Chanel prevails in unfair competition case over its No5 perfume bottle in China.

Chanel prevails in unfair competition case over its No5 perfume bottle in China

In an interesting case, Chanel has won an unfair competition lawsuit over a copycat fragrance imitating the iconic trade dress of its N°5 perfume in China. The Trial Court and the Court of Appeal both afford the iconic brand, protection over the unique trade dress of CHANEL N°5 perfume.

Background

Chanel discovered in 2019 that a Chinese company, Yiwu Ai Zhi Yu Cosmetics Ltd ('Ai Zhi Yu'), had created an N°9 Flower of Story perfume that was highly similar to the distinct trade dress of the CHANEL N°5 classic perfume bottle.” (See the comparison below).

N°5 Chanel perfume bottle and packaging [Left] | Flower of Story perfume bottle and packaging [Right]

The production and sale of which, in a Trial Court, and Court of Appeal decision in China - Chanel was able to successfully prove constituted an act of unfair competition.

Facts and law

In a decision that we note was first reported by World Trademark Review. Chanel filed the original lawsuit back in December 2019. In a first instance Trial Court hearing back in 2020, legal counsel acting for Chanel Wanhuida Intellectual Property, relying largely on Article 6 (1) of the Anti-Unfair Competition Law in China, proved that the defendant company Ai Zhi Yu acts amounted to unfair competition.

Article 6 of the Anti-Unfair Competition Law of the People's Republic of China stipulates that: ‘the unauthorized use of the same or similar logos as the name, packaging, decoration, etc. of commodities that have a certain influence on others, leading people to mistakenly believe that they are commodities of others or have a specific connection with others. constitutes an act of unfair competition.’

This provision shows that to determine whether the accused infringement of the defendant constitutes an act of unfair competition over the packaging and decoration of the plaintiff's commodities, the factors to be considered are:

“Whether the packaging and decoration of the plaintiff's commodities constitute packaging or decoration that has a certain influence; whether the packaging and decoration of the accused infringing goods are the same or similar to the packaging and decoration of the plaintiff's goods; (and) whether the similarity causes others to misunderstand that there is a specific connection with the plaintiff (Chanel) or the plaintiff's (Chanel’s) goods.” (Emphasis added to translation)

The main basis for determining whether the packaging and decoration of the product constitute a certain influence is first, whether the product has a certain market reputation in China and is known to the relevant public; and second, whether the packaging and decoration of the product have distinctive features that distinguish the source of the product.

Despite arguments from the defendant that the Chanel N°5 bottle was not ‘distinctive’ nor ‘original’. In a hearing judgment in 2020 – Chanel was able to prove that:

• Through continuous, large-scale, and extensive sales and promotion of its perfume products in mainland China, the Chanel N°5 classic perfume bottle and packaging have gained a high reputation and reputation in the industry and among Chinese consumers, and the bottle and packaging serve as a key source identifier of the perfume.’

• The layout and design of the Chanel N°5 bottle shape, as well as the colour of the characters on the front label, are distinctive, and the arrangements of the trade dress of the infringing N°9 product were highly similar to the Chanel N°5 product, which was likely to ‘confuse and mislead’ consumers.

As a result, the court determined that the defendants' actions constituted unfair competition, ordered the defendants to cease such behavior and to pay damages of CNY 600,000 (about 69,000 pounds).

The appeal

Ai Zhi Yu filed an appeal with the Shaanxi High Court in January 2021. Ai Zhi Yu, the makers of N°9 Flower of Story Perfume contested the distinctiveness of the Chanel N°5 perfume's trade dress, claiming that the trademarks N°5 and Chanel, rather than the bottle itself (trade dress), served as the source identification of the items. To support its argument, the defendant company presented an earlier ruling of the Beijing High Court rejecting Chanel's three-dimensional (3D) trademark application No. 27067168 (in 2020) for the bottle of the N°5 perfume (as a base for its claim).

Regarding the claim that the shape of the N°5 perfume bottle has not been protected by three-dimensional trademarks and are not distinctive, the courts dismissed this argument, the Court noted that the outcome of the 3D trademark application had no bearing in the current case, moreover because of the differences between the legal protection requirements to stop unfair competition and protect overall image design, from the requirements of three-dimensional trademarks.

Focusing squarely on the requirements of unfair competition law then, the courts assessed the inner and outer packaging of the Chanel N°5 perfume to determine whether unfair competition was at play.

 In the Courts assessment of the outer packaging and decoration of Chanel’s perfumes, and whether within the meaning of Article 6, Chanel perfume belongs to the packaging and decoration of commodities that have certain influence. The courts held, no - that the Chanel N°5 perfume packaging and decoration do not have the distinctive features that distinguish the source of the commodity firstly, on the basis ‘that the design of the black frame on a white background is a common decoration for perfume packaging and the arrangement of the text in the centre was common, general and not significant, and difficult to associate them with the source of a specific product.’

 Secondly, Chanel claimed that the outer packaging involved in the case had a certain market reputation, but on this point - the courts did not feel that the brand ‘provided sufficient evidence to substantiate its claim. In particular, Chanel was unable to ‘prove that the packaging and decoration were promoted and publicised by Chanel, so that consumers had formed a perception that the packaging and decoration at issue were commercial signs. Therefore, the outer packaging and decoration did not qualify as packaging and decoration of commodities with a certain influence, (under Article 6 of Chinese Anti-Unfair Competition Law), and should not be protected the courts said.

Turning next to the assessment of the inner packaging and decoration of Chanel perfume (bottle) belonging to the packaging and decoration of commodities that have a certain influence. Judging from its interior packaging and decoration, the Courts held:

‘The packaging and decoration to be unique because of the arrangement and combination of the elements, such as graphics, colors, shapes, sizes, fonts, etc.,’ that in the Courts view ‘form a remarkable overall image, which does not belong to the general packaging of similar products. And according to the photos, advertisement screenshots and other evidence provided by Chanel, it can be proved that the packaging and decoration have been used for a long time and, the publicity surrounding the product has been enough to make the relevant public compare the overall image of the (defendants) packaging and decoration with Chanel's N°5 perfume series products.’ It has the function of identifying the source of its goods. (and) It can be determined that the inner packaging and decoration have had a certain impact, which should belong to the provisions of Article 6 of the Anti-Unfair Competition Law.’

Finding that, the use of identical or visually indistinguishable product packaging and decoration on the same product to be sufficient to cause confusion with the packaging and trade dress of Chanel’s perfume bottle .

Pointing to similarities between the trade dress of the two bottles the Courts noted:

“The perfume bottle of the accused infringing product and the perfume bottle of Chanel N°5 perfume are of the same shape and material height. They are both rectangular transparent glass bottles with slightly curved shoulders. The bottle cap presents an octagonal rectangle with a diamond-shaped cut side; the upper part of the bottleneck is a raised ring design, and the lower part is surrounded by a decorative band of about 5 mm wide, with golden lines on the top and bottom of the decorative band; the proof label design of the perfume bottle. The color scheme, text arrangement, size ratio, and position are all highly similar. Since the packaging and decoration of the perfume involved in the case of N°9 Flower of Story company are basically the same as the inner packaging and decoration of the Chanel N°5 - is enough to cause the relevant consumers to misunderstand the source of the perfume, including the misunderstanding that the two parties have a commercial alliance and license.

Ai Zhi Yu, The N°9 Flower of Story perfume producer maintained that the price of its perfume is much lower than the price of Chanel perfume, which will not cause confusion among consumers, but the courts confirmed that “difference in price is not the criterion for identifying confusion. Generally, confusion has occurred before the actual purchase of relevant consumers.” And on appeal upheld the original judgement.

The case illustrates the different laws brands can rely on to protect iconic trade dress features of products – where trademark law may fall short.

Commenting on this case:

Wen Cui and He Wei of Wanhuida Intellectual Property representing CHANEL in prevailing in the unfair competition lawsuit commented that: “The registration of 3D trademarks has become an uphill battle in China. Brand owners hoping to protect the design of their iconic products are increasingly shifting to alternative remedies, such as seeking trade dress protection based on unfair competition.”

The two judgments for this case can be accessed here: https://wenshu.court.gov.cn/

Additional translation by FLB – This case was first reported by World Trademark Review.

Luxury Brand Hermès Loses China Trademark Dispute

Fashion house Hermès, a luxury brand based in France, has lost its trademark dispute in China to cancel a trademark similar to the Chinese version of it's name. Hermes registered its English name in China in 1977. However, it never registered its Chinese name as a trademark.

In 1995, Dafeng a menswear company applied to the trademark board to the trademark a similar name for clothing products. The application granted and in 1997, Hermes appealed to the trademark board saying that the registered name, “爱玛仕” (Ai Ma Shi), was similar to the Chinese translation of Hermès, which is “爱马” (Ai Ma). The two names contain very similar Chinese characters with the same pronunciation.

However, the trademark board rejected Hermes' appeal and approved the Chinese company's registration in 2001. In 2009, Hermes once again appealed to the board, saying its Chinese name enjoyed a high reputation around the world and asking the board to cancel the disputed trademark. However, Hermes' application was rejected for a second time in May last year.
Hermes claimed that its Chinese name should be protected as an unregistered well-known trademark in China. It said the disputed trademark was an imitation of its Chinese name and was obtained through "deceptive means.

The court said that most of the evidence presented by Hermes happened after the disputed trademark had been registered. Also, the evidence was mainly media reports about the Chinese name of Hermes in Hong Kong, which fails to prove Hermes was well-known among consumers on the Chinese mainland.
 
For brand extension, you need a clear strategy. The case highlights the disadvantages of not being the first to file for an application of a trademark in overseas territories. Hermes had not secured trademark protection in the region With Chinese consumers being the largest market for purchasers of luxury goods,  as well as being one of the largest market for counterfeit goods, this decision could be particularly damaging for the French luxury brand.