Cui Wen and He Wei, 28 November 2022, first published by WTR

Background:

Hermès is a prestigious French luxury fashion house. Since 1837, Hermès has remained faithful to its artisanal model and its humanist values. “Hermes” brand and the iconic commercial designs associated with Hermes enjoy high reputation around the world.

In China, luxury goods are frequently used as gifts with purchase in the promotion of real estate property to create a high-end image of the real estate projects. However, with competition now reaching fever pitch, some real estate developers start to step out of line and piggyback on the reputation of luxury brands to influence the buying decision of the consumers. Below is a live example, which may offer brand owners some takeaways on how to hold the free-riders accountable.

In 2020 Hermès found that a Chinese company, Shandong Hu Gang Construction Real Estate Development Co., Ltd. (‘Hu Gang Company’), developed and promoted a real estate project “Hugang Center”. Hu Gang Company named its apartments “Hermes Theme Apartment”, which blatantly used the house mark of Hermes. Hu Gang Company also used Hermes trademark in the promotional material such as posters, brochures, advertisement and extensively deployed Hermes iconic design elements such as the orange color, “H” character, horse and carriage device, as well as Hermes products as the interior decoration of the sales center and prototype apartment (as shown below).

Hermès sued Hu Gang Company before Qingdao Intermediate Court, alleging the use of Hermes’s trademark constitutes trademark infringement and the use of Hermes iconic elements and products unfair competition.

The defenses of Hu Gang Company mainly include:

• The defense for trademark infringement: The leather products (designated goods of Hermes registered trademarks) and real estate-related services are markedly different. Even if the trademarks of Hermes “” and “爱马仕” (Chinese equivalent of Hermès) have reached well-known status, the protection scope of such marks cannot be extended without limit so as to cover the real estate-related services.

• The defense for unfair competition:

1. Once the products are sold, Hermès has no right and no control over in what way its products are used others, hence, the display of Hermès products in the sales center is legitimate.

2. The alleged design elements, such as orange color, “H” character, horse and carriage device, are common elements in the public domain, over which no one shall have monopoly, including Hermès. Therefore, the use of these elements did not constitute unfair competition.

Trial court decision

Qingdao Intermediate Court rendered on August 28, 2022 the judgment as follows:

• The evidence adduced by Hermes sufficed to justify that its trademark “” and “爱马仕 (Chinese equivalent of Hermès)” have reached well-known status, and the use of these trademarks by the defendant in the promotion of real estate project would cause confusion among the relevant public. Therefore, trademark infringement can be established.

• Hermès iconic design elements including orange color, “H” character, horse and carriage patterns have formed one-to-one correspondence with Hermès and enjoy high reputation among the relevant public. Rather than just using one or two of the aforesaid design elements, the defendant slavishly copied all the elements, which in combination with the use of the Hermès house mark and products, which exhibits the unmistakable bad faith of the defendant and aims to create confusion among the consumers. Hence, the malicious use of these iconic elements as well as Hermès products may evoke an association with Hermès thus helps the defendant gain unfair competitive edge. Therefore, unfair competition shall be established as well.

Qingdao Intermediate Court thus ordered cessation and awarded Hermès damages of RMB 2 million. The defendant later appealed before the Shandong High Court and the case is now pending for trial.

Comment

Due to its unparalleled position in the luxury world, Hermès has basically become synonymous with top-level quantity, thus it is frequently misused by players in an array of different industries for promotional purposes. It is therefore inevitable that Hermes resorts to cross-class protection in dissuading these misuses.

The court decision reaffirms that the well-known trademark recognition is the best way to obtain cross-class protection, even if the accused products/goods are markedly different from that of Hermès.

The Qingdao Court also innovatively grant protection over the iconic design elements of Hermes on unfair competition basis. This attests the increasing willingness of Chinese courts in acknowledging the significance of iconic designs, especially in dealing with bad faith infringers.