By Xu Jing, Ye Wanli, Liu Xinyu, King and wood Mallesons
On December 30, 2019, Guangzhou Tianhe District People’s Court issued a judgment granting trade dress protection for two iconic handbag series designed and sold by a famous luxury good company1. The distinctiveness determination test in this case is particularly helpful to luxury brands for protecting iconic styles or product series that normally include generic design elements that have been widely used by the industry.
In this case, the court ruled that a combination or arrangement of generic design elements used by the industry is protectable as trade dress under the unfair competition law, if 1) these elements have broad scope of “design freedom”, 2) the plaintiff incorporates its own unique design features to these elements, and 3) the combination or arrangement of these elements demonstrates unique overall appearance that satisfy the distinctiveness requirement.
After the amendment to the trade dress provision in 2017, PRC courts become more open to the “totality of the circumstances” approach rather than the traditional three-step test, i.e. courts will evaluate all relevant factors together and slightly lower the threshold on the determination of distinctiveness or degree of fame for the trade dress if the defendant’s bad faith in causing public confusion is apparent. This trend is mirrored by another two cases decided in December 2019 by Jiangsu Higher People’s Court and Beijing Intellectual Property Court, which applied the same approach and granted trade dress protection on combinations of generic design elements for a honey product manufacturer (honey bottles)2 and a popular restaurant chain (restaurant decorations)3. This case is a good example to illustrate how a court determines threshold of distinctiveness for an iconic style or product series with generic design elements under the “totality of the circumstances” approach.
Defendants, a HK-registered shell company with a trade name confusingly similar with the plaintiff, a PRC-registered trade company and their person in charge, made, sold and promoted two handbag series, which overall appearance are confusingly similar with the plaintiff’s two iconic series, on a stand-alone website and online stores since 2015. The defendants claimed themselves as a business in redesign and parody of famous brands. Their distributors also made some false association with the plaintiff in online promotion.
Figure 1 – Defendant’s Series A
Figure 2 – Defendant’s Series B
In 2018, the plaintiff sued the defendants for infringement of trade dress and violation of the general principle of good faith and sought 1) an injunctive order, 2) a damage award in amount of RMB 3,000,000, including enforcement costs, and 3) an order for eliminating negative effects.
The plaintiff produced a significant amount of evidence to support high degree of fame that the plaintiff and the trade dress to be protected had achieved in China, including media coverage, special audit reports, fashion guides, market research reports, and protection records. The plaintiff also submitted a consumer survey to prove the exclusive connection between the plaintiff and the trade dress.
The plaintiff claimed the following elements as its trade dress for its iconic series A: 1) the three-dimensional diamond pattern; 2) the half-covered front panel with a slightly-curved hem; 3) the tongue-shape lock container; 4) the smile-shape pocket on the back; and 5) holes for securing the metal strap.
Figure 3 – Plaintiff’s Iconic Series A
The plaintiff claimed the following elements as its trade dress for its iconic series B: 1) the U-shape three-column hem; 2) the full-covered front panel; 3) the container of metal lock; and 4) the large-size round-shape chain.
Figure 4 – Plaintiff’s Iconic Series B
Defendant’s primary rebuttal arguments were: 1) the elements of the plaintiff’s claimed trade dress were generic design elements in the industry, supported by evidence on similar designs made by Michael Kors, Valentino, Zara and other famous brands; and 2) the plaintiff’s applications for registering the two bag series as 3D trademarks were rejected by the Trademark Office for lack of distinctiveness.
The court found that the trade dress had acquired high degree of fame in China. Then the court explained the rule as stated in the second paragraph, and found that the combination of elements 1), 2), 3) and 4) of the plaintiff’s iconic series A and the combination of elements 1), 2) and 3) of the plaintiff’s iconic series B presented a unique overall appearance and thus protectable as trade dress. The court also referred to a consumer survey, which results showed that the interviewees could quickly recognize the bags without seeing the plaintiff’s trademark. As for the defendant’s arguments, the court rejected them on the ground that the plaintiff first used the designs and the standard of distinctiveness is different in examination of a 3D trademark.
