China’s Supreme Court sides with Foreign Owner of Famous Consumer Product, despite lack of Trademark Protection

June 23, 2008

Most consumers know the gold tinfoil packaged, hazelnut-centered chocolate products, Ferrero Rocher, perhaps not by name but by the distinctive appearance of the dazzling packaging. When Ferrero S.p.A., the Italian maker of these pricy delicacies, entered the Chinese market in 1984, it did not bother to register their Chinese name (JINSHA), although it registered its trademark in Taiwan and Hong Kong. Later a Chinese company, Zhangjiaggang Dairy Factory One (“Factory One”) applied for and obtained PRC registration of “JINSHA” as a trademark and began to produce chocolate under the brand name JINSHA in China. In 2002, Factory One assigned the trademark JINSHA to Montresor, which began marketing its chocolate products as JINSHA TRESOR DORE in 2003, using packaging strikingly similar to FERRERO ROCHER.

After a 5-year Chinese court battle, FerreroRocher recently won a fight to stop infringement of its intellectual property rights in China’s Supreme People’s Court (SPC). This is the first known case where Chinese Courts applies the Anti-Unfair Competition Law to well-known foreign merchandise despite trademark registration by a Chinese company.

The fight started in Tianjing No. 2 Intermediate People’s Court in July 2003. Ferrero Rocher could not bring a simple trademark infringement claim because it did not own the trademark for JINSHA. Instead, it brought a lawsuit under the Chinese Anti-Unfair Competition Law (“AUCL”), which provides that a party must not, without consent of the manufacturer of “well-known merchandise”, use packing or decoration that is identical or similar to the unique packaging or decoration of “well-known merchandise” and thereby creates confusion among consumers that its products are the well-known merchandise. Montresor argued that more Chinese people recognized Montresor’s JINSHA than FERRERO ROCHER, that consumers were not confused, and that each company had attached its own registered trademarks to its products.

China’s Supreme Court affirmed the judgment of the Tianjing Court, which ruled in favor of Ferrero Rocher. The ruling represents a victory for IP holders who cannot enforce their rights under trademark law, but are nonetheless protected by the Anti-Unfair Competition Law if a competitor rips off the trade dress of a famous brand.

Ferrero Rocher is indeed a world-wide famous brand, and its distinctive packaging can be found in specialty shops, airports and other places throughout the world. While the ruling here would not protect a start-up producer or a manufacturer of lesser-known products, it signals a willingness by the Chinese courts to prevent copycat designs and packaging by companies that try to achieve market share by unfairly appearing to look like well-known company brands.

Frost Brown Todd acknowledges the effective work of the Jun He law firm, colleagues in MULTILAW, for their achievement on behalf of Ferrero Rocher.

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The Judgment of the Higher People’s Court of Tianjing is as follows:

“This court held that: according to the rules of applicable of laws in the foreign related civil cases in “P.R.C General Provisions of Civil Law” , P.R.C. Anti-unfair competition law (“AUCL”) is applicable to this case. In addition, China and Italy both are members of “Paris Convention for the Protection of Industrial Property.” If there are differences between domestic laws and the Convention motioned above the Convention shall prevail.

  1. A “well-known merchandise” in AUCL is the merchandise that has been sold in a certain market and known by the public. The criteria to determine “well-known merchandise” should be the name of the merchandise in the domestic market of China and the international market. A well-known merchandise shouldn’t be interpreted to be a merchandise that is known in the Chinese market only. Ferrero is a well-known enterprise that makes chocolate products. It is a publicly known fact in this industry. According to the evidence provided by Ferrero, we can conclude that the Chocolate series products of Ferrero, before entering the Chinese market, were known by the public in the chocolate industry and had a high degree of “well-known name”. Since these products had been sold in the Chinese market in 1984, the Ferrero products in the Chinese market had a unique combination of packaging and trade dress and conspicuous visual characteristics and effectiveness. Since then, FERRORO ROCHER Chocolate Series Products have been sold in the Chinese market for a long term. It has been known by the relevant public. Therefore it should be determined to be a well-known merchandise.
  2. The packaging and trade dress of FERRERO ROCHER Chocolate Series Products were integrated designs expressing a unique meaning and came to be unique packaging and trade dress forms. After examination in the court, TRESOR DORE chocolate products used the basically identical packaging and trade dress to the FERRERO ROCHER Chocolate Series Products. In addition, Montresor could not prove that it designed the trade packaging and trade tress independently. Because Montresor could not prove that it designed the trade packaging and trade tress independently or used the packaging and trade prior to Ferrero, we concluded that JINSHA Chocolate Products of Montresor used FERRERO ROCHER Chocolate Series Products of Ferrero without authorization.
  3. According to the good faith principal and other commercial ethical standards, a well-known merchandise is an achievement gained from honest business operations. Therefore, the law cannot use a result gained by unfair competing methods as a criterion to determine the degree of a well-known name. The fact that JINSHA Chocolate Products of Montresor used FERRERO ROCHER Chocolate Series Products of Ferrero without authorization directly affected the sales and the name of Ferrero. Therefore, if we had rejected the appeal of Ferrero by reasoning that JINSHA TRESOR DORE chocolate products have a higher degree of recognition in the Chinese market, we would have approved the result of unfair competition.
  4. According to Section 2 (2) of the “Paris Convention for the Protection of Industrial Property, if we apply AUCL to here, we should not be limited to the situations listed in the AUCL. Therefore, we concluded that Montresor’s activities constituted the unfair competition that caused the damages to the operations of Ferrero. Law should restrain those activities. ”

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From the judgment of the court, we can conclude that in order to protect rights of trade dress under AUCL, three tests must be met: first, the trade dress must be unique with distinctive characteristics to identify and distinguish its source, and may not be features commonly adopted by others for the same or related products. Second, the product must fall within the scope of “well-known merchandise.” Third, the likelihood of confusion among customers needs to be shown. “The Application of Law in Trials of Civil Cases involving Unfair competition, The Supreme People’s Court of P.R.C. December 30, 2006.”

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