Shanghai Chenxuan Intelligence Technology Development Co. Ltd, v. The Procter & Gamble Company for unfair competition

(2001) Hu Gao Zhi Zhong Zi No. 4

 

    Appellant (Defendant of the original trial): Shanghai Chenxuan Intelligence Technology Development Co. Ltd, Place of Residence:No. 3370, ZhenBei Road, ShangHai City, PRC.

    Legal Representative: LiangJian, President.

    Entrusted Agent: Yue Wenhui, Lawyer of Shanghai Wenda Law Office

    Appellee (Plaintiff of the original trial): The Procter & Gamble Company,

    Place of Residence: NO.1, The Procter & Gamble Square, Cincinnati, Ohio, USA.

    Legal Representative: Alan G.Lafley, Chairman of the Board & CEO.

    Entrust Agent: Tao Xinliang, Attorney of Shanghai HuaCheng Law Office.

    Entrusted Agent: Guo Keqiang, Male, Legal Manager of Guangzhou Procter & Gamble Co. Ltd. Place of Residence: Room 113, Entrance 5, No.2 Building, No. 77 Courtyard, Suzhou Road, Haidian District, Beijing.

    The appellant, Shanghai Chenxuan Intelligence Technology Development Co. Ltd (hereinafter referred to as "Chenxuan Company"), appealed against the (2000) Hu Er Zhong Zhong Chu Zi Civil Ruling No. 23 of Shanghai Second Intermediate People's Court on the case of unfair competition dispute to this Court. The Court formed a collegial panel according to the law and made public hearing. Entrusted Agent of the Appellant the Chenxuan Company Yue Wenhui, Entrusted Agent of the Appellee the Procter & Gamble Company (hereinafter referred as "The Procter & Gamble Company") Tao Xinliang and Guo Keqiang, attended the action. The Court has now reached a conclusion.

    The original court found out through trial that: In May, 1976, the plaintiff (The Procter & Gamble Company) applied for and registered the "SAFEGUARD" trademark in China with its registration number 75405. The authorized commodities include Category No. 70 fancy soap, soap, washing and polishing preparation. The trademark's valid period has been extended to May, 2006. In June,1994, the plaintiff (The Procter & Gamble Company) applied to State Administrative Bureau of Industry and Commerce and registered the "safeguard\舒肤佳" trademark witht its registration number 692335 and authorized commodities including Category No.3 bleacher and other washing preparation, cleanser, scrubing and rubbing preparation, soap, hair-protecting preparation etc. The valid period of this registration spans from June, 1994 to June, 2004. In addition, the plaintiff (The Procter & Gamble Company) also applied to State Administrative Bureau of Industry and Commerce and registered several other tradmarks such as "舒肤佳", "safeguard" and their combinations. Internationally, since 1962, the plaintiff (The Procter & Gamble Company) has registered "safeguard" trademark in various countries and regions such as The United States, Germany, Japan, France and Australia, etc.