In infringement analysis, the court found that the defendant’s series A and B were almost identical with the plaintiff’s iconic series A and B respectively, and the relevant public with ordinary degree of care could not distinguish them even the defendants used its own trademark on its bags. Then the court stated that the defendants, as a company in the same industry, should develop its own unique features based on those generic design elements with broad scope of “design freedom” and refrain from copying or intimating other’s designs with high degree of fame. The court ruled that the defendant’s unauthorized use of the trade dress would mislead consumers on the relationship between the plaintiff and the defendants, even though differences on price, quality, targeted groups of consumers, trademarks and manufacturers existed. The court, again, referred to the consumer survey to support its finding on likelihood of confusion.
The court ruled that the defendants violated Article 6.1 of the PRC Anti-Unfair Competition Law (2019), and granted 1) an injunctive order refraining the defendant from using designs similar with the plaintiff’s trade dress on handbags; 2) an order for issuing a public statement on China Market Regulation News (note: this paper is operated by the State Administration of Market Regulation) to eliminate impacts of public confusions; and 3) an award of damages in amount of RMB 1,000,000, including enforcement costs.
- Take a more positive position
The growing trend that PRC courts become more open to use the “totality of all the circumstances” approach in unfair competition cases is a good signal to luxury brand owners, especially for iconic and classic styles or product series which designs and elements might have been “diluted” as generic elements after years of copying or intimating by the infringers. This case shows that a court can have some degree of flexibility on the threshold on distinctiveness when a plaintiff can establish that the trade dress to be protected enjoys high degree of fame among Chinese relevant public and the defendant’s bad faith are egregious. A luxury brand owner may consider taking a more positive position in dealing with infringers who copy those highly famous classic series.
- Evidence on high degree of fame is critical
Evidence demonstrating high degree of fame of the product and the trade dress are still essential to success and weigh more in court’s analysis. Special audit reports, professional journals, media coverage and other types of evidence that show strong sales performance and exposure to relevant public exclusively associated with the product and the trade dress to be protected are the strongest evidence.
- Distinctiveness is still important
While court has some degree of flexibility on threshold of distinctiveness, it is still recommended to arrange thorough evidence collection on uniqueness of the trade dress and be prepared to counter any rebuttal arguments based on similar designs from other brands, as the court in this case examined very closely on every similar design mentioned by the defendant. A clear history of the product series with necessary supporting evidence are also helpful, especially when the trade dress to be protected have been copied by strong competitors.
- Muster the strongest evidence on bad faith
Evidence related to infringer’s false association with brand owners, offering of a significant number of products that copy styles or designs of the brand owner, and false claims on its products origins from overseas are strong. It is always recommended to engage private investigators to conduct a thorough desktop search and onsite visits to confirm details of the infringer and its infringement as many as possible, and to closely monitor the infringer’s online activities and timely secure the evidence. Cost efficient alternatives to the traditional notarized downloads are provided by certified vendors, and new online infringement or false association spotted before the trial can be secured in a proper format in a much cheaper way.
- Broad discretion, execution matters
While consumer surveys were admitted in some cases, PRC courts still take a conservative attitude on this and judges have relatively broad discretion in determining the probative force of the survey. When consumer survey become critical to establish distinctiveness or likelihood of confusion, a well-designed questionnaire and well-executed data collection and processing are equally important. It is always recommended to involve lawyers to monitor and provide guidance to survey firms on the execution, to decrease number of invalid answers due to poor interview skills or data processing.
 (2018) Yue 0106 Min Chu No. 9505
 (2019) Su Min Zhong No. 1486.
 (2019) Jing 73 Min Zhong No. 3003.
For further information
Jing Xu Partner
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Wanli Ye Senior Associate
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Xinyu Liu Associate
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