Comments and Analysis on the Trademark Infringement Case between “Hong He Hong” and “Hong He”

In the field of intellectual property, this case is particularly noteworthy, because

1.The compensation judged for trademark infringement was 10 million Yuan, which is very noticeable.

2.It is the first trademark infringement case taken over by the Supreme Court. Before this case, there is only one trademark administrative case was reheard by the Supreme Court after its appeal was countered by the Supreme People’s Procuratorate.

3.The Supreme Court judged a compensation of 20 thousand Yuan, which is a big contrast with 10 million.

I.The court of first instance and the court of second instance both gave judgment that, “Hong He Hong” mark infringes the exclusive right of “Hong He” mark, and the compensation is 10 million Yuan.

On March 19, 2004, “Jinan Honghe Business Department of Shandong Taihe Company” (hereinafter referred as “Jinan Honghe” brought a lawsuit against “Yunnan Honghe Guangming Limited Liability Company” (hereinafter referred as “Yunnan Honghe”, who changed its name into “Yunnan Chengtou Properties Limited Liability Company” after the judgment of second instance) with the Guangdong Province Fushan Municipal Intermediate People’s Court. Jinan Honghe complained that the beer with “Hong He Hong” mark produced by Yunnan Honghe infringed the exclusive right of its registered mark “Hong He”, and requested the court order Yunnan Honghe to stop the infringing act immediately and compensate Jinan Honghe 10 million Yuan for its economic loss.

On September 20, 2009, the court of first instance gave the judgment as follows:

 “Hong He Hong” mark used by Yunnan Honghe is similar with the mark “Hong He” prior registered by Jinan Honghe on the aspects of appearance and meaning. Yunnan Honghe used “Hong He” mark on its adverting flags, of which the words is identical with Jinan Honghe’s “Hong He” mark. Yunnan Honghe’s behavior constitutes trademark infringement.

Since Yunnan Honghe is a listed company, according to its annual financial statements published during the period of infringing act, the court regards half of the gross profit of beer as the gross profit of “Hong He Hong” beer, which is about 22 million Yuan. Therefore, the court supports Jinan Honghe’s claim of 10 million compensation.

In October 2007, after Guangdong Higher People’s Court rejected Yunnan Honghe’s appeal, Guangdong Court went to Yunnan Province and had Yunnan Honghe execute the judgment partially, that is, make a compensation of 2 million Yuan first.

I. The Supreme Court gave the judgment that, “Hong He Hong” mark does not constitute similar marks with “Hong He” mark, and the compensation is only 20 thousand Yuan.

One year later, through Yunnan Honghe’s efforts, this case was taken over by the Supreme Court. The court session was opened on November 11, 2008. On April 8, 2009, the Supreme Court gave the final judgment that Yunnan Honghe should compensate Jinan Honghe 20 thousand Yuan for its economic loss. This judgment, which is vastly different form the former two, caused a sensation in the field of Intellectual Property.

Two focus points in this case are: first, whether “Hong He Hong” mark is similar with “Hong He” mark and whether Yunnan Honghe infringe Jinan Honghe’s exclusive right to use the registered mark “Hong He”; second, how to determine the amount of compensation. These two focus points appear to be in totally different aspects, however, in fact, to judge the similarity is the crucial point of this case.

Focus point 1: whether “Hong He Hong” mark is similar with “Hong He”.

The Supreme Court holds the opinion that:

1. Jinan Honghe submitted a Contractor’s Agreement, a sales invoice of 2.2 thousand Yuan issued by Wifang Changhong Color Printing Factory for beer cases and bottle labels, photographs of “Hong He” beers and “Hong He” bottle labels, and an invoice issued for sale of a case of “Hong He” beers as evidence to the court. But it turned out that all the evidences were faked especially for the lawsuit, which surely could not prove Jinan Honghe’s actual use of “Hong He” mark.

Since Jinan Honghe didn’t provide any evidence to prove its continuous use of “Hong He” mark in the production and sales of beers or the reputation of “Hong He” mark, it couldn’t be proved that “Hong He” mark had gained distinctiveness through actual use.

