Reflection on “Hong Shi Ma” trademark case
By Kevin Nie (China IP)
Updated: 2011-05-04

Beijing No. 1 Inter mediate People’s Court has reached a conclusion in the first instance on the trademark case brought by Hubei Xiangyun (Group) Chemical Co Ltd (Xiangyun Group) against the Trademark Review and Adjudication Board (TRAB) of the State Administration for Industry and Commerce (SAIC) and the third person BASF SE. (BASF), a Germany-based chemical company. With the award for Xiangyun Group, the case was brought to a temporary end. This seemingly ordinary trademark dispute case, however, aroused hot debates among well-known experts and drew continuous attention from the media covering this field.

Cancellation of Trademark

In July 2008, BASF applied to TRAB for canceling the registered trademark “Hong Shi Ma (registered as “红狮犸’ in Chinese) and the device”, claiming that Xiangyun Group’s No. 3783811 trademark “Hong Shi Ma and the device” (Picture 1 ) had deliberately imitated its prior No. 300030 mark “Shi Ma Pai” (registered as “狮马牌” in Chinese) (Picture 2 ) and misled the public. On November 4, 2003, Xiangyun Group, a large-scale Chinese private chemical enterprise, applied to the Trademark Office of SAIC for registering its mark “Hong Shi Ma and the device”. On August 28, 2005, the mark “Hong Shi Ma and the device” was granted for the first class of goods, i.e., fertilizer, compost, phosphate fertilizer, chemical fertilizer, chemical products for industrial use, triclosan (chemical products for industrial use), sulfuric acid, sodium fluosilicate and etc. The right to exclusive use of this trademark is to expire on August 27, 2015.

In contrast, BASF filed on February 10, 1987, for registration the trademark “Shi Ma Pai”, and was granted its rights later, on September 30, 1987. BASF is currently No. 59 among the global top 500 enterprises and the largest chemical enterprise around the world. The trademark was approved for Class 1: fertilizer, and the right to its exclusive use is to, after renewal, expire on September 29, 2017.

On April 6, 2010, TRAB rendered its Ruling on Disputed No. 3783811 Trademark “Hong Shi Ma and the device”, numbered by Shang Ping Zi (2010) No. 07331, declaring that the disputed trademark, for being similar in characters with the No. 300030 trademark “Shi Ma Pai” (the cited trademark), constituted a similar trademark. As the disputed trademark was approved for fertilizer, compost, phosphate fertilizer and chemical fertilizer, which were identical with or similar to those of the cited trademark, it was a similar trademark for the same or similar goods. Under Article 28 of the Trademark Law, TRAB ruled on the removal of the disputed trademark from the above goods, and green-lighted the mark for other commodities.

According to Peng Xuewen, chief administrative officer of Xiangyun Group, Xiangyun Group had gained high reputation in the chemical industry after 40 years of hard work. Its main products, in terms of sales volumes, ranked among the top ones in the country. The trademark “Hong Shi Ma and the device”, created in 1999 and later registered in 2005, had been in use in the market for ten years. The products were sold well in all the regions of the country except Tibet. In an effort to protect the original package of “Hong Shi Ma and the device” for compound fertilizer, Xiangyun Group applied to SIPO for design patent in July, 2008, and was granted in 2009. In March, 2010, the trademark “Hong Shi Ma and the device” was recognized as “a famous trademark in Hubei Province” by Hubei Administration for Industry and Commerce.

Peng Xuewen is of the opinion that the lawful registration of the trademark “Hong Shi Ma and the device” and the granting of patent right to the package have fully proved that the trademark is original and distinctive and does not have the same features as BASF’s trademark “Shi Ma Pai”. It has never caused confusion and mistaken recognition among consumers in the market. Moreover, Xiangyun Group has never had any business relationship with BASF. For the past ten years, including the trademark opposition period, of the creation, registration and full use of the trademark “Hong Shi Ma and the device”, BASF never filed any objection, which in itself indicated that it acknowledged the legality of “Hong Shi Ma and the device”.

Dissatisfied, Xiangyun Group appealed the TRAB’s ruling to Beijing No. 1 Intermediate People’s Court on May 17, 2010. BASF appeared in court as the third person. On October 22, 2010, the court held a session for the case.

Debate on Similarity

It is obvious that the issue of this case is whether the disputed trademark and the cited trademark are similar trademarks for the same or similar goods. BASF claimed, in its Application for Ruling on Registered Trademark Dispute submitted to TRAB, that the distinctive part of the trademark “Shi Ma Pai” was “狮马”, whereas the last two characters “狮犸” of the trademark at issue had the same pronunciation as “狮马”. Though “犸” and “马” were not completely identical in font, they were similar in appearance. The disputed trademark “Hong Shi Ma” was not distinct from the cited trademark “Shi Ma Pai” in meaning. The similarities of “Hong Shi Ma” and “Shi Ma Pai” in pronunciation and character were sufficient for determining that they were similar trademarks. In addition, the goods for which the two marks were designated were the same class and had identical functions, purposes, consumption channels and consumers. Therefore, the disputed trademark “Hong Shi Ma” could not be distinguished from the applicant’s prior mark “Shi Ma Pai”, and the concurrent use of the two trademarks would cause confusion among consumers.

Moreover, BASF statedinits application that under Article 10 of the Interpretation of the Supreme People’s Court on Several Issues Regarding the Application of Law to the Trial of Civil Disputes on Trademark, the courts, in deciding whether one trademark was similar to another, should take into account the distinctiveness and fame of the trademark for which protection is sought. Since the “Shi Ma Pai” fertilizer made by BASF entered the Chinese market at the beginning of the 20th century, the trademark “Shi Ma Pai” had enjoyed a high degree of fame. BASF also claimed that as Chinese farmers, the purchasers and users of fertilizers, were of low education, the distinction between “狮马” and “狮犸” might not exist at all. For these reasons and in accordance with Article 28 and Article 81.3 of the Trademark Law, BASF petitioned TRAB for canceling the registration of the trademark “Hong Shi Ma and the device”.

Xiangyun Group contested in its Answer to Dispute that the characters contained in its mark “Hong Shi Ma and the device” were a fabricated combination by Xiangyun Group based on its business characteristics and the features of its goods on which the trademark was approved for use. The characters on its trademark marked strong originality and distinctiveness. Furthermore, the characters contained in the trademark “Hong Shi Ma and the device” were written in red traditional Chinese strokes and the trademark was a combination of device and characters. However, the characters in the mark “Shi Ma Pai” were written in black simplified Chinese strokes, and the mark was a pure word mark. The two marks were not comparable in meaning, pronunciation, font and the entire appearance, and thus they were completely different marks.

Hou Huachong, attorney for Xiangyun Group, president and trademark agent of Shanghai Tongda Trademark Agency Co., Ltd., made an elaborate analysis. The trademark “Hong Shi Ma and the device” were composed of three parts: the characters of Hong Shi Ma, the device of Hong Shi Ma, a lion and a mammoth (犸). The character “犸” consisted of two parts: “犬” and “马”. “犸” was a type of elephant in Africa and had been extinct. “犸” and “马” were absolutely different. Besides, the distinctiveness of the trademark “Hong Shi Ma and the device” was that it had its own uniquely eye-catching red color, whereas BASF’s trademark pattern had only the three characters “Shi Ma Pai” in ordinary boldface fonts. Therefore, no evidence can prove confusion or mistaken recognition between the two marks.

Debate on Confusion

“In recent years trademark cases, especially those involving trademark infringement, were on the rise in Beijing No. 1 Intermediate People’s Court and Beijing High People’s Court,” said Cheng Yongshun, a former veteran judge in IPR trials and now director of Beijing Intellectual Property Institute, “Administrative agencies tend to apply legal provisions rigidly and literally in dealing with individual cases, leaving aside the original legislative intent. Such practices are on the rise. TRAB mechanically makes decisions based on meager similarity concluded from a very simple comparison of pronunciation, appearance and meaning, despite the fact that every single case has its own distinctive features.

“In my estimation, 95% of people will, just from the pronunciation, deem the above two trademarks similar before seeing them. However, the result may be different when they actually saw the two marks. The result may be even more distinctive if farmers, the direct consumers, saw the two marks. They can tell apart the two marks without any difficulty. For another example, there is a liquor brand ‘Jing Jiu’ (京酒 in Chinese) in Beijing, ‘Jin Jiu’ (津酒 in Chinese) in Tianjin, and ‘Jin Jiu’ (劲酒in Chinese) in Hubei, all of which are alcohol. Judging from their pronunciations, people with accents may think that the three marks are identical. Yet, alcohol drinkers have never made a wrong choice. In conclusion, different people have different feelings, and things are far more complicated than they seem to be. The courts, as a result, should base their decisions on the concrete conditions of each individual case.”

In Mr Cheng’s opinion, similarity of goods or of trademarks does not necessarily mean infringement. The key is whether confusion arises. Generally, confusion leads to similarity, but similarity does not necessarily result in confusion. The court, in deciding cases, should take into consideration that trademarks are used for distinctive purposes. As long as there is no confusion among consumers, there is no infringement. This is the intent of the legislation. Anyway, trademark resources are limited.

“As a matter of fact, a trademark is not merely a design for symbols but part of the whole market mechanism that integrates products, market and consumers. A trademark primarily serves as a link between consumers and products or services it represents. It provides for products and services a stable, vivid, distinctive and unique symbol that is stable in itself and in its association with the goods and service it represents. Take Coca Cola as an example, it has a mark on its package and the consumers’ decision to buy it can be made in a blink because its mark is stable,” said Liu Chuntian, dean and professor of Intellectual Property School of Renmin University of China, “A trademark, with its stability and distinctiveness features, actually marks a market system that connects products, services and consumers into a network. Through a mark, a stable sales channel can be built between an enterprise’s products and the market. Therefore, a trademark itself represents a part of the cost of goods.”