   The plaintiff (The Procter & Gamble Company) authorizes Guangzhou Procter & Gamble Company and Tianjin Procter & Gamble Company which it funded and established in China the use of trademarks "safeguard","舒肤佳"and "safeguard\舒肤佳" etc. registered by the plaintiff in mainland China in a series of daily clearning product including fancy soap, bath dew etc. When the plaintiff (The Procter & Gamble Company) sells its soap product with the "safeguard" trademark in the mainland, the outer packages were all printed with registered trademarks such as "safeguard\舒肤佳", "舒肤佳" etc. The Procter & Gamble (China) Co. Ltd has been investing with considerable quantity of advertising expenses on its advertisement via various kinds of medias for products with registered trademarks including "safeguard", "舒肤佳" and ""safeguard\舒肤佳". In Oct., 1993, "舒肤佳" fancy soap was awarded "Golden Bridge Award for Best-selling Domestic Goods" by Department of Domestic Trade. In Feb., 1994, "舒肤佳" fancy soap was awarded certificates of the second place in "Ideal Brand" and the second place in "Actually Purchased Brand" in the National Market Product Competence Rankings of 1993 by China Enterprise Management Association and China Entrepreneur Association. In the retail sales rankings published on the Special Edition of China Cosmetics by Market Times covering 50 large-size and medium-size shopping centers national wide, "舒肤佳"fancy soap ranked first in terms of retail sales pertains to the soap category commodities in Dec.1995, January, April, June, and October of 1996. As shown in the "National Key Large-scale Retailing Enterprise's Commodities Sales Statistics And Brand Monitoring Information" published by the Department of Market Monitoring and Evaluation of China National Commercial Information Center, "舒肤佳" fancy soap ranked first in terms of comprehensive market occupancy, market sales share and market coverage in both Dec, 1998 and Mar, 1999. In the "1999 Sales Report of National Key Large-scale Shopping Centers in terms of Commidity Brand Market" published on China Commercial Paper (Mar 26, 2000) and China Industrial and Commercial Times (Apr 5, 2000), "舒肤佳" fancy soap ranked first in the comprehensive market occupancy of soap category commodities. As indicated by the research done on some cities by Beijing Huatong Modern Market Information Consultation Co. Ltd and Beijing Jingchengxing Information Co. Ltd, from 1997 to Mar, 2000, recognizing and using ratio of "舒肤佳" exceeded 90 percent. In 1997, National Technological Supervision Bureau ranked the "Procter & Gamble Shampoo/Hair-protection Series and Washing Products" among the second group of key protected quality products. In 2000, the plaintiff (The Procter & Gamble Company) was listed by Guangzhou Administration Bureau of Industry and Commerce as one of the key enterprises for trademark protection. In June of the same year, State Administration Bureau of Industry and Commerce listed the registered trademark of "safeguard\舒肤佳" as one of national key protected trademarks.

    On Jan. the 18th, 1999, Shanghai Chenxuan Technology and Trade Co. Ltd applied to China Internet Network Information Center (CNNIC) and registered the domain name safeguard.com.cn. On Jan. 3, 2000, Shanghai Chenxuan Technology and Trade Co. Ltd changed its enterprise name to Shanghai Chenxuan Intelligence Technology Development Co. Ltd. On Feb. 1, 2000, the domain name holder of safeguard.com.cn changed to the defendant Chenxuan Company. The business scope of defendant Chenxuan Company includes "the design, installation and maintenance of low voltage electric system and security systems engineering". In April of the same year, the defendant Chenxuan Company was awarded certificate of membership by China Security and Security Protection Products Business Society.

    The court of the original trial takes the position that: In market competition, operators should abide by the principle of interity and commonly recognized commercial morals. The plaintiff (The Procter & Gamble Company) is the obligee of a series of registered trademarks namely "SAFEGUARD", "舒肤佳" and "safeguard\舒肤佳" etc. The "SAFEGUARD" trademark of the plaintiff has been registered in many countries and regions around the world. The plaintiff has spent substantive advertising fees for publicizing the registered trademark - "safeguard\舒肤佳". The plaintiff's products with the registered trademark, "safeguard\舒肤佳", enjoy a high market occupancy, market sales share and market coverage among commodities of the same category. The plaintiff's registered trademark "safeguard\舒肤佳" is commonly recognized among consumers and enjoys a good repution. The plaintiff's registered trademark, "safeguard\舒肤佳", has also been listed as key protected trademark by National Industry And Commerce Administrative Bureau. Therefore, the plaintiff's "safeguard" registered trademark should be considered as a trademark with honors in the market and well-known to the related public. The defendant Chenxuan Company itself was not entitled to any legal rights and interests of "safeguard" before the application and registration of "safeguard" as their third level domain name. Instead, the defendant should have known that the plaintiff's registered trademark "safeguard" enjoyed good fame and wide popularity in the market. However, the defendant still put the registration behavior into practice, and excluded the possibility that the plaintiff registers their "safeguard" registered trademark as the third level in ".com.cn". It should then be determined that the defendant (Chenxuan Company)'s domain name (safeguard.com.cn) registration behavior is of malicious registration which damaged the interests of the holder of "safeguard" registered trademark, thereby constitutes unfair competition. According to provisions in Section (1), (2), Article 10 of Paris Convention About The Protection of Industrial Property, Article 4 in the General Principles of the Civil Law of the People's Republic of China, Section 1, Article 2 in People's Republic China Anti-Unfair Competition by Inappropriate Means, the court of the first trial ruled as the followings: The domain name "safeguard.com.cn" registered by the defendant Chenxuan Company is invalid. The defendant Chenxuan Company should immediately stop using that domain name, and revoke that domain name within 15 days since the date of this ruling.

