A positive step against infringers in China 4 min read
A subsidiary of Treasury Wine Estates (TWE) has succeeded in a claim against a trader operating in China (East Bright Sunshine) to protect the Penfolds brand, with the Supreme People's Court of the People's Republic of China finding that East Bright Sunshine's trade mark registration for 奔富酒园 ('BENFU Winery', BENFU being the Chinese translation of PENFOLDS used by TWE) should be invalidated.
This will be a welcome result for brands looking to enforce their rights against infringers in China. Brand owners should consider their trade mark protection and enforcement strategies in China.
Key takeaways
- China's highest court has found that East Bright Sunshine's trade mark registration for 奔富酒园 (BENFU Winery) should be invalidated on the ground it was registered in bad faith, having regard to East Bright Sunshine's broader illicit activities.
- Businesses concerned about copycat and counterfeit traders in China should consider their trade mark filing and enforcement strategies in light of the decision, which sets an important precedent supporting the protection of brands in China.
Background
TWE owns the global luxury brand Penfolds. Penfolds has a long-term relationship with China dating back to the late 19th century, when the first bottle of Penfolds was exported to Shanghai. In China, TWE sells Penfolds wines under the mark 奔富 (pronounced 'BEN FU' in Mandarin). These characters are a phonetic approximation of 'Penfolds' in both Mandarin and Cantonese, and also have the auspicious meaning of 'running [towards] wealth'.
The other side to the dispute (Rush Rich) operated an import and export business in South Australia and China, and previously sought trade mark registrations in Australia and China covering variations of the Penfolds brand. A Chinese entity in the group, East Bright Sunshine based in Jinjiang in Fujian province, applied for the BENFU Winery trade mark in 2012, and has since applied for over 40 trade marks containing the 奔富 characters. Rush Rich entities have also applied for a large number of trade marks that are identical or similar to other renowned luxury brands, including '宾利' (the Chinese brand name of Bentley Motors).
TWE has been pursuing Rush Rich in proceedings across Australia and China over the last six years. In 2019, we reported on a successful action by TWE against an Australian entity in the Federal Court of Australia. In China, TWE has brought various proceedings, represented by China-headquartered law firm Zhong Lun. This includes proceedings to invalidate East Bright Sunshine's BENFU Winery registration and trademark infringement and unfair competition cases (we acknowledge the assistance of Jimmy Huang and Hope Yang, partners of Zhong Lun, in the preparation of this Insight).
At the first appeal level, East Bright Sunshine's registration was upheld by the Beijing High People's Court. TWE appealed to the Supreme People's Court.
The court's decision
The Supreme People's Court found that when East Bright Sunshine filed the trade mark BENFU Winery, the Chinese characters for 'BEN FU' had already been used for a long time to indicate 'Penfolds' wines among the relevant public in the wine industry. Based on the facts, it was held that by registering the trade mark BENFU Winery, East Bright Sunshine had the intention to free-ride on the reputation of 'Penfolds' trade mark in order to obtain improper benefits. The Supreme People's Court also found that the registration of the trade mark BENFU Winery and over 250 trade marks such as 'Bentley' filed by East Bright Sunshine and its affiliates in class 33 and 35 and other classes were 'hardly necessary for normal business activities'.
In reaching that decision, the court indicated that the relevant test for invalidation—being whether 'the registration was acquired by fraud or any other illicit means'—turned on whether the trade mark registration was obtained by illicit means (as indicated by, for example, the entity registering a large number of trade marks, which exceeds normal business needs). The test does not focus on the purpose of the registration.
Protecting your brand rights overseas
China has adopted several major revisions to improve its trade marks law over the past two decades. This decision demonstrates that Chinese courts are willing to enforce the rights of foreign brand owners against local counterfeit and copycat businesses. Brand owners should not shy away from enforcement in China. With a sound litigation strategy and well-managed case preparation, it is possible to use the modernised trade mark law in China to enforce your trade mark against infringers, and to protect it against encroachment by malicious third-party registrations.
For businesses in the Australian wine industry, a related development in Australia is the Australian Government's Wine Export Label Directory, introduced on 1 July 2021, which is designed to avoid the export of wines with counterfeit labels.
Actions you can take now
- Review your trade mark registration, monitoring and enforcement strategies in China to ensure your business is in the best possible position to protect its brand.
- If you are an Australian business concerned about IP breaches in China, we—together with our correspondent firms in China, including Zhong Lun—can assist.