SPC clarifies requirements for citing prior use defence in trademark infringement cases

Introduction
Facts
SPC decision
Comment

Introduction

In Lin Mingkai v Fuyun ([2018] ZGFMZ 43, 3 September 2019), the Supreme People's Court (SPC) clarified the requirements to cite the prior use defence under Article 59.3 of the Trademark Law. In this regard, the court stated that:

• the only person eligible to cite this defence is the prior user themselves; and
• such use must have occurred prior to the registration application and the trademark owner's use of the registered trademark.

Further, for the first time, the SPC made it clear that geographical scope is a key element in defining the original scope of use.

Facts

Lin Mingkai sued a Chengdu furniture store (Chengdu Fuyun Furniture Store) for the infringement of two trademarks, which had been applied for with regard to furniture in Class 20 on 19 November 2002 (3374814) and 25 September 2009 (7724167).

In its defence, Chengdu Fuyun Furniture Store claimed that it had been authorised to use the trademarks by Fuyun Company, which had been using the disputed trademarks since 2001. Therefore, Chengdu Fuyun Furniture Store invoked the prior use defence, as provided for in Article 59.3 of the law.

The first-instance court ruled in favour of the plaintiff. It found that although Fuyun Company's use of the disputed trademarks had led them to acquire a certain influence before the registration of the plaintiff's trademarks, the evidence failed to show that Chengdu Fuyun Furniture Store (the defendant) had used the disputed trademarks itself before the application date. Moreover, the authorisation that Chengdu Fuyun Furniture Store claimed to have received from Fuyun Company concerned another trademark, registered by Fuyun Company in 2010 in a different class.

The appeal court ruled in favour of the defendant and supported the prior use defence. The court not only confirmed Fuyun Company's right of prior use, but also affirmed that Chengdu Fuyun Furniture Store had obtained the right to use such trademarks from Fuyun Company, together with the rights attached to such prior use. In addition, the court found that:

• the disputed trademarks were not identical to the plaintiff's registered trademarks; and
• Chengdu Fuyun Furniture Store had not copied the plaintiff's registered trademarks in bad faith.

SPC decision

The SPC reversed the appeal court's judgment and rejected the prior use defence. It found that the evidence proved only that Fuyun Company's prior use of the trademarks had caused them to acquire a certain influence before 2009, but not before 2002. Further, whether Chengdu Fuyun Furniture Store had obtained authorisation from Fuyun Company was irrelevant.

The SPC clarified the conditions which must be fulfilled in order to cite the prior use defence:

• The prior use should predate not only the application for registration of the claimed trademark, but also the trademark owner's use of the registered trademark.
• The prior use should concern a mark identical or similar to the registered trademark.
• The prior use should concern commodities identical or similar to those designated by the registered trademark.
• The prior use should have led the mark to acquire a certain influence before the application for registration and the trademark owner's use of the registered trademark.
• The prior use defence cannot be raised by any persons other than the prior user, even if the persons are authorised by the prior user to use the mark.
• The prior use should be maintained within the original scope, which should be decided according to the scope defined by the reputation produced by the prior use, including geographical scope, method of use (online or in physical stores) and production scale. The court added that opening new stores in places where the prior mark's influence does not reach and extending the physical business to online sales could be deemed as exceeding the original scope. In addition, the production capacity and operation scale should be considered in deciding the meaning of 'exceeding the original scope'.

Comment

This is the most comprehensive analysis by the SPC to date regarding the prior use defence under Article 59.3 of the Trademark Law. The court clarified the following key points.

Person eligible for defence
The SPC indicated that only prior users are eligible to cite the prior use defence. Other courts have upheld prior use defences raised by persons authorised to use the relevant marks by the prior user (eg, Jiang Yuyou v Fuzi Temple Catering company ([2013] SZMZZ 37, 27 April 2013), Jiangsu High Court). Thus, the SPC's judgment may affect future judicial practice.

Prior use must start before certain critical date
The SPC made it clear that the prior use of a sign should have caused it to acquire a certain influence before:

• the date of the registration application of the trademark; and
• the registrant started using its trademark.

This differs from the Beijing IP Court's judgment in Zhongchuang v Beijing Qihang ([2015] JZMZZ 588, 31 December 2015), which was selected by the SPC as one of the top 10 IP cases in 2015. In this case, the court held that if the use of a sign was made prior to the application date of the registered trademark but after the use of such mark by the trademark registrant, the prior use defence could be upheld – as long as such prior use was made in good faith.

Geographical scope as factor of original scope
For the first time, the SPC included geographical scope, among others, in defining the original scope of use. In practice, if the mark in question is a service mark (eg, a restaurant), it will be easy to refer to the concept of geographical scope. However, if the mark is applied to goods, the question of how to control the circulation of such goods – especially online – remains unanswered.

For further information on this topic please contact Paul Ranjard, Hui Huang or Binbin Du at Wanhuida Intellectual Property by telephone (+86 10 6892 1000) or email (ranjard@wanhuida.com, huanghui@wanhuida.com or dubinbin@wanhuida.com). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.

Cai Ye assisted in the preparation of this article.