Chenxuan Company refuses to accept the ruling and appealed to the Court. The reasons of the appealing are: (1) "safeguard" purports meaning of "guard and protect". It justifiably fits the connotation of the appellant's business scope and products "the design, installation and maintenance of security system engineering", so it is nothing inappropriate for the appellant to register "safeguard" as the third level domain name. It is of coincidence that the domain name is the same as the "safeguard" trademark of the appellee. The domain name registration behavior of the appellant does not constitute malicious registration. (2) The appellant registered the domain name a second time in CNNIC due to the change of enterprise name. The appellant has smoothly succeeded in the registration of the domain name for two times, reflecting the fact that popularity of the trademark "safeguard" owned by the appellee is not high, since even CNNIC does not know that "safeguard" is the trademark of the appellee and that the domain name registration behavior of the appellant is not malicious. (3) The treatment endowed to the trademark "safemark" of the appellee as well-known trademark has no factual and legal ground. (4) There's no legal ground to find the domain name registration behavior of the appellant to constitute unfair competition. The appellant applys to quash the original judgement and send the suit back for retrial or change the original sentence according to the law.

The appellee defended himself that 'well-known trademark' is the factual state of a trademark in a specific period, and the trademarks of appellee such as "safeguard" have already formed well-known trademarks. According to prescriptions regarding the protection of well-known trademarks stipulated in The Paris Convention About The Protection Of Industrial Property, trademarks of the appellee (safeguard, etc) should be protected as well-known trademarks, and the registration of trademarks similar to "safeguard" on disimilar products by others is also prohibited by State Administration Bureau of Industry and Commerce. The company name, trademarks and other logos of the appellant all does not correlate with the "safeguard", therefore, act of the appellant to register the appellee's trademark (safeguard) as his domain name constitutes malicious registration. The appellant's act of domain name registration breaches the principle of good faith stipulated in General Principles Of Civil Law and the Law Against Competition by Inappropriate Means, constitutes competition against the appellee by inappropriate means.

The Court has found through hearing that the the determination of facts by the original trial court is clear, however, there are mistakes in determination of facts of the following section, but these facts do not affect the law application of this case. Original trial determined that in May, 1976 the appellee applied and registered the trademark of SAFEGUARD in China, the registry number of which is 75405. Both parties all had no dissenting opinions about the above-mentioned determination. Nevertheless, by checking the trademark registration certificate provided by the appellee during the original court trial, the Court found out that: it is The Procter & Gamble  (Switzerland) Company instead of the appellee that registered the above-mentioned trademark in China in May.1976. Approved by State Administration Bureau of Industry and Commerce in Aug, 1992, the appellee was assigned the above-mentioned trademark from The Procter & Gamble (Switzerland) Company.

The court also finds out in the process of hearing that: 1. According to the Rulings on No. 1122322 "JEYES SAFEGUARD" Trademark Disagreement of Trademark Bureau of State Administration Bureau of Industry and Commerce (1999) Trademark Category Yi Zi No. 3852, it is deemed that: as "SAFEGUARD" trademark has been in use for a long period of time and acquired certain degree of popularity, so it is prohibited that other people register commodities which are dissimilar to ones with trademark "SAFEGUARD" with trademarks similar to "SAFEGUARD". 2. 1997' Annual Monitoring Report on National Key Shopping Centers/Market of Consumable published by Commerce Information Center of Domestic Trade Department said that: in 1997, "舒肤佳" branded fancy soap has ranked the first place in the comprehensive market occupancy, market share of sales and market coverage. 3. After the appellant registered the disputed domain name for the first time, the appellee made written notification to the appellant that the appellant was using the registered trademark (safeguard) of the appellee, which does not correlate with the company name and trademark of the appellant and required the appellant modify or revoke the registered domain name. In Nov. 1999, the appellant replied to the appellee in written form that, they had doubts about the conditions provided by the appellee, and asked the appellee to dispatch personnels to resolve the problems together with them in Shanghai . After the appellant changed their enterprise name, they once again registered the disputed domain name on Feb 1, 2000.

