Sunday, October 21, 2007

A Delicious Case of Moon Cakes for Hong Kong

For many westerners, moon cakes, a traditional Chinese dessert consumed during the Mid-Autumn Festival, are much like fruitcakes (if you get my drift).

For the Chinese, moon cakes, however, are an integral part of the wonderful traditions surrounding the Mid-Autumn Festival.

And for a Hong Kong moon cake maker, Wing Wah Moon Cake Co. (“WWMC” Co.), a recent victorious lawsuit in the Dong Guan Intermediate Court brought an extra measure of sweetness.

WWMC Co. has had many problematic encounters with infringers in the mainland over its trademark. It began selling its delicious moon cakes in the mainland in 1987, and established a factory in Dong Guan, Guangdong Province subsequently. Infringing moon cakes bearing WWMC Co.’s trademarks soon followed its presence in China. Unfortunately, WWMC Co. did not register its signature moon cake trademark, which significantly limited its options in term of protecting its trademark rights.

After waiting for more than a decade (and probably swallowing the dire consequences of not registering its trademark prior to entering China), WWMC Co. finally slammed its infringers with a lawsuit in Dong Guan, claiming trademark infringement and unfair competition. Notwithstanding the unregistered status of its trademark, WWMC Co. wisely predicated its request for trademark protection on the provisions regarding famous trademarks provided in the Chinese Trademark Law. Defendants in the case included many large retail supermarkets and small companies.

The Court agreed with WWMC Co. It found confusion between the infringing moon cakes and those of the plaintiff because the packaging and appearance of the alleged infringing cakes were the same as or similar to the plaintiff’s. Given the similarities, consumers, as the Court reasoned, could be easily confused as to the source of the moon cakes. (I would have liked a copy of the opinion to see how exactly the court reached this conclusion since most moon cakes do look pretty much the same to me. I guess the Court mostly focused on the packaging.)

With respect to trademark protection, the Court stated that registration of a trademark is not a necessary condition to protection in China under the Trademark Law. A trademark could gain the “famous trademark” status in a given market if its owner has conducted continuous, extended advertising and marketing, and if its owner has established brand recognition among consumers in a given market. Since WWMC Co. has met the above requirements, the Court held that its trademark is legally “famous”, thus deserving protection in spite of the fact that it is not registered.

Of course another important factor is that the infringement occurred in the same category of products—moon cakes. Had the usage of the trademark in question been in a totally unrelated industry, the result would be very different. Got to remember that protection for unregistered famous trademark is only limited to instances where illegal use occurred in the same or similar products/goods.

This case is significant for a few reasons. First, many trademark owners have an alternative way to protect their intellectual property rights if somehow their trademark is not registered in China, and I do see an increasing number of cases where plaintiffs take the “famous trademark” route for relief. In fact, that is what inspired WWMC Co. to sue in this case.

Second, the strategic choice of venue in Dong Guan Intermediate Court was a shrewd move. WWMC Co. has a factory in Dong Guan, and presumptively this factory generates good tax revenue for the city, and making this venue a friendly place, even though WWMC Co. is an outsider. Of course, the Court seemed competent in arriving at the right decision.

Third, I kept wondering whether a Hong Kong plaintiff has a distinctive advantage over its western counterparts in “famous trademark” cases. In Southern China, especially in Guangdong, certain famous marks in Hong Kong will probably gain consumer recognition easily due to the affinity in culture and language. However, western famous trademarks might not because of the huge cultural and language barriers. To overcome the barrier, western companies will have a higher bar to meet in terms of the requisite advertising, establishing consumer recognition with their brands. Therefore, I think that Hong Kong trademark owners have an edge over their western counterparts in famous mark lawsuits. (as a side note, this is purely based on my instinct and limited understanding of doing business in Southern China.)

So, your comments are welcome.

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