Battle over tea brand could have significant implications for treatment of trade dress in Chi

China’s Supreme People’s Court is poised to rule on a case which could provide a major test of how courts in the country, whose laws do not explicitly protect trade dress, will handle disputes over product packaging.

As has been covered previously in World Trademark Review, Jia Duo Bao (JDB) and its former licensor Guangzhou Pharmaceutical Holding Company (GPH) have been engaged in a long-running battle over herbal tea products. In the latest development, the Supreme People’s Court heard an appeal from JDB, which has lost a series of lawsuits focused on claims of false advertisement, unfair competition, trademark infringement and copyright infringement.

The latest claim concerns the colour, package design and trade dress of Chinese herbal tea brand ‘Wang Lao Ji’, which both parties claim ownership of. The brand boasts more than 100 years history in China and is generally considered as a “famous good”. When GPH licensed rights to JDB (owned by Hong Kong company Hung To Group Co) in 1995, JDB became the producer and distributor of the herbal tea across China, and was authorised to sell herbal tea packaged in a red aluminium can (while GPH continued to sell herbal tea products in a green carton package). The products were different in terms of taste and packaging despite being marketed under the same brand name. Following the termination of their licensing agreement in 2012, JDB continued to sell herbal tea with the same red can design but labelled with its own new trademark JIA DUO BAO.

Over the past four years, JDB has generated RMB20 billion in revenue using its JIA DUO BAO mark, challenging GPH’s dominance of China’s herbal tea market (GPH’s Wang Lao Ji brand generated less than half of JDB’s revenue), according to Zhen Yun from Scihead & Partners (known as Hui Hua Law Firm), which is representing GPH. Against this backdrop, GPH filed lawsuits against JDB alleging that it was confusing consumers.

In a bid to convince the public and the courts that it did not “take a ride” with the WANG LAO JI mark or sought to confuse consumers about the source of goods, JDB has invested excessively in branding through sponsorships, TV commercials and national charity events. However, last year the company was found liable for misleading advertising by a Beijing court.

Yun alleges that JDB is taking advantage of the current situation to sell more products while the verdict is pending – noting that had it not appealed it would have been required to make public apologies to GPH in major media outlets and cease infringing marketing activities. Zhen told World Trademark Review: “JDB does not mind spending money and time in litigations because honestly, the amount of litigation expenses and compensation added up together is still so insignificant compared to the profit they have made from selling a similar product, which is originally owned by GPH.”

JDB and the law firm that represents it in this case did not respond to World Trademark Review’s requests for comment.

Courts in Guangzhou and Beijing have issued injunctions demanding that JDB change the colour of its aluminium can packaging and stop all false advertisements, along with the payment of RMB300 million in compensation. However, a number of commentators hold a different perspective, arguing that JDB should have some ownership rights over the Wang Lao Ji brand. “JDB designed the red can. It is not fair that JDB was issued an injunction to prevent it using the original work it designed,” Xu Xinming, the Chief Lawyer of China Intellectual Property Lawyers (www.ciplawyer.com) , argues.

Other IP law experts have argued that Wang Lao Ji would not have achieved its fame without JDB’s efforts. “This case can’t simply be solved by law,” argues Shao Wei, director of Beijing NTD Intellectual Property Attorneys. As to why, Shao describes the country’s IP laws as “still developing”, with a question over the way that the interaction between ‘packaging’ and ‘brands’ should be treated.

In the current scenario, the ultimate owner of the packaging is in dispute because it was designed by JDB but the brand was owned by GPH. As Charles Chao from East and Concord Partners observes: “The dispute over Wang Lao Ji’s red tin addresses the cutting-edge issue concerning the ownership of goodwill between trademark licensors and licensee manufacturers.”

The decision will therefore be keenly watched.