Finding of Unconventional Trademark Infringement— A Case Analysis of the “优玛U.MA” Trademark Infringement

Issue 31 By Zhou Xiaobing,[Trademark]

I. Facts
Plaintiff: Wang Doe (Taiwan, China)
Defendant: Beijing Longxiang Huaxia Trading Co., Ltd.

Plaintiff claims exclusive right to the word and design combination mark of “優瑪U.MA” under registration coving goods in Class 17 with respect of heat insulation paper for automobiles and heat insulation paper for buildings. Plaintiff has licensed Guangzhou Chinnex Trade Co., Ltd. (herein “Guangzhou Chinnex”) to employ this trademark on the rupture film products, which have achieved market reputation. In early 2008, realizing unauthorized use of “优玛U.MA” by the defendant on rupture film products for automobiles, and promotional materials from defendant on its website, in the cover page of the Advertisement of Huicong Commercial Information, and in street advertisements, designating优玛U.MA as its trademark, plaintiff brought action in court demanding cease and desist, destruction of the infringing products and promotional materials, removal of all infringing advertisements, and an apology in Beijing Evening News, etc., recuperation of damages of 500,000 Yuan, and litigation costs.

Defendant contends that the “优玛U.MA” mark it uses has distinctive differences from the registered trademark of plaintiff; the automobile rupture films that defendant is selling under the “优玛U.MA” mark is neither identical nor similar to the goods approved to use the registered trademark of plaintiff; that its use of the “优玛U.MA” mark is fair use in the sales process, which does not constitute infringement; that even if the rupture films for automobiles bearing the “优玛U.MA” mark were infringing goods, defendant as seller, without actual knowledge, should not be liable for damages; and therefore, defendant has not infringed the registered trademark of plaintiff, and moved to dismiss plaintiff claims.

The trial court found that the trademark “優瑪U.MA” was registered by the Trademark Office on April 21, 1997 under No. 984057 in the name of Pujun (Taiwan) Co., Ltd. covering goods in Class 17 for heat insulation paper for automobiles and heat insulation paper for buildings;

Said mark was assigned to Wang Xianghua, which was duly recorded with the Trademark Office on June 28, 2007, effective until April 20, 2017;

After assignment, Wang Xianghua issued an Authorization of Trademark Licensed Use under which Wang Xianghua authorized Guangzhou Chinnex to use the mark exclusively and to take all actions on behalf this company in case of trademark infringement. The authorization remains effect until April 20, 2015.

Wang Xianghua claims that the authorization is an exclusive license, and contends that that Guangzhou Chinex began selling the rupture film products under the brand “U.MA” in January 1, 2000. From January 1, 2007 until July 30, 2008, the total sales of those products are 4,337,827.56 Yuan and the gross profit rate is 29%.

On November 29, 2007, Wang Xianghua made purchases of rupture film products from defendant, in the name of Jiangsu Taizhou Famous Cars Tour. Wang Xianghua submitted to the court in evidence the packagings marked with “优玛TM U.MA汽车防爆膜” (优玛TM U.MA Automobile rupture film); “NAME: 金墨绿” (NAME: Jin Molv); “ROLL NO: CA-3000”; “SIZE: 1.52m×12m”; “MADE IN U.S.A.”, and the rupture films themselves are marked “U.MA CA-300031.”

Defendant alleges that from September until November 2007, defendant purchased from Beijing Chinnex Co., Ltd. (hereinafter “Beijing Chinnex”) 4 rolls of the allegedly infringing goods, the total price being 4,950 Yuan and that all the products have been sold out, the selling price being 7,400 Yuan.

Guangzhou Chinnex granted Beijing Chinex an exclusive right to use the “优玛 U.MA” mark which was registered by the United States Patent and Trademark Office under No. 2793683 of the United States, and to take all actions on behalf this company in case of trademark infringement. The authorization remained effect until December 31, 2008.
Wang Xianghua did not object to the authenticity of the license, but claims that he was entitled to the U.S. Registration No. 2793683 for the word and arrow design combination mark of “U.MA”; he further claims that Guangzhou Chinnex rescinded its license to Beijing Chinnex in July 2007 and made no more shipments to the latter since August 1, 2007.

