In 1998, Shenyang Jiushengcheng applied and was approved for registration of No. 1347502 trademark "Layaer" for use on commodities of Category I "cement waterproof preparations except paints". The company then invested heavily in advertising to raise the brand awareness of "Layaer" and released over 30 advertisements on Chongqing Business Daily in 2006. In 2006-2007, " Layaer Mortar Waterproofing Agent" was rated as "The Most Satisfying Home Building Material Brand of the Year 2007" by Chongqing Business Daily, "The Most Influential Decoration Building Material Brand in Chongqing Municipality for the Decade" by Chongqing Youth Newspaper, and "The Most Trusted Building Material Brand by Millions of Citizens for the Decade" by Chongqing Morning Post. Through the continuous use and promotion of Shenyang Jiushengcheng, the brand "Layaer" has gained a high reputation in the industry and among the public. And it has become a public opinion that "Laoyaer" is a well-known brand that is exclusively owned by Shenyang Jiushengcheng.
Chongqing Xiufeng Plant applied for registration of No. 5270376 trademark "Layaer" for use on commodity category 19 "non-metal building materials" and then transferred the trademark to Chongqing Shengbaili in 2013. In 2017, Shenyang Jiushengcheng found three types of "Layaer" waterproof slurry series products marked with the words of "Chongqing Shenbaili Waterproof Building Materials Co., Ltd." were sold at a building materials market in Chongqing. Chongqing Jiushengcheng and Shenyang Jiushengcheng believed that such act of Chongqing Shengbaili infringed upon the "Layaer" trademark that they registered, and the use by the Chongqing Shengbaili of the product's packaging which was of certain influence and already in used by them constituted unfair competition, so they filed a lawsuit against Chongqing Shengbaili.
At the press conference for the Intellectual Property Publicity Week held by the Supreme People's Court on April 21, 2022, before the arrival of the 22nd World Intellectual Property Day, the SPC released 50 typical intellectual property cases in China in 2021. The case between Chongqing Jiushengcheng Waterproof Material Co., Ltd. (“Chongqing Jiushengcheng”), Shenyang Jiushengcheng Economic Trade Co., Ltd.(“Shenyang Jiushengcheng”), and Chongqing Shengbaili Waterproof Building Material Co., Ltd.(“Chongqing Shengbaili”) over trademark infringement and unfair competition was successfully selected among the representative cases. The case was advised by Jincheng Tongda & Neal Law Firm senior partners, Yong WANG and Zhenzhong YANG, and their colleagues.
1. Case facts:
In 1998, Shenyang Jiushengcheng applied and was approved for registration of No. 1347502 trademark "Layaer" for use on commodities of Category I "cement waterproof preparations except paints". The company then invested heavily in advertising to raise the brand awareness of "Layaer" and released over 30 advertisements on Chongqing Business Daily in 2006. In 2006-2007, " Layaer Mortar Waterproofing Agent" was rated as "The Most Satisfying Home Building Material Brand of the Year 2007" by Chongqing Business Daily, "The Most Influential Decoration Building Material Brand in Chongqing Municipality for the Decade" by Chongqing Youth Newspaper, and "The Most Trusted Building Material Brand by Millions of Citizens for the Decade" by Chongqing Morning Post. Through the continuous use and promotion of Shenyang Jiushengcheng, the brand "Layaer" has gained a high reputation in the industry and among the public. And it has become a public opinion that "Laoyaer" is a well-known brand that is exclusively owned by Shenyang Jiushengcheng.
Chongqing Xiufeng Plant applied for registration of No. 5270376 trademark "Layaer" for use on commodity category 19 "non-metal building materials" and then transferred the trademark to Chongqing Shengbaili in 2013. In 2017, Shenyang Jiushengcheng found three types of "Layaer" waterproof slurry series products marked with the words of "Chongqing Shenbaili Waterproof Building Materials Co., Ltd." were sold at a building materials market in Chongqing. Chongqing Jiushengcheng and Shenyang Jiushengcheng believed that such act of Chongqing Shengbaili infringed upon the "Layaer" trademark that they registered, and the use by the Chongqing Shengbaili of the product's packaging which was of certain influence and already in used by them constituted unfair competition, so they filed a lawsuit against Chongqing Shengbaili.
In the second instance of the trial, the Chongqing High People's Court held that considering the alleged infringer provided defense by claiming entitlement to the trademark rights, the court should conduct the necessary review on the basis of the right of the alleged infringer, make a systematic and comprehensive judgment on the alleged infringement and reasonably determine the scope and strength of judicial protection. The trademark in question is a prior registered trademark that has been used and advertised for many years, rendering the "Layaer" brand to become a well-known brand in the waterproof industry. In line with the purpose of intellectual property protection and the principle of proportional protection, judicial protection should be granted to a trademark in proportion to its prominence and popularity of it. More importantly, the applicant should apply for trademark registration and use trademarks by following the principle of good faith. If an applicant intends to apply for registration of a trademark for use on a commodity whose category is hard to ascertain, it should take reasonable care to avoid registering any prior trademark used on the same type of products in the same industry, so as to protect the legitimate rights and interests of the prior right owner, and avoid infringing others' existing legitimate rights and interests.
Given how similar Chongqing Shengbaili was to Shenyang Jiushengcheng and Chongqing Jiushengcheng in terms of business scope and geographic areas of operation, it was highly doubtful that Chongqing Shengbaili was unaware of the previous trademark. Furthermore, because "Layaer" was a distinctive trademark because it was a completely new word developed by the plaintiff with no specific connotations, it was nearly impossible for Chongqing Shengbaili to register the same trademark without being aware of the plaintiffs' registration. Because the category of the commodity for which the disputed trademark was registered was not clarified in the Distinction Table, and most trademarks of waterproof materials company were registered under Category 1, Category 19, and Category 2, as trademarks of Chongqing Shengbaili, Chongqing Shengbaili was highly likely to be aware of the prior trademark's existence. Despite the aforementioned circumstances, Chongqing Shengbaili not only failed to exercise reasonable care to avoid registering the disputed trademark, but also it used it in the mass production and sale of similar products for a long time, causing market confusion, revealing its intention to profit from the prior trademark's goodwill, and preventing the trademark from performing its function of distinguishing the products.
Because Chongqing Shengbaili was a subsequent registrant of the "Layaer" trademark and applied for trademark registration in bad faith, it is unable to challenge Shenyang Jiushengcheng and Chongqing Jiushengcheng's exclusive right to the prior trademark based on the fact that it uses a registered trademark on an approved product. The defendant's actions constituted an abuse of rights and infringement of the plaintiffs' trademarks, as well as a violation of the principle of good faith.
2. Significance:
（1）The court asserted that the trademark distinctiveness, popularity, and the accused infringer's objective and subjective intention of registering and utilizing the subsequent trademark are all elements to be examined in determining whether there was trademark infringement. Infringement of the prior right owner's trademark occurs when the prior trademark has been registered and used and has gained significant popularity, and the accused infringer subsequently registers and uses the same trademark with the subjective intent of exploiting the prior trademark's reputation, and fails to avoid infringing the prior right holder's prior legitimate rights and interests.
（2）In the judgment, the court displayed its willingness to step up efforts to combat malicious preemptive registration and trademark free-riding, disclosed the judicial direction of upholding the ideal of valuing honesty, encouraging and protecting innovation, and supporting the cause of establishing a great nation of brand, and played an essential role in protecting the interests of well-known enterprises and brands.
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