Infringing use of 'N' device penalized by Shanghai court

On October 23 2006 the Shanghai Second Intermediate People's Court upheld a trademark infringement and unfair competition action filed by Nippon Paint (China) Co Ltd (Nippon) against Guangdong Province Zhongshan City Keban Paint Co Ltd (Keban) and its distributor Shanghai Ding Fu Paint Co Ltd (Ding Fu).

Nippon is a foreign-funded enterprise, focusing mainly on paint production and distribution. In August 2003 it registered trademarks including the device 'N' and Chinese character 'Li Bang' (the Chinese transliteration of 'Nippon') in China. In 2004 it successively licensed Lang Fang Nippon Paint Co Ltd, Guangzhou Nippon Paint Co Ltd and Nippon Paint (Guangdong) Co Ltd to use the two trademarks.

Keban is a paint producer located in Zhongshan City, Guangdong Province. In April 2004 it established a Hong Kong company: Japan Li Bang Paint International Group (Hong Kong) Co Ltd. This Hong Kong company then registered LAI SHI WEI KEBAN as a trademark in China. On May 17 2004 the Hong Kong company signed a 30-year licence agreement with Keban, authorizing Keban to use the trademark LAI SHI WEI KEBAN in China. It also licensed Keban to manufacture its product.

Nippon filed an action with the Shanghai Second Intermediate People's Court, claiming that Keban was using a device mark similar to Nippon's well-known 'N' device mark without authorization and that this use constituted trademark infringement. In addition, Keban was using the character 'Li Bang' alongside its device, which would cause further confusion among relevant consumers. Further, Ding Fu, Keban's distributor, had acted in bad faith and, according to Nippon, it too had infringed Nippon's trademarks. Nippon sought a public apology and compensation of Rmb2.5 million ($312,500).

Keban argued that both the structure and the meaning of its device mark were different from Nippon's device mark. It further argued that Nippon had provided insufficient evidence to prove that Keban's use of its mark was likely to cause confusion.

The court considered that Keban's device mark was similar to Nippon's device mark and that the evidence provided by Nippon was sufficient to show that its device mark had acquired distinctiveness and an extensive reputation. It also found that Keban had been aware of the reputation of Nippon and its products. In such circumstances, use of the mark in the Hong Kong company's name (ie, Japan Li Bang Paint International Group (Hong Kong) Co Ltd) was likely to cause confusion among relevant consumers. Such use also demonstrated Keban's intention of free-riding on the fame and reputation of Nippon's company and its brands in order to obtain illegal benefits. Thus, Keban's actions not only constituted trademark infringement, but also unfair competition. Further, Ding Fu's distribution of Keban's goods also constituted trademark infringement.

Accordingly, the court ruled in favour of Nippon and ordered Keban and Ding Fu jointly to pay compensation of Rmb90,000 (approximately $11,250).

Jin Ling, Rouse & Co International, Beijing