Chanel fails to defend mark against retail store’s reference

According to the Taiwan Trademark Act, a trademark owner can enforce its rights against a third party’s use of a mark that is identical or similar to its registered trademark and used on or with the same or similar goods or services.

It is common to see a third party’s trademark used in marketing materials – this is not intended to confuse consumers as to the origin of goods but is merely for promotional purposes.

In a case brought by a world leader in luxury products, Chanel claimed that a local retail chain in Taiwan was using its famous trademark on marketing materials to celebrate its 30th anniversary. The retail chain was holding a competition in which consumers had a chance to win Chanel bags with a purchase value of NT$400 or more as a prize. Chanel claimed that the retail chain had not obtained approval or a licence to use its trademark and thus infringed its rights.

In the first instance, the Taiwan IP Court noted that although the retail chain had used the Chanel mark and a picture of the Chanel product on marketing materials, it had also used its own trademark on these materials and thus the relevant consumers clearly understood that the Chanel trademark referred to the prize only. The court ruled that this did not constitute infringement.

Chanel appealed the decision and asserted that the retail chain’s actions exceeded the scope of permitted fair use and also indicated that use of its mark for promotion without prior approval went against standard practice in the luxury industry.

The IP Court in the second instance sustained the first-instance decision and ruled that the use by the retail chain was not intended to refer to the origin of the Chanel product. Further, the court stated that such lucky draw promotions with store purchases are now common in commercial practice. As the Chanel product provided by the retail chain was genuine, the court also applied the principle of exhaustion.

Chanel appealed the second-instance decision, which the Supreme Court rejected, and thus this judgment became final.

According to the Trademark Act, the following acts in the course of trade constitute ‘use’ of a mark:

• to affix a mark to goods or packaging or containers thereof;
• to possess, display, sell, export or import the goods referred to in the preceding sub-paragraph;
• to affix a trademark to articles relating to the provision of services; or
• to affix a trademark to commercial documents or advertisements relating to goods or services.

However, if the third party’s use simply indicates the term, shape, quality, nature, characteristic, intended purpose, place of origin or any other description in relation to their own goods or services, in accordance with honest practices in industrial or commercial matters, and this third party is not using a mark as a trademark, then this will not be deemed as trademark use.

The judgment as to whether a specific act constitutes use of a trademark is made on a case-by-case basis. However, in light of this case, it is suggested that an entity should include its own trademark in promotional materials when using that of a third party, as this will help to prevent confusion among consumers and avoid accusations of infringement.