  

During the second trial, the appellant did not provide new evidence. The appellee provided the following two new pieces of evidence: 1. The package bottle of hand washing lotion produced by the company established by the appellee in Philippine. The bottle uses "safeguard" trademark combined by english words and graphics. The appellee proves that the trademark "safeguard" has been used outside China. 2. The outer packages of the fancy soap produced by Tianjin Procter & Gamble Co., Ltd. are printed with the trademark composed of english/chinese words ("safeguard\舒肤佳") and graphics and the trademark composed of "safeguard" and graphics is directly printed on the soap. The appellee testifies by these evidences that the trademark of "safeguard" has been widely used on his fancy soap products. The appellant did not dissent from the above evidence and the facts it proves. The court confirmed this.

    The court deems that:

  

1. The 3rd level domain name registered by the appellant is the same with the english words in the appellee's SAFEGUARD english trademark, trademark composed of "safeguard" and graphics, and the trademark composed of words "safeguard\舒肤佳" and graphics. Therefore, the registration behavior of the domain name by the appellant sufficed to cause the public to mistake the relationship between the two parties.

2. The appellant did not enjoy the appropriate right or legal interests for "safeguard" itself before registering the disputed domain name. The appellant claimed that the meaning of "safeguard" fits the connotation of their business scope and products - the design, installation and maintenance of security system engineering, so the registration of "safeguard" as his domain name is nothing inappropriate. The Court deems that, business marks of the appellant (such as enterprise name, trademark, etc.) have no relation with the word "safeguard". Although the business scope and products of the appellant is related to the meaning of "safeguard", it does not justify that the appellant enjoyes appropriate rights or legal interests of "safeguard" itself, or that the appellant properly registered the disputed domain name before the registration. Therefore, the appellant has no legitimate rights or legal interests of "safeguard" itself before registration of the disputed domain name.

3. There are apparent wrongs in the appellant's registration of the disputed domain name. Firstly, the trademark, composed of "safeguard\shufujia" (chinese, by pronunciation) used on the soaps by the appellant, constitutes well-known trademark. The appellant appealed that, it has no factual and legal ground that the Court endows the "safeguard" trademark with the treatment of a well-known trademark. The Court deems that the public familarity with the trademark is a hard fact. According to the registration, usage, advertising and recognization facts of the appellee's SAFEGUARD english trademark, the trademark composed of "safeguard" and graphics, the trademark composed of "safeguard\舒肤佳", and the protection of the above trademark and its corresponding products by administrative departments such as State Administration Bureau for Industry and Commerce, National Technology Supervision Bureau, etc, we may conclude that above-mentioned trademarks enjoy high reputation and brand familiarity in China. Among them the trademark composed of words "safeguard\舒肤佳" and graphics, which is used by the appellee on soap products, has already constituted well-known trademark. The appellant must have known the above-mentioned well-known trademark of the appellee. Especially, before the appellant once again registered the domain name because of the change of his enterprise name, he was already informed by the written notification of the appellee that his previously registered 3rd level domain name is the same with the word "safeguard" in the well-known trademark of the appellee. But the appellant still re-registered "safeguard" as his domain name . Therefore, it is by no means a coincidence that the appellant registered "safeguard" as his domain name, and the appellant has apparent subjective wrongs when registering the disputed domain name.

