Supreme People’s Court denies trademark infringement in bad-faith lawsuit against Michael Kors

On 30 March 2020 the Supreme People’s Court issued a retrial decision, confirming previous judgments rendered by Hangzhou Intermediate Court and Zhejiang High Court, which had dismissed an infringement claim initiated by a Chinese trademark owner against the world-famous brand Michael Kors. All three courts stated that when the prior trademark has a low reputation and the later trademark is well known, there is a risk of confusion as the prior mark may not be able to expand because consumers have been misled to believe that its products carry the well-known brand. In this situation, the courts often maintain that protection should be granted to the owner of the older mark. However, in this case, the decision was handed down against the owner of the prior registered trademark as the first and second-instance courts and the Supreme People Court found that the case had been filed in bad faith and therefore dismissed it.

Background

On 7 February 1999 Chenghai Jianfa Craft Handbag Factory registered the below mark in Class 18 under “bags, handbags, etc”. The use of this mark was relatively limited and most of the products were exported overseas.

In 2015, Jianfa found that the company Micheal Kors (Switzerland) International GMBH was using the following logos.

In February and August 2015, Jianfa applied to register the following marks in Class 18.

In October 2015 Jianfa started using the right-hand logo above on its products, made several notarised purchases in different cities and filed a civil action with Hangzhou Intermediate Court in 2017, claiming trademark infringement and seeking damages of Rmb950 million.

Michael Kors argued that it had been doing business in China since 4 November 2013 and that it owns several trademark registrations in the country.

Both Hangzhou Intermediate Court and Zhejiang Hight Court dismissed Jianfa’s claim. Jianfa then filed a retrial application with the Supreme People’s Court.

SPC decision

On 30 March 2020 the Supreme People’s Court dismissed Jianfa’s retrial application.

This was because the three allegedly infringing logos and Jianfa’s mark are not identical trademarks – they are simple letter combination and, even though the two letters are the same, the fonts and the designs are different.

Further, the court found that the logos were not confusingly similar to Jianfa’s trademark.

Jianfa’s trademark, being merely composed of two stylish letters, was not considered to be very distinctive and had not gained stronger distinctiveness or reputation through use. Although this mark has been in use since 1999, evidence of use is very limited as most of the products are exported overseas.

In addition, Jianfa had used and filed applications for the below marks in 2015.

These were Michael Kors’s trademarks, which indicates that Jianfa had given up its efforts to improve the distinctiveness of its marks. The court agreed that it was even intentionally seeking some market confusion with Michael Kors.

The court stated that Michael Kors had entered the Chinese market in 2011 and had continuously used its logo (see Figure 2).

This mark had been in use abroad since 2008. Further, Michael Kors has a high reputation, enjoys a stable clientele and the letters MK (ie, the initials of Michael Kors) have always been used together with MICHAEL KORS, so that consumers can establish a link between MK and MICHAEL KORS. Therefore, Michael Kors did not use Jianfa’s mark in bad faith to create confusion among consumers. Moreover, Michael Kors had reason to use the MK logos, and has been using different fonts in order to avoid disrupting Jianfa’s market development. Finally, Jianfa and Michael Kors have different clientele and distribution channels; Jianfa’s products are low priced and mainly target oversea markets via Yiwu market or online platforms, while Michael Kors’ products are mainly sold in franchised stores at a higher price. Objectively, these differences would not cause confusion among the relevant public. Nevertheless, the court confirmed that two Michael Kors marks), use the same letters as Jianfa’s mark and are not specially designed, although there are very few examples of use of these two logos on the official website and wechat account, among other places, in order to establish clearly the boundaries between both parties, Michael Kors was ordered to stop using these two logos. Further, it must now use the two words MICHAEL KORS or any other distinctive logo together with certain of its marks.

This is in order to avoid any possible confusion with Jianfa’s trademark.

Comment

This case shows that, even if, in principle, a lesser-known registered trademark should be protected against an infringement committed by a bigger, but later trademark – this only applies if the owner of the less well-known mark acts in good faith and is not trying to benefit from the reputation of the trademark that it is suing.

However, some of the court’s reasonings were unnecessary and arguable, such as the fact that the plaintiff’s trademark had a low distinctiveness and a low reputation, versus the high reputation of Michal Kors’s trademarks. The different price ranges, different distribution channels or even the absence of bad faith on the part of Michel Kors all led to the conclusion that there was no reverse confusion – however, this is, arguable. It is true that, when assessing the likelihood of confusion between two marks, the courts must take into consideration all the circumstances of the case, including the level of distinctiveness and the reputation of the trademark seeking protection. However, price ranges, distribution channels and good faith on the part of the alleged infringer are usually considered irrelevant.