Retailer of parallel-imported vodka guilty of trademark infringement and unfair competition

The Suzhou Intermediate Court has found that a local retailer of parallel-imported spirits, the identifier code of which had been removed, was guilty of trademark infringement and unfair competition, on the ground that the removal of the identifier code had compromised the source-identifying function of the trademark. This violated the consumers’ right to know the origin of the products and interfered with the trademark owner’s control of product quality. The fact that the defendant had concealed key product information and created a fake importer constituted false advertisement and unfair competition.

Pernod Ricard China (Trading) Co Ltd is the exclusive trademark licensee of a series of trademarks, including:

• ABSOLUT in Latin characters:
  
• ABSOLUT in Chinese characters:
  
• ABSOLUT VODKA in Latin characters:
  
• the following device mark:
  

Over the years, Pernod Ricard had become aware of an increase in the amount of parallel-imported Absolut vodka on the Chinese market. The parallel-imported Absolut vodka exhibited the following features:

• the lot code - which contains the bottling information and a tracking system for quality management - had been removed; and
• a Chinese label indicating the name of the unauthorised importer and distributor had been affixed to the bottle.

Pernod Ricard and the legitimate trademark owner of the ABSOLUT marks, the Absolut Company Aktiebolag, brought civil litigation proceedings against the local retailer of parallel-imported vodka before the Suzhou Intermediate Court on the grounds of trademark infringement and unfair competition.

The Suzhou Intermediate Court rendered its judgment on October 8 2013, ruling in favour of the plaintiffs. The court found as follows:

1. The defendant had concealed the origin of the products by removing the identifier code, which compromised the integrity of the products and caused the loss of key product information. This act caused injury to both consumers and the trademark owner since:
   1. it compromised the source-identifying function of the trademark, which violated the consumers’ right to know the origin of the products, and would lead to confusion and misidentification as to the origin and distribution channel of the products; and
   2. it interfered with the trademark owner’s control of product quality and violated its right to control product quality.
      
      The defendant’s action thus constituted infringement under Article 52.5 of the Trademark Law.
       
2. The defendant, by removing the identifier code, had concealed key product information and created a fake importer, which constituted false advertisement and unfair competition under Article 9 of the Anti-Unfair Competition Law.



3. The defendant had affixed a Chinese label on the Absolut vodka and printed ‘绝对’ (‘Absolut' in Chinese) prominently on the label without the authorisation of the trademark owner. The defendant’s acts constituted trademark infringement under Articles 52.1 and 52.2 of the Trademark Law.



4. The defendant had affixed a Chinese label that was inconsistent with the original design of the trademark owner, which undermined the completeness and aesthetic appearance of the genuine product. In addition, the name of the importer indicated on the Chinese label was not registered legitimately. This would be sufficient to cause reasonable doubts among consumers as to the source of the products. The defendant’s acts thus constituted trademark infringement under Article 52.5 of the Trademark Law.

The Suzhou Intermediate Court thus upheld the claims of the plaintiffs, and ordered the defendant to:

• put an end to the infringement and unfair competition acts; and
• compensate the plaintiffs in the amount of Rmb100,000.

The judgment has now come into effect.

Parallel imports are an intricate problem in China, since the issue of whether the parallel import of trademarked products constitutes trademark infringement is not specifically addressed in China’s laws and regulations.

The ruling in this case thus provides guidance on the issue. The key question is whether the alleged acts are detrimental to the interests and rights of the trademark owner. Trademark owners may take measures to stop third parties from parallel-importing their trademarked products if they can prove either that the products have quality and safety problems (see the Changsha Michelin case), or that the defendant’s act compromises the source-identifying function of the trademark or interferes with the quality management of the trademark owner.

Zhang Yan and Yan Zinan, Wan Hui Da Law Firm & Intellectual Property Agency, Beijing

Wan Hui Da represented the plaintiffs in this case