First guidance issued on application of dilution principle

China
The decision in Inner Mongolia Yi Li Industrial Group Corporation v Trademark Review and Adjudication Board represents the first consideration of dilution by a Chinese court since the issuance of the Supreme People’s Court's Interpretation on Several Issues Concerning the Application of the Law to the Trial of Cases in Civil Disputes over the Protection of Well-Known Trademarks, which came into force on May 1 2009.

Although Chinese courts have made reference to dilution in the past, a form of dilution has been formally recognized as being a part of Chinese trademark law only since the issuance of the Supreme People’s interpretation (for further details please see "Opinion on protection of well-known marks in civil disputes issued"). The Chinese concept of 'dilution' serves as a basis for refusing the registration of reproductions, imitations or translations of well-known trademarks.
  
The YILI mark (in Chinese characters), which is registered in China for over 1,000 dairy products (Class 29 of the Nice Classification), is  owned by Inner Mongolia Yi Li Industrial Group Corporation
 
In 2000 Wenzhou City Longwan Haicheng He Cheng Water Heating Store filed an application for the registration of the marks YILI and YILI in Chinese characters in Class 11, to be used in association with, among other things, “hydrants and bath fittings”.
 
Yi Li filed an opposition against Longwan’s application based on Article 13(2) of the Trademark Law of the People’s Republic of China. Article 13(2) provides that the owner of a registered well-known mark has the right to prevent the registration of a reproduction, imitation or translation of its mark for non-identical or dissimilar goods, if it “may mislead the public and cause injury to the interests of the owner of the famous trademark".
 
In January 2005 the Trademark Office allowed the registration of Longwan's YILI marks for goods in Class 11. According to the office, although YILI is a registered trademark and the use of YILI for dairy products can be considered as well known to the relevant public, Longwan's goods were sufficiently dissimilar to those of Yi Li. Therefore, there would be no confusion among consumers, and Article 13(2) did not apply. Yi Li's appeal to the Trademark Review and Adjudication Board (TRAB) was unsuccessful.
 
Yi Li appealed to the Beijing First Intermediate People’s Court, which overturned the decision of the TRAB in September 2009.
 
According to the court, due to the notoriety and reputation of the YILI mark, it would be inevitable that consumers would associate Yi Li with any products bearing the YILI mark in Chinese characters.
 
The court also held that the use of the YILI mark by Longwan on “hygienic fittings” would:

  • dilute the distinctiveness of the well-known YILI mark; and
  • adversely affect the reputation of Yi Li’s goods by associating dairy products with goods considered as 'unclean'.
The court was also of the opinion that there were justifiable reasons to believe that Longwan’s use of the YILI mark took advantage of the reputation of Yi Li's mark in the marketplace.
 
For all of the above reasons, the court reversed the decision of the TRAB and rejected Longwan's application for the registration of the YILI mark. In December 2009 the Intermediate Court’s decision was upheld by the Beijing High People’s Court.
 
As the first Chinese case to consider dilution following the issuance of the Supreme People’s Court's interpretation, this case provides a number of interesting lessons.
 
First, the application of the dilution principle in China will apply to trademark applications and registrations that predate the issuance of the interpretation - as illustrated by the present case, in which the application at issue was filed in 2000.
 
Second, although both the TRAB and the courts agreed that the YILI mark was well known with regard to dairy products, they differed on how the well-known status of the mark was to be considered within the context of dilution. The TRAB appeared to be of the view that there must be an element of confusion prior to the consideration of dilution, while the Beijing courts seemed to focus on the test set out in the Supreme People’s Court's interpretation.
 
Article 9(2) of the interpretation provides as follows:
 
Where [the reproduction, imitation or translation of the well-known mark] is sufficient to make the relevant public believe that there is a certain connection between the trademark against which the lawsuit is lodged and the famous trademark, and, as a result, the distinctiveness of the famous trademark is diluted, and the market reputation of the famous trademark is degraded or the reputation of the famous trademark is improperly utilized, this would fall within the circumstances set forth in Article 13(2) of the Trademark Law [...].”  
 
Therefore, it may not be necessary to provide evidence of confusion when claiming that the registration and use of a trademark dilutes the distinctiveness of a well-known mark.
 
Finally, evidence of dilution of a well-known mark by itself is insufficient to prevent the registration of a trademark. The courts - and, consequently, the Trademark Office and the TRAB - will look to the other requirements listed under Article 9(2) of the interpretation before refusing an application.

George Chan, Rouse, Beijing

Unlock unlimited access to all WTR content