Chivas Regal Loses Latest China Trademark Squatting Case

March 13, 2012

Yes, here we go again. I told you these were common, didn’t I? If you read my post on trademark squatting, you know about the recent judgment on the Hermès case, which involved a squatter and a failed attempt by the luxury brand owner to prove that it was a well-known brand in China many years ago.

Chivas Regal, the scotch whiskey brand, is now feeling Hermes’ pain:

A Chinese court has rejected a petition by the Chivas Regal, maker of Scotch whisky, to strip a garment maker of the right to use the famous brand name.

The Beijing No. 1 Intermediate People’s Court ruled in favour of the Trademark Appeal Board under the State Administration for Industry and Commerce, which was brought to court by Chivas Brothers after allowing a Zhejiang Province businessman to use Chivas Regal as a brand on its clothing.

The man from Wenzhou, identified by his surname Wen, in 2003 applied to the trademark authority to register Chivas Regal as a trademark for garments, shoes and caps, Shanghai Daily reported.

Chivas Brothers challenged several times but was rejected by the trademark board, according to the Legal Evening News.

The board has said the Zhejiang man didn’t violate Chinese trademark law because the brand is used in different kinds of products. The Beijing court said Chivas Brothers failed to establish that the spirits brand was “well-known” in China before the registration of Chivas Regal clothing in 2003, which would have been grounds to deny the application.

Chivas Brothers, owned by French group Pernod Ricard, also argued that the company has also used Chivas Regal on clothing. But the Chinese court said it found that the brand was only printed on the uniform clothing for the whisky maker’s salespeople, not on clothing for commercial use.

Okay, fairly standard stuff, but let’s unpack this a bit. (If you want a better version, in Chinese, read this.)

Before the 2003 registration by the Wenzhou squatter, Chivas Brothers (the brand owner) had registered the marks in a number of Classes, including 33, which includes alcoholic beverages. However, just because a brand owner registers the mark in one Class (or for a certain set of goods/services), this does not automatically protect against other registrants for different goods/services or for products in other Classes.

Unfortunately, Chivas Brothers failed to prove that the mark was sufficiently well known in China at the time of the application. Therefore the argument that the Wenzhou squatter filed the mark in bad faith failed.

One additional issue that came up was evidence that the mark was used on clothing by Chivas Brothers’ staff prior to 2003. The argument here is that this evidence of use was relevant in proving that the Wenzhou registrant had knowledge of this use and filed in bad faith.

The court didn’t buy this argument, saying that use of a logo by staff in this way did not constitute a commercial use.

In terms of procedure, this guy in Wenzhou filed in Class 25 for clothing. Chivas Brothers filed an opposition, which is the administrative procedure used to challenge an application prior to it being formally registered. The opposition was rejected by the Trademark Review and Adjudication Board (TRAB), and Chivas Brothers then appealed that rejection to the courts, where it also lost.

If this reminds you of the Hermès case, it should. Very similar procedure and legal issues involved. What this case comes down to is Chivas Brothers ability to prove that the mark in question was famous in China at the time the mark was filed. Making a well-known mark argument allows a brand owner to expand its scope of protection to other goods/services within a particular Class or even to other Classes entirely.

Interestingly enough, this mark was apparently recognized as famous by the Trademark Office in 2009. Two points on that. First, that would have come well after this dispute was initiated. Second, such recognition is not some sort of imprimatur that can be ported to future disputes — it’s more of an ad hoc recognition that relates to the specific dispute at hand. Moreover, I couldn’t find any information on what dispute Chivas Brothers was dealing with in 2009. Anyway, it ultimately doesn’t matter.

This is yet another example of trademark squatting, where a “famous” brand is filed by a third party without authorization. But since China is a first-to-file jurisdiction, this is often permissible. Because Chivas Brothers could not prove that the mark was famous at the time or that the registrant filed in bad faith, it lost the case.

These disputes are won or lost on evidence. Companies that are organized, keep good records, and enjoy management continuity in their overseas operations can prevail, but if a brand owner is unable to come up with sufficient documentation, the squatters will prevail.

So what does this loss mean for Chivas? In terms of future disputes, not much. They were apparently victorious on that well-known mark argument in 2009, so I assume they’ve nailed down documentation at this point. In terms of the market, this squatter has the right to sell certain types of clothing with the Chivas brand on it, or license/sell that right to third parties. Chivas may therefore wish to purchase the mark, if the price is right.