2. On the other side, “Hong He Hong” mark had gained a certain reputation in the market through Yunnan Honghe’s continuous actual use. Therefore, “Hong He Hong” mark had gained its own distinctiveness and should be regarded not similar with “Hong He” mark on the whole. From a common consumer’s angle, it’s easy to judge the source of “Hong He Hong” beers. Since Jinan Honghe didn’t put the “Hong He” mark into actual use, “Hong He Hong” mark won’t lead to consumer’s misrecognition or confusion or even regarding “Hong He Hong” mark is related with Jinan Honghe.

Besides, Yunnan Honghe is located in Honghe Prefecture of Yunnan Province, so it’s reasonable for Yunnan Honghe to use a mark containing “Hong He”. Judging from the situation of Yunnan Honghe’s actual use of the mark, Yunnan Honghe didn’t have improper intention to intimate Jinan Honghe’s registered mark “Hong He”.

Focus point 2: why the compensation changed from 10 million to 20 thousand

The Supreme Court overturned the decision made by the Trademark Review and Adjudication Board and judged that the two marks are not similar. Yunnan Honghe did infringe Jinan Honghe only due to the use of the word “Hong He” on its advertising flags. According to this condition, Yunnan Honghe was required to compensate Jinan Honghe 20 thousand Yuan.

II.Advanced application of judicial interpretation

Facing the same facts and same defendant, the accuser gained the court’s support in 2003(not mentioned in this article). And later, the accuser won the case both in the first instance and second instance in Guangdong. Also, 2 million of the 10 million compensation was already executed. However, in the last instance, the final judgment changed the compensation from 10 million to 20 thousand. Why did this happen? No reason was detailed in the final judgment made by the Supreme Court. To figure out this question, we have to analyze this case combined with the domestic and international economic and social background.

According to the domestic economic situation in the background of global financial crisis, on April 21, 2009, the Supreme Court promulgated Opinions on Some Issues Concerning Judgment of Intellectual Property Serving the Overall Interests under Current Economic Circumstance, in which the 7th article clearly states that “If a registered mark that calls for protection was not put into actual commercial use, ordering to stop infringing act should be the main choice when determining the civil liability, when determining the compensation for loss, the facts of no actual use should be considered according to situation, except the expenses spent on asserting rights, if there is indeed no actual loss or damage, the compensation is seldom determined according to the profit earned by the accused infringer; The registrant or the assignee of the mark who has no intention to use the mark but only takes the mark as a tool to demand compensation may not be compensated in general; If registered mark that calls for protection does constitute nonuse for 3 consecutive years stipulated in the Trademark Law, the request for compensation can be ignored.

Although this “Opinion” had not been promulgated when the judgment of “Hong He” case was made, the judgment and its basis are actual application of the said “Opinion” in advance. It can be example and reference for judging similar intellectual property cases of specific conflict in special period under particular situation.

III.Yin Shao ping from the intellectual property tribunal of the Supreme Court, one of the presiding judges in this case, points out that:

    Nowadays, there are two undesirable trends in trademark registration, one is through imitating well known marks on same or similar ods to earn illegal profit; the other is to rush register some od marks, hoard as rare commodity, and hope to sell them at a high price. Some applicants preemptively apply some unregistered marks which have already gained a certain reputation in the market, or preemptively apply well known registered mark in the related classes. Then, the said applicants file lawsuit of trademark infringement, expecting to receive huge amount of compensation. But neither of these two kinds of behavior will gain legal support or protection.

IV.The definition of “take over by a higher court”

    If the Supreme Court thinks the judgment made by the People’ Court of all levels is actually wrong, or a higher People’s Court thinks judgment made by a lower People’s Court is wrong, the Supreme Court or the higher People’s Court can take over the case. There are three fundamental points, first, the subject to take over the case must be the Supreme Court or the higher People’s Court; second, the former judgment must have already entered into force; third, the effective judgment must be really a mistake.