For the first time, a colour combination trade dress has been granted judicial protection – before being registered as a trademark – as a 'specific trade dress of a famous commodity' under the Anti-unfair Competition Law.
Article 5 of the Anti-unfair Competition Law states:
"A business operator shall not harm his competitors in market transactions by resorting to any of the following unfair means…
(2) using without authorisation a unique name, package or decoration of another person's famous commodity, or using a name, package or decoration similar to that of another person's famous commodity, thereby creating a confusion between its own commodity and that famous commodity and leading the consumers to mistake the former with the latter."
ANDREAS STIHL AG & CO KG is the largest manufacturer of chainsaws in the world. Since 1972, STIHL has been using the orange and grey colour combination as its trade dress on chainsaws and other garden power equipment worldwide (see Figure 1 below).
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Figure 1
As early as 1995, STIHL established a wholly owned subsidiary in China to explore the Chinese market, opening chain stores and providing after-sale service to consumers. STIHL's products are sold in most cities and provinces in China, claiming more than half of the market share of high-end chainsaw products.
In 2013 STIHL became aware that a garden machinery company in Hangzhou was producing and selling STIHL chainsaw copies. This company copied a series model of STIHL chainsaws using the specific colour combination of orange and grey – without, however, using any STIHL trademark on the products.
In September 2013 STIHL filed a complaint against the infringer with the Hangzhou Administration for Industry and Commerce (AIC), Yuhang Branch, on the grounds of unfair competition. The local AIC inspected the premises of the company and discovered more than 160 assembled chainsaws with orange and grey decoration along with a large number of spare parts. The AIC ordered the company to stop use of the orange and grey colour decoration. In March and April 2014 the AIC – following up on STIHL's new complaints – inspected the company twice and found that it was still producing and selling STIHL chainsaw copies with the orange and grey colours.
On April 23 2014 STIHL filed suit against the Hangzhou company before the Hangzhou Intermediate Court on the grounds of unfair competition (Article 5 of the law).
On June 2 2015 the Hangzhou Intermediate Court rendered its judgment, finding as follows:
- The plaintiff's orange and grey colour combination on chainsaws constituted a unique trade dress of a famous commodity under the Anti-unfair Competition Law.
- The unauthorised use of such colour combination constituted an act of unfair competition.
The defendant appealed to the Zhejiang High Court, arguing that the colour combination should not be granted protection under the Anti-unfair Competition Law on the following grounds:
- The evidence furnished by STIHL was insufficient to prove the famous status of its chainsaw commodities.
- The orange and grey colour combination was neither distinctive nor specific.
On September 18 2015 the appeal court rejected the appeal. The court affirmed that STIHL's chainsaw products have been distributed in numerous provinces and cities in China, boasting substantial sales numbers and revenues. The court also confirmed – in the absence of any contrary evidence from the appellant – that such products were highly reputable in the Chinese market and were widely known by the relevant consumers. The court further determined that STIHL's chainsaw products were famous commodities by taking into account sales volumes and STIHL's considerable efforts in promoting the products.
The court thus concluded that STIHL's long-term and extensive promotion and use of the orange and grey colour combination trade dress on its famous chainsaw products enabled the relevant public to associate such trade dress with STIHL's chainsaw products, which made the trade dress distinctive enough to serve as a source identifier.
Notably, STIHL had filed a trademark application for the orange and grey colour combination, which had been initially refused by the China Trademark Office.
The Trademark Law 2001 allows colour combinations to be registered as trademarks. Nevertheless, since colour combination trade dress is normally deemed as inherently non-distinctive, it is an arduous task for the applicant to prove that such colour combination has acquired secondary meaning through extensive use and advertisement.
Upon review of the preliminary refusal of trademark registration, STIHL submitted a large amount of evidence and finally obtained approval of the trademark on August 13 2015. However, the civil litigation had to be based on the Anti-unfair Competition Law, because in 2014 the trademark had not yet been registered.
The decision constitutes the first precedent in China that a colour combination trade dress can be granted judicial protection as the unique trade dress of a famous commodity. In this case, STIHL furnished extensive evidence to prove the famous status of its chainsaw products and the distinctiveness of its orange and grey colour combination. The evidence included market survey reports, constant advertisement and publicity campaigns, audit reports on sales volumes in China, industry rankings and the testimony of industry insiders. This could serve as an important example for similar cases in future.
For further information on this topic please contact Shuhua Zhang or Fengquan Yang at Wan Hui Da Law Firm & Intellectual Property Agency by telephone (+86 10 6892 1000) or email ([email protected] or [email protected]). The Wan Hu Da Law Firm & Intellectual Property Agency website can be accessed at www.wanhuida.com.
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