“As a result, a trademark is a very complicated issue. The determination of confusion and similarity does not simply depend on the symbol itself but the entirety of the trademark. It is not an objective attitude to separate any individual element from the entirety to determine whether there is similarity or confusion.” said Professor Liu Chuntian. Cheng Yongshun pointed out that our past understanding of trademarks was incomplete and biased, which resulted in many cases of trademark preemption. According to Mr. Cheng, a trademark is different from a patent. A trademark is not of much value when it is just designed. It is probable that a design fee has been paid, but it is not the value of the trademark. A trademark means nothing before it is used on goods. It has value only after it combines with, and becomes a symbol for, the goods.

Hou Huachong told the reporter that “Hong Shi Ma and the device” had gained a high degree of fame and influence through Xiangyun Group’s long time use. The plaintiff, during the administrative examination period, produced evidence of actual use and publicity efforts for the disputed trademark. Based on the evidence, TRAB should have been able to make judgment as to whether the relevant public could identify the source of goods with regard to the disputed trademark and the cited trademark. However, the TRAB failed to make in its ruling any comment on the evidence submitted by Xiangyun Group, which was obviously improper. Hou Huachong also revealed that BASF Europe had actually ceased to use the trademark “Shi Ma Pai” as early as in 2000 and had sold out its business.

After hearing, the Beijing No. 1 Intermediate People’s Court held that for those disputed trademarks that had established higher market reputation and formed their own relevant public through long-term uses, it was necessary, by accurately grasping the legislative spirit that the trademark law was, on the one hand, to protect the rights and interests of prior commercial symbols and, on the other hand, to safeguard the market order, to fully respect the market reality that the relevant public had actually been able to distinguish relevant commercial symbols, and pay attention to the maintenance of the already formed stable market order. Though “狮犸” and “狮马” had the same pronunciation and similar appearances, the former’s device part had strong distinctiveness, making its entire visual effect far different from the latter’s. It was an omission in examination for TRAB to enter its ruling on whether the relevant public was able to identify the source of goods without making any comment as to the evidence, ie., production booklets and sales invoices, submitted by Xiangyun Group regarding the uses and publicity work for the disputed trademark.

On this ground, Beijing No. 1 Intermediate People’s Court rendered, on 22 November, 2010, the Administrative Judgment numbered by Yi Zhong Zhi Xing Chu Zi (2010) 2047, revoking TRAB’s ruling and demanding TRAB to make a fresh decision on the No. 3783811 trademark “Hong Shi Ma and the device” after its judgment took effect. TRAB appealed the first instance judgment to Beijing High People’s Court.

Protection of Trademarks

A trademark is an important asset of an enterprise. In recent years, two hot topics were circulating among people of the industry, i.e., how to effectively protect trademarks and how to accurately grasp the standard of trademark similarity in the course of trademark examination and adjudication.

According to Hu Huawen, chairman of the board of Xiangyun Group, Xiangyun Group is a major taxpayer in Wuxue, Hubei, with an annual tax of nearly 100 million Yuan. For the past 11 years since the trademark “Hong Shi Ma and the device” was put into use, products using the Xiangyun trademark had been sold well nationwide and the annual sales had reached over 300 million Yuan. Presently the trademark “Hong Shi Ma and the device” enjoys a high reputation and popularity among the industry and the relevant public, and has a high commercial value that, as estimated, reached 260 million Yuan. To cancel the trademark would seriously affect the company’s production and operation as well as market order. For Xiangyu Group, TRAB’s decision on the trademark dispute is a disaster to the enterprise’s brand development because the loss of this brand would amount to the loss of the trademark value that was accumulated in the past decade.

“A trademark has its own value. It is a property of an enterprise which cannot be deprived at will.” Cheng Yongshun holds the view that a trademark worth over 200 million Yuan is property that should be protected. The loss of the trademark means the loss of the same amount of cash. The right of enterprises and citizens to their properties should be protected and shall not be denied or abridged randomly, which is in conformity with a provision made by the Supreme People’s Court a few years ago. The judgment of this case is just the reflection of this provision. Hou Huachong agreed to Mr. Cheng’s words, “Trademark rights are granted by law, but not by any person. To cancel a trademark after it has obtained its value is, to me, the same as pillaging.”

“As an attorney in this case, my deepest feeling is that trademark similarity is a very complicated issue. The administrative and judicial authorities have their own respective criteria in judging whether one trademark is similar to another.” Hou Huachong stated, “The standard for trademark similarity is mainly decided by the Standard for Trademark Examination and Adjudication, which was formulated by the Trademark Office and the TRAB of the SAIC. However, to reflect the flexibility and initiative of trademark examination, the Standard granted the trademark examiners great discretionary power with respect to the determination of trademark similarity. As a result, the subjective judgment of the examiners becomes a key element in deciding whether two trademarks are similar. The lack of a clear trademark similarity standard and the lack of an accurate trademark definition and concept are the main reasons behind the frequent trademark disputes in recent years.”

“Of cour se, we hope that the administrative agencies will make more efforts to transform its functions in serving enterprises and consider problems from the angle of the properties of trademarks. We believe that with the progress of China’s legal system, trademark right will eventually live up to its name.” said Hou Huachong.

(Translated by Zhang Meichang)