Secondly, the appellant should have made the necessary trademark query before the registration of his domain name. The appellant claimed that they have twice succeeded in registering the domain name smoothly in CNNIC which shows that CNNIC is also unaware of the "safeguard" trademark which in turn proves that brand familarity of this trademark is not high and registration of the domain name is not malicious. The court deems that the China Interim Measures on Internet Domain Name Registration mandated by Informationization Work Guidance Group Office of State Of Council in May, 1997 has provided in its Article 11 provisions for "restrictive principle of the naming of domain name under the 3rd level (inclusive)". The Provision 5 of this article stipulates that: It is proscribed to use the enterprise name or trademark name other people has registered in China. Article 23 of this measures stipulates that: All levels of domain name governing bodies have no responsibility to inquire state industry and commerce administrative departments and trademark administrative departments about whether the domain name of a user conflicts with registered trademark or enterprise name and whehter it violates the third party's rights and interests. The applicant should deal with disputes arises from such conflicts and bear the related legal responsibilities. Therefore, although it is not a precondition for domain name registration to do trademark query. For the purpose of avoiding the conflict with other people's trademarks, the appellant is also obligated to do necessary trademark queries to determine whether the registration of "safeguard" as domain name conflicts with other people's trademarks. However, the appellant registered "safeguard" appeared in the well-known trademark of the appellee as the domain name without any necessary queries for the trademark, so it is the appellant's wrong to register "safeguard" as the domain name. CNNIC also failed to fulfill the duty of trademark inquiry when they perform the administrative function of domain name registration, and it is not the standard to determine the trademark's popularity whether or not CNNIC approves registration of the domain name, and not the standard for determining whether the holder of a domain name has wrongs during the registration of the domain name.

4. The domain name registration behavior of the appellant violates the stipulations of relevant laws. The appellant appeals that, there's no legal ground to determine that his domain name registration behavior constitutes unfair competition. The Court deems that, citizen, artificial person and other organizations should abide by the principle of good faith and commonly recognized commercial morals during the application and registration of a domain name, and should not cause the public's confusion and mistaking of the holder of a domain name and other operators and commodities or services provided by them by the domain name registration, and should not take advantage of other people's commercial goodwill and damage other people's lawful rights and interests by the domain name registration. The domain name registration behavior of the appellant breaches stipulations of the following laws: provisions regarding the protection of well-known trademarks in Section 2 (Article 6) of Paris Convention About the Protection of Industrial Property Right; Provisions of Section 2 (Article 10) of this convention, "All competitive behaviors that violate the tradition of good faith in industrial and commercial matters constitute unfair competition behavior"; The provision of Article 4 in General Principles of the Civil Law of the People's Republic of China, "civil activities should abide by the principle of good faith"; The provision of Section 1 (Article 2) in Law of the People's Republic China Against Competition by Inappropriate Means, "Operators should abide by the principle of good faith and commonly recognized commercial morality in the trade of market."

To sum up, the trademark composed of "safeguard\舒肤佳" used by the appellee on his fancy soap products is a well-known trademark. The appellant does no enjoy any legitimate rights or lawful interests for "safeguard" itself before registration of the disputed domain name. The appellant should have been aware that "safeguard" is the same as the one in the well-known trademark of the appellee before the first registration of the disputed domain name and was notified before the second registration, but the appellant still registered that domain name. The domain name registration behavior of the appellant not only had wrongs subjectively, but also sufficed to cause the public's mistaking of the relationship between the two parties objectively, and enabled the Web site of the appellant to take advantage of the well-known trademark and enterprise's commercial goodwill of the appellee to improve the popularity of himself and to increase its hitting rate. Therefore, the domain name registration behavior of the appellant violated the principle of good faith and commonly recognized commercial morality, inappropriately took advantage of commercial goodwill of the appellee and damages commercial interests of the appellee, and constitutes unfair competition for the appellee.The appellant should bear the corresponding civil liabilities. The chenxuan company 's reason for appeal has no ground, the court will not support it. The facts confirmed in the original trial are clear, and the law applied is appropriate. According to the stipulations of Provision (1), Section 1, Article 153 in Civil Procedure Law of the People's Republic of China, and from decisions made by the discussion of judicial committee of the court, the judgement is given below:

    Dismiss the appeal and maintain the original judgment.

The charge for second instance of this case with a total of RMB 1,000 yuan should be paid by the appellant - Shanghai Chenxuan Intelligence Technology Development Co. Ltd.

This judgment is final ruling.

 

 

Chief Judge       Lu Guoqiang

Judge            Wang Haiming

Substitute Judge    Zhu Dan

                                        July 5, 2001

Clerk     Wangjing