II. The ruling
The Second Intermediate People’s Court of Beijing ruled, in accordance with the Civil Code, Article 134 (a) (1) and (7), and Trademark Law, Articles 52 (e) and 56, (1) that defendant is permanently enjoined, as of the date of the decision, from the infringing activities of advertising the “优玛U.MA” as its own trademark in commercial operations; (2) that defendant compensate Wang Doe’s economic losses in the amount of 2000 Yuan within 10 days of the decision; plaintiff’s all other claims are hereby dismissed. Upon the above judgment, neither party appealed.

III. Analysis
The case seemed to be a simple trademark infringement against a seller, but it touches upon at least three important issues: (1) determination of similar goods which are not specified in the International Classification of Goods; (2) consideration of possible thirty party manufacturer’s defense which is not raised in the present infringement disputes involving a mere seller; and (3) consideration of nonstatutorily defined trademark infringement activities upon a registered trademark.

(I) Whether defendant’s rupture film products constitute infringing products for the trademark infringement
Wang Doe’s trademark “優瑪U.MA” is a registered trademark and as such, deserves protection under the laws of China.

Whether plaintiff’s claims of trademark infringement arising from defendant’s sales of rupture films for automobiles can be sustained depends on the following three: (1) whether defendant’s products were identical with or similar to plaintiff’s products; (2) whether defendant’s mark was identical with or similar to that of the plaintiff; and (3) whether the mark as used on the rupture films was under authorization by the trademark registrant.

In judicial practice, to judge the tenability of infringement, the court usually follows the following sequence: “identical or similar class of the goods” → “identical or similar trademarks” → “the existence of a license or other right cause for defendant’s use of the allegedly infringing goods”.

(1) Were the automobile rupture films that defendant sold the same or similar type as the goods on which plaintiff had been approved to use the registered trademark?

Usually, to determine identicalness or similarity between two goods, the International Classification of Goods and Services may be used as a reference, but it is not dispositive. Where a party produces evidence to show similarity or dissimilarity of goods in contradiction with the Classification, such evidence must be evaluated by courts; otherwise, the Classification may be presumed to be relevant.

In the case at hand, defendant claims that it sold “heat insulation film for automobiles”; whereas plaintiff insists that rupture film for automobiles, heat insulation and rupture prevention film for automobiles, or heat insulation film and automobile heat insulation paper are the same products; defendant acknowledges that heat insulation paper and heat insulation film are the same products, but heat insulation film and rupture film are not. So, it can be determined that “heat insulation paper for automobiles” and “heat insulation paper for buildings” are two types of products intended for different purposes. In determining the class of the allegedly infringing good, “automobile heat-insulation film” and “automobile heat insulation paper” should be compared. However, because neither “heat-insulation film for automobiles” nor “heat insulation paper for automobiles” is listed in the International Classification of Goods and Services, it is impossible to resolve whether the goods are similar or not.

Since defendant uses multiples designations on its website in relation to the rupture films it sells, it can reasonably be derived that rupture film, heat insulation and rupture prevention film, heat insulation film and heat insulation paper, all for automobiles, are different in name only. Therefore the rupture films that defendant sells are identical to the goods approved to use plaintiff’s registered trademark.

(2) Whether identicalness or similarity existed as to the word and design combination mark of “優瑪U.MA”

Determination of similar marks should be based on the general level of attention paid by the average consumer with ordinary knowledge or experience when buying the products in question. Since the main portion of a mark will usually affect the general public’s overall impression of the mark, the judgment of trademark similarity should be made on the marks as a whole, supplemented with comparison of main parts. Word and design combination trademarks may be determined as similar in case of any of the following which is sufficient to confuse or mislead the relevant public: (1) similarity in the entirety; (2) identicalness or similarity between words; (3) similarity of the designs in spite of different words; or (4) Other factors that may contribute to determination of similarity.

In the case at hand, for the “優瑪U.MA” text-and-graph combination trademark that plaintiff owns, the main part is the text of “優瑪U.MA” which can be called and is fundamentally distinctive. Despite the difference between traditional Chinese and simplified Chinese, “優瑪U.MA” and “优玛U.MA” are identical in terms of the text. Therefore, the two text-and-graph combination marks should be determined as similar.

(3) Whether authorization had been obtained from a trademark registrant for using the “优玛U.MA” or “U.MA” on the automobile rupture films that defendant sold

There are a large number of cases in judicial practice where the proprietor goes directly after the seller or even the retailer, rather than the manufacturer, of the infringing goods. Jurisprudentially, a manufacturer and a seller have conducted separate infringing acts upon intellectual property, and should therefore be held severally liable. Thus, usually, the manufacturer and the seller are not necessarily sued  as co-defendants in an IP infringement cases. To enforce its rights, a plaintiff may name both as codefendant, or alternatively, go after anyone of them.

However, from the perspective of judicial practice, the manufacturer of the infringing goods is much more capable and positive than the seller in raising pleas against the allegations of plaintiff. The seller or retailer, on the other hand, usually lay emphasize  on the legal source of the product it sells. It is often passive in raising infringement comparison or other pleas.

For the case at bar, it can be confirmed that the related automobile rupture films that defendant sold were different from those that plaintiff presented as manufactured by Guangzhou Chinnex. Defendant presented the court with a photocopy of the Trademark License that Beijing Chinnex issued. That trademark license says that Guangzhou Chinnex granted Beijing Chinnex full access to the “优玛 U.MA” mark, but it contains flaws: the trademark noted in the license is a U.S. trademark; and according to plaintiff’s statement in court, this trademark in the form of “优玛 U.MA” was somewhat different from the U.S. trademark that plaintiff owns. However, considering the nonstandard use of “优玛U.MA” also appears in the trademark license by which plaintiff grants Guangzhou Chinnex the full access to the “優瑪U.MA” text-and-graph combination trademark, the licensor-licensee relationship between plaintiff and Guangzhou Chinnex, and the parent-son relationship between Guangzhou Chinnex and Beijing Chinnex, as Guangzhou Chinnex and Beijing Chinnex are not parties to the case at hand, the existing evidence is impossible for the court to judge the effectiveness of the trademark license from Beijing Chinnex as provided by defendant or that the automobile rupture films that defendant sold and were marked with “优玛U.MA” and “U.MA” infringe the exclusive right of plaintiff to the “優瑪U.MA” text-and-graph combination registered trademark. To sum up the above, plaintiff’s claim that defendant should bear the infringement liabilities for selling the automobile rupture films which infringe the trademark of plaintiff cannot be supported by the court due to insufficient evidence.

(II) Whether commercial advertisements constituted infringement
Plaintiff claims that defendant publicizes the “优玛U.MA” mark as a brand of defendant in a number of advertisements. In addition to the four typical infringing acts, as listed in Article 52 (I)-(IV) of the Trademark Law of China, Article 52(V) provides that “other prejudices to the exclusive use of a registered trademark” can be determined as infringement. Then, on what jurisprudential basis is this determination made?

Concerning the special laws governing intellectual property, the academic field and the judicial practice field have long been divided into legalism and general-clause view. Take the Trademark Law of China for example. In the opinion of this author, first, if strict legalism is adopted in the application of the law, it will be detrimental to trademark protection because of the changing ways and methods of infringement. Second, as the special laws of intellectual property, including the Trademark Law of China, are both private and public, it will be appropriate to construct the current provisions using a “limited general-clause view”. That is, the legalism view is used if administrative penalty is levied on the basis of the Trademark Law of China, and the general-clause view is adopted if civil liability for trademark infringement is determined. Trademark infringement is a tort in civil law. The civil law of China does not provide for legalism for torts, that is, in addition to typical tortious acts in the law, other acts of tort which are not legally provided for can also be determined and disposed of in accordance with the general provisions of the tort law. Therefore, even if an act is not specifically provided for in the Trademark Law of China, the court can and may still determine it as infringing and seek for civil liabilities against the actor in accordance with the legal principles of the Trademark Law of China. Unfortunately, despite the provision that “other prejudices to the exclusive use of a registered trademark” can be determined as infringement, Article 52 of the Trademark Law of China does not clarify whether judicial organs or administrative organs may make the determination. In addition, although Article 53 provides that upon trademark infringement, the right holder may negotiate on its own initiative to solve the dispute, apply for administrative examination and punishment or seek judicial remedies, it does not specify the type of infringing act, that is, whether it is a typical infringing act listed in Article 52(I)-(IV) or a atypical one listed in Article 52(V). This is rather a miss in the trademark legislation of China.

Moreover, for the case at hand, defendant, as the seller of the infringing rupture films, may introduce the trademark information of the products to the public in the business operation, but when using the trademark, should not confuse or mislead the consumers as to the relationship between the trademark owner and the seller. Now, defendant publicizes, as its “subordinate brand”, the “优玛U.MA” mark, which was similar to the “優瑪U.MA” text-and-graph combination registered trademark of plaintiff. It will easily cause the consumers to mistakenly believe that defendant is the exclusive user of the “优玛U.MA” mark and further misunderstood the ownership of the “優瑪U.MA” text-and-graph combination registered trademark of plaintiff. As a result, the above act of defendant prejudiced the exclusive right of plaintiff to the registered trademark. It can be determined that this act of defendant was infringing in accordance with Article 52(V) of the Trademark Law of China and the infringer should bear the infringement liabilities accordingly. Plaintiff claimed that defendant publicized the “优玛U.MA” mark as a brand of defendant on its website. Because the website clearly indicated that the “优玛U.MA” mark was a brand for which defendant was the agent and the use of the “优玛U.MA” mark by defendant is intended to introducing and publicizing the rupture films that defendant sold as an agent, this claim of plaintiff lacked basis and should not be supported.

As to the wording of court judgment, many judgments state in the main body that [defendant shall] “cease and desist from conducting the concerned act of infringing the trademark of plaintiff”. However, for the case at hand, as the trademark infringement is atypical, as provided for in Article 52 (V) of the Trademark Law of China, the court should describe the infringement as clear as possible in the main body of the judgment, in order to enhance the enforceability of the judgment. In the judgment, the court states as follows: “defendant shall cease and desist from conducting the concerned infringing act to publicize the ‘优玛U.MA’ mark as its ‘subordinate brand’ in its business operation”.

As to the amount of compensation from defendant to plaintiff for the financial losses incurred by plaintiff, as far as this case is concerned, the court may consider the following. (I) plaintiff claims that the license concerned is an exclusive license; and (II) defendant alleges that from September until November 2007, defendant had purchased from Beijing Chinnex totally 4 rolls of the allegedly infringing goods. Although these considerations provide a preliminary understanding for the court on the losses of plaintiff or the gains of defendant, they are only one-side stories of the parties and weak evidences. Moreover, it is very difficult if not impossible how to determine the amount of the financial losses incurred by plaintiff or the amount of the gains on defendant, on account of the concerned publicizing act of defendant. Despite the above, generally speaking, considering the trademark-infringing act as determined in the case is an atypical one, it will be advisable to award a not-too-high compensation. Therefore, on its discretion and on a comprehensive basis, the court appropriately decided that defendant compensate plaintiff for the financial losses incurred by plaintiff in the amount of 2,000 Yuan.

About the author:
Zhou Xiaobing is a judge of the IP Division, the Beijing No.2 Intermediate People’s Court.

(Translated by Ren Qingtao)

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