The disputes between Huatuo Sinopharm and Guangdong Huatuo Pharm continued for over 10 years, which received high attention from the China traditional pharm industry. In 2024, Beijing High People’s Court overruled the judgement of the 1st Instance and considered the defendants Guangdong Huatuo Pharm and other companies constituted trademark infringement and unfair competition on free riding of Huatuo trade name. [Case No: (2023)Jing Min Zhong 621].
Key Takeaways
The Beijing High People’s Court highlighted the following points in its second-instance judgment:
It is not necessary to claim a trademark as well-known in order to obtain cross-class protection. In the case at hand, the disputed trademark pertained to medicine and drugs in Class 5, while cold compresses were categorized as medical devices under Class 10 according to the Nice Classification. Nevertheless, they were considered similar to medicine and drugs in Class 5 in the context of trademark infringement disputes.
If a company that has received investment is permitted to use a shareholder’s trade name under a cooperation agreement that has since expired, and the shareholder has requested that the company cease using the trade name, the company's continued use of the trade name in its business activities constitutes unfair competition.
Case Background
Plaintiff
Huatuo Sinopharm Co., Ltd. (Huatuo Sinopharm)
Defendants
Beijing Yuetai Fangze Trading Co., Ltd. (Beijing Yuetai)
Huatuo Sinopharm (Guangdong) Great Health Industry Co., Ltd. (Guangdong Huatuo Health)
Huatuo Sinopharm (Guangdong) Pharmacy Co., Ltd. (Guangdong Huatuo Pharm)
Cangzhou Qianwei Medical Products Co., Ltd. (Canghzou Qianwei)
Disputed Trademarks
Huatuo Sinopharm is the trademark right holder who owns several Huatuo trademarks in Class 5 designating the medicine goods. The trademarks included:
Summary of the Second Instance Court Judgment
1. Determination of the Well-Known Status of the Disputed Trademark in Class 5 of Huatuo Sinopharm
The defendants contended that the products in question should be categorized as Class 10 medical devices, which differ from the Class 5 pharmaceuticals and human medicines protected by Huatuo Sinopharm's trademark registrations.
The products alleged to infringe upon the trademark, produced by Cangzhou Qianwei and sold by Beijing Yuetai, Guangdong Huatuo Health, and Guangdong Huatuo Pharm, include items such as Huatuo Pediatric Cough Plaster, Huatuo Medical Fever-Relief Plaster, Huatuo Cold Compress Therapeutic Gel, and Huatuo Lumbar Intervertebral Disc Cold Compress Plaster. These products do not conform to standard naming conventions under the China Nice Classification.
According to the China Nice Classification, which categorizes similar goods and services, items like plasters, bandaging materials, medical health bags, and medical massage gels are classified under Class 5 as pharmaceutical goods, while medical cold compresses fall under Class 10 as medical instruments and devices. Analyzing the components and functional descriptions of the allegedly infringing products, it becomes evident that they are not entirely equivalent to Class 10 medical devices but are more closely aligned with Class 5 products such as plasters. Furthermore, based on public perception, it is more likely for consumers to associate these products with pharmaceuticals.
Taking into account various factors, including the function, usage, production methods, sales channels, and consumer perceptions, the Court of Second Instance concluded that the allegedly infringing products have a significