By Jiao Hongbin

At the end of the year 2019, the Supreme People’s Court of the People’s Republic of China (“SPC”) made a retrial judgment on administrative dispute over the invalidation request against the renowned liquor brand “Jiang Xiao Bai”. With the help of KWM, Chongqing Jiangxiaobai Liquor Co., Ltd. (“Jiangxiaobai”) successfully reversed the disadvantageous situation of the second instance trial and finally won the retrial. The retrial judgment of this case put an end to a 7-year dispute over the validity of the trademark between Jiangxiaobai and Jiangjin Winery (Group) Co., Ltd. (“Jiangjin Winery”). It safeguards and reinforces the innovative achievements and market reputation of “Jiang Xiao Bai” brand, and to a great extent guarantees its future operation and development. On April 23, 2020, this case was selected as one of the 60 typical cases in the Annual Report of 2019 on Intellectual Property Cases of SPC.

Created at the end of 2011, “Jiang Xiao Bai” has become a representative of emerging liquor brands in China. The trademark “Jiang Xiao Bai” No.10325554 involved in this case is the first trademark applied for registration among the registered trademarks owned by Jiangxiaobai, and is also the core intellectual property of Jiangxiaobai. The focus of dispute in this case is whether the application of the registered trademark “Jiang Xiao Bai” No.10325554 (“Subject Trademark”) constitutes the situation where an agent or a representative preemptively registers the trademark of its principal, which is forbidden by Article 15 of the Trademark Law of the PRC amended in 2001 (“2001 Trademark Law”). SPC supported most of Jiangxiaobai’s claims  and further clarified the followings: (1) There are many doubts in the evidence submitted by Jiangjin Winery and thus the said evidence cannot prove that Jiangjin Winery had used the “Jiang Xiao Bai” trademark beforehand; (2) Although Jiangjin Winery and Xinlantu (the predecessor of Jiangxiaobai and the previous rights owner of the Subject Trademark) was in a distribution relationship, the sales contract of custom-made product between them stipulated that the related rights and interests including the product concepts and advertising slogans of the custom-made product belonged to Xinlantu; (3) The documented evidence proves that the name and related product design of “Jiang Xiao Bai” were first proposed by Tao Shiquan, the legal representative of Xinlantu at that time. Therefore, SPC held that the application for registration of the Subject Trademark did not violate any legal rights or interests of Jiangjin Winery and thus it did not violate Article 15 of the 2001 Trademark Law. As a result, the validity of the “Jiang Xiao Bai” registered trademark is finally maintained.

In the Annual Report of 2019 on Intellectual Property Cases, SPC’s following comments on this case have provided guideline for the judicial application of Article 15 of the 2001 Trademark Law: although there was distribution relationship between the two parties, if both the trademark design and related product design were proposed by the agent, and the sales contract clearly stipulated that the legal rights and interests related to the product belonged to the agent, in the absence of the principal’s prior use of the subject trademark, the subject trademark should not be determined as the “trademark of the principal” protected by Article 15 of the Trademark Law.

This case sets a good precedent for the understanding and application of Article 15 of the 2001 Trademark Law correctly. It can be concluded from the case that: (1) It is the principal who should bear the primary burden of proof regarding “the prior trademark of the principal”, and if it fails to do so, the disputed trademark should not be determined as violation of Article 15 of the 2001 Trademark Law even if the parties are in a distribution or representative relationship. (2) Although Article 15 of the 2001 Trademark Law does not require the proof of “actual use” of the prior trademark in PRC, it does not mean that said article has no requirement on the proof of “prior trademark”. The principal still needs to prove that the claimed trademark constituted a trademark protected by the trademark law and belonged to the principal before the application date of the subject trademark.

In addition, this case also explains the value and legislative purpose of Article 15 of the 2001 Trademark Law. As an exceptional protection for those unregistered trademarks under the trademark registration system of the PRC, the application of Article 15 should be in a strict and prudent way. When applying the said article, the court should consider the current trademark registration system adopted in the PRC and correctly set the thresholds and borders of its judicial application. While combating trademark squatting, Article 15 shall by no means be interpreted in an extensive way and the threshold for its application shall not be lowered either so as to prevent it from becoming a tool for those bad-faith people to plunder others’ trademark rights by improperly using the trademark dispute system.