Chanel loses trademark dispute in China

Recently Chanel Co. lost a trademark infringement case relating to its ‘Double C’ logo in China.

In 2016, the representatives of Chanel along with Guangzhou Haizhu District Administration for Industry and Commerce (Haizhu AIC) carried out a detailed investigation into a local jewellery store operated by Ye. The representatives identified several products carrying the pattern ‘Double C’ logo, which seemingly infringed Chanel’s exclusive rights to use the registered trademark.  A case was filed against Ye and in an Administrative Punishment Decision, the agency confiscated the goods in question and required Ye to pay a penalty of CNY 80,000, based on the ‘established’ trademark infringements.

Chanel then filed a lawsuit with the Guangzhou Haizhu District People’s Court (Haizhu Court), seeking an order for Ye  to pay compensation of CNY 100,000.

Ye responded with two main arguments:

1. His store was a franchise store of Zhoubaifu, a brand that belongs to Hong Kong ZhouBaifu Jewelry International Group Co., Ltd (Zhoubaifu Ltd)
2. He had done little damage to Chanel, considering that there was only a total of 8 products with the sum of CNY 6,000 tag price involved, and they were not being sold.

However, the Haizhu Court ruled in favor of Chanel and ordered Ye to pay a compensation of CNY 60,000.

Ye appealed to the Guangzhou Intellectual Property Court (Guangzhou IP Court). His appeal was based on the following claims:

1. The ‘infringing goods’ were identified by the on-site evaluation conducted by Chanel’s representatives, which lacked procedural credibility
2. Ye’s silence regarding the Administrative Punishment Decision did not exclude the possibility of enforcement errors being made by the administrative agencies.

The Guangzhou court identified the primary issue as whether Chanel’s exclusive trademark rights had been infringed by Ye. This raised a question as to whether the shape of the products alone could be deemed as infringing. The current legal framework of China does not provide any specific answer to this question.

Under Chinese law, use of trademark is the prerequisite of infringement. In this case the products in question were sold with labels of ‘Zhoubaifu’, under the roof of a Zhoubaifu franchise store. Chanel failed to submit sufficient evidences to prove the unlawful uses of Chanel’s trademarks in the very store, such as soliciting customers or promoting products, that took advantage of the similarities between the products and Chanel’s trademark registration.

The Court found that there was no evidence of any circumstances to indicate that Ye misled consumers by advertising or marking the products in question as originating from Chanel. In addition, no evidence had proved that the ordinary consumers with a general level of understanding would deem that they were purchasing Chanel products in Ye’s store.

As a result, the Court ruled that Chanel had not made a sufficiently strong case, and thus rescinded the judgement of the 1st instance.