as amended) to the designation 'kanten oligo sugar'.

Article 2(1)(1) of the law provides that the following actions constitute unfair competition:

"using indications of goods, etc (meaning any indication of a person's name, trade name, trademark, mark, container or package of goods in connection with the person's business or other indications of goods or business...) which are identical... or similar to those well known among consumers as indications of goods, etc, of the other person, or acts of assigning, delivering, displaying for the purpose of assignment or delivery, or exporting, importing, or providing through electric telecommunication lines, the goods using the indication of goods, etc, of the other person, and thereby causing confusion with the goods or business of the other person."

Article 4 of the law provides that:

"a person who has intentionally or negligently injured the business interests of another person through unfair competition shall be liable to compensate [him] for the damage caused by such injury."

Article 19(1)(1) of the law provides that Articles 3 to 15 inclusive, 21 (excluding the part referred to in Article 21(2)(6)) and 22 shall not apply to acts of:

"unfair competition proscribed in Article 2(1)(1), (2), (13) and (15) in regard to any act of using or indicating, in a common way, the common name (excluding the appellation of origin concerning products made from grapes which have become the common name) of the goods or business or indications of goods, etc, customarily used in respect of identical or similar goods or business (hereinafter collectively referred to as the 'common name, etc'), or using the common name, etc, in a common way, or assigning, delivering, displaying for the purpose of assignment or delivery, exporting, importing or providing through electric telecommunication lines goods on which the common name, etc, has been applied (including the act, in the case of unfair competition prescribed in Article 2(1)(13) or (15), of providing services indicating or using the common name, etc, in a common way)."

Plaintiff Hamamatsu Kenkodo sold health food under the name 'kanten oligo sugar'. It brought a lawsuit against defendant Takara Bio Inc, which had also been selling health food under the same designation. The plaintiff argued that the name was a well-known indication of its goods. It claimed Y50.4 million for lost profits and Y5 million in legal expenses, plus the legal rate of interest for such amounts, as compensation for damages under Articles 2(1)(1) and 4 of the law.

The district court dismissed the claims on the grounds that the words, which were the name of the plaintiff's product, did not fall within the definition of an 'indication of goods or business' under Article 2(1)(1).

The plaintiff appealed to the IP High Court, additionally asserting that the packaging of its product in its entirety, incorporating the words 'kanten oligo sugar' and the background pattern, should be considered as the indication of the goods or business. On this basis, the use of similar packaging on the defendant's product, which caused confusion with the plaintiff's product, should be deemed to constitute an act of unfair competition under the law.

The court affirmed the lower court's decision and dismissed the appeal. In so doing, it offered the following reasoning on the nature of an indication of goods or business:
  • The name 'kanten oligo sugar' has been generally used in scientific materials and patent public disclosure gazettes to indicate agaro oligo sugar and neo-agaro sugar, which are types of oligo sugar derived from kanten (or agar), since around 1988 at the latest.
  • The designation is the name of the substance, indicating oligo sugar produced from kanten (ie, agaro oligo sugar and neo-agaro oligo sugar). It has come to be recognised among consumers as indicating oligo sugar derived from kanten since around July 1999 at the latest.
  • Therefore, the designation is a common name and has no function in distinguishing the goods from those of others or indicating the source of origin in principle. Thus, it does not have the character or nature of an indication of goods or business, even if used on the goods.
  • No evidence could be found in support of the claim that the plaintiff was the business entity that had initiated the use of 'kanten oligo sugar' as the name of the health food. On the contrary, it was recognised that the name had come to be known to consumers through newspapers and other media as a result of the announcement of research by Takara Shuzo Co (ie, the defendant's predecessor), and from the history of the development of the products following such announcement. Thus, consumers would recognise that Takara Shuzo had commercialised kanten oligo sugar. It was also recognised that the impetus for the plaintiff to market kanten as a health food came from its knowledge of the results of the research. Therefore, the plaintiff could not be recognised as the only business entity to have initiated the use of 'kanten oligo sugar' as the name of the health food.
  • In view of the sales results, the results of the promotion and advertisement of the plaintiff's products and the size of the health food market, the plaintiff's sales results, promotion and advertisement were negligible. Thus, it could not be held that the common name had acquired the function of distinguishing the goods in question from other goods, or of indicating the source of origin of the plaintiff's product based on such sales results and on its promotion and advertisement.
  • On examining the evidence submitted, the advertisement was found to include the simple statement that the kanten seaweed was pulverised by a special method, but no advertisement showed the specific details of the method. Therefore, the plaintiff's assertion that the indication had been used and was recognised in combination with the special method was without merit.
  • The indication was not recognised as having the character or nature of an indication (in respect of goods or business) of the plaintiff's business entity. Therefore, it was unnecessary to examine the other points of the case. Thus, the claim based on Article 2(1)(1) that the name was a well-known indication of the plaintiff's goods or business had no legal basis.
The court's reasoning in respect of the additional assertion was as follows:
  • In comparing the designation on the packaging of the plaintiff's product and on the packaging of the defendant's product, it was evident at first sight that the patterns and colouring were entirely different.
  • The designation was found to be a common name indicating the raw material of the product and could not, alone and of itself, be recognised as distinguishing goods or indicating origin.
  • Therefore, the designation on the packaging of the plaintiff's product could not be seen as similar to that on the packaging of the other product.
  • The additional assertion was thus groundless.
The plaintiff's claims, including the additional assertion, were therefore rejected.

Article 19(1)(1) of the law provides that use of a common name on goods or in business in a common way does not constitute a violation of the law.

In many cases, a common name has been alleged to have acquired distinctiveness through use. Although the Japanese courts have acknowledged the distinctiveness of such indications (eg, 'Megane Center', 'Hokka Hokka Bento', 'Almond' and 'Nagasaki Tanmen'), the present case demonstrates that it is generally difficult to prove that a common name has acquired sufficient distinctiveness as to have developed a secondary meaning.

Eiichi Fukushima, Nishimura & Asahi, Tokyo  

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