Facts

The plaintiff Martell is the oldest of the great cognac houses, having created cognacs for three centuries. Martell offers a plethora of spirits including Martell XO, L’or de Jean Martell, Martell Noblige, Martell Cordon Bleu and Martell Creation, which feature unique bottle designs and are known to the public in China. Martell has registered all the aforesaid bottle shapes as trademarks in China in class 33, including trademarks No.4831519 (since April 14, 2008), No.7107227 (since December 21, 2011), No.5667880 (since August 28, 2009), No.6956698 (since June 21, 2010) and No.5707932 (since December 14, 2009).

In 2018, it came to Martell’s attention that Company A and Company B jointly produced and distributed five brandy products “SDEGREE XO”, “MANSIE XO”, “HUANG VSOP”, “DINGYI V.S.O.P” and “DINGYI XO”, with shapes quasi-identical with its trademarks and trade dresses (collectively “Infringing Products”). Mr. Gan, as the legal representative and controlling shareholder of the two companies, owns design patents for the Infringing Products and has been using his personal bank account in daily business operations, specifically as a beneficiary account to receive payments from the buyers of the Infringing Products.

Below is a comparison table showcasing Infringing Products and corresponding Martell spirits (with the image of the registered trademarks and product trade dress).

Martell filed five civil lawsuits before the Huadu District People’s Court of Guangzhou on the ground of 3D trademark infringements and unfair competition against the three infringers.

Court decision

On 31^st December 2019, the Huadu District Court ruled in favor of Martell, affirming trademark infringement and unfair competition (infringed the famous decorations/trade dress of the five Martell spirits). Mr. Gan used the design patents as non-infringement defence, which was dismissed by the court. Regarding the damages, the court fully supported Martell’s claim for the amount totaling RMB 5 million in the five cases. The Court also ruled that Mr. Gan shall bear joint and several liabilities with the companies.

The defendants appealed the five cases to the Guangzhou IP Court. The Court of Appeal also sided with Martell, found trademark infringement and affirmed the damages awarded by the Trial Court. It is the case concerning Martell XO, where the opinions of the Trial court and the Court of Appeal diverge. Rather than following the same logic applied in the rest four cases, where trademark infringement and unfair competition are simultaneously established, the Court of Appeal opined that Martell cannot argue trademark infringement and unfair competition (decoration of famous products) in this one case at the same time.

Comments

The inconsistency in the findings of the Court of Appeal seems to substantiate the complex and murky judicial landscape as to whether 3D trademark infringement and trade dress infringement (unfair competition) could be concurrently applied to protect the same product design in China.

Still it is extremely welcome that the controlling shareholder is found jointly and severally liable with the accused companies. China’s Company Law exempts the shareholder of a limited liability company (LLC) from assuming joint and several liabilities in connection with the company’s activities, unless the former is a shareholder of a one-person LLC (namely a LLC with only one natural person shareholder or legal person) and is unable to prove that the property of such one-person LLC is independent from his own property. In the five cases, both courts ascertained that the contolling shareholder not only holds a share in the accused companies but also jointly committed infringing acts with these entities. The evidence collected by Martell proving that Mr. Gan has been using his personal bank account to receive payments from the buyers of the infringing products plays a decisive role.

By Yongming Fan