Synopsis

This is a case of first impression regarding protectability of a sufficiently distinctive getup localized on a well-known product. This case establishes, in light of scarce discussion both in theory and in practice, and in light of the significance of controversies involved, that protection may be accorded based on legislative purposes of China’s Anti-unfair Competition Law, to a get-up that is distinctive on a localized portion of a well-known product, to the extent that such protection extends only so far as to the localized portion. Competitors remain free to use such getups in other locations. The rationale of this case has not only enriched the theoretical connotation determining distinctive get-ups of well-known products, but also provided guidance of skills and wisdom which can be useful for the trial of similar cases in the future.

Facts

Appellant (defendant below): Quanzhou Niubanlun Sporting Goods Co., Ltd. (Niubanlun) Appellee (plaintiff below): New Balance Athletic Shoe, Inc. (New Balance)

New Balance highlighted the use of a slightly distorted “N” letter mark, capitalized and in bold face on the central part of both sides of shoes that was close to shoelaces ( “N” letter mark). New Balance had opened several specialty stores in Beijing, Shanghai, Hangzhou, Nanjing and other cities after entry into China’s market, and put up advertisements on Life Style, Modern Weekly and other newspapers and magazines for promotion and introduction of its new balance athletic shoes, which prominently featured numerously use of “N” letter mark on both sides of its athletic shoes. It also used “N” letter mark on both sides of such athletic shoes in its 2007 Product Brochure to display several kinds of its new balance athletic shoes, and such “N” letter marks were prominently displayed in the pictures.

The plaintiff through an agent made a purchase in 2010 under seal of notarization of the allegedly infringing products from the defendant. At trial, the sealed purchase was introduced into evidence in court. The court found that although there were differences among the six pairs of athletic shoes purchased under notarization, they were featured by: (a) a slightly distorted, capitalized and bold “N” mark with two smaller slashes below the right side of every shoe (“N” logo) was used on both sides of four shoes, and such “N” logo was also prominently displayed in the central part on both sides of other two shoes; (b) “N” logo and character of “N?PAI” was used on tags of the six pairs of shoes; (c) “N” logo was used on the front shoeboxes for six pairs of shoes, and character of “N牌”(“N Brand”) was found in the product name that was pasted on the tag, and such “N” logo was prominently used on both sides of shoelaces which were equipped by four pairs of shoes; (d) “N” logo, “N PAI” and other displays were used in shoe tongues, backup counters, insoles and other positions of the six pairs of shoes.

The defendant also used “N” mark on both sides of athletic shoes in exhibition in its Retro product publicity atlas, and such mark was also prominently used in most of its goods pictures.

New Balance claimed that “N” letter mark used by itself on the central part of shoes it produced had been a distinctive decoration for its famous goods, that Niubanlun used such “N” graphic mark on its athletic shoes and packaging in quantity, which was sufficient to cause confusion or misidentification among consumers concerned, and that such acts had thus constituted unfair competition against the plaintiff. Therefore, New Balance requested the court to render a judgment of (1). an immediate injunction against defendant from unfair competition, and (2). damages against defendant, and reasonable cost totaling 500,000 yuan.

Niubanlun counter argued that the plaintiff had no evidence to prove the reputation of its goods, that the sole “N” logo used by the plaintiff was separated from get-ups and lost integrity in consequence, which should not be ascertained as the object under the protection of distinctive getups for famous goods, and that unfair competition alleged by the plaintiff cannot be established.

Judgment

At trial, Shanghai Huangpu District People’s Court found that New Balance was entitled to relevant legal rights and interest to its goods, that it stated a cause of action against unfair competition in the form of passing-off by the getup of its products, and that the “N” logo used on both sides of the athletic shoes was the most prominent and distinctive part of the get-up and had nothing to do with the function of such products. But, as the long publicity and extensive use of the “N” logo had been sufficient to make the public associate those shoes having such a logo on both sides with athletic shoes produced by New Balance, thus the letter N without distinctiveness in nature had acquired distinctiveness to distinguish special goods because of its being continuous used in fixed position of athletic shoes. Therefore, the “N” letter mark used by New Balance on both sides of shoes had constituted the special get-ups under the provision of Article 5 (2) of China’s Anti-unfair Competition Law. Although it ought to have known the foresaid get-up used by New Balance on its products, Niubanlun still decided to use “N” logo on the same location in respect of the same products it produced that was extremely similar to and almost not visually different from “N” logo of New Balance. As a result, Niubanlun had an obvious intention of free rider to take off on the goodwill of New Balance, which was sufficient to cause confusion or misidentification among consumers in terms of the source of goods and obviously violated the principle of good faith and widely accepted business ethics. Thus it should be ascertained as unfair competition against New Balance and should bear civil liabilities in the form of cessation of infringements and compensation for losses. Therefore, Shanghai Huangpu District People’s Court entered the judgment of (1). an immediate injunction against New Balance, (2). damages for a total of 480,000 yuan in compensation with reasonable cost within ten days after the decision, and (3). dismissal of all other claims of New Balance.

Dissatisfied with the judgment of the first instance, Niubanlun appealed to Shanghai Second Intermediate People’s Court.

Niubanlun contended on appeal that the “N” logo used by New Balance on both sides as product getup was not special decoration for famous goods and as a result, it requested the court of second instance to reverse the ruling in (1) and (2) of the judgment above.

New Balance requested the court of second instance to reject the appeal and sustain the judgment because it was clear in fact finding and correct in application of law.

The court of second instance entered a judgment in favor of New Balance.

Comments

There have been hot controversies in judicial practice on whether distinctive get-up of famous goods on specific position (“localized get-up”) should be protected by Anti-unfair Competition Law as distinctive trade dress. The courts made some useful explorations in the case, which will not only enrich the theoretical connotation of ascertainment of distinctive decoration for famous goods, but also provide courts with judgment skills and wisdom as useful reference to future trials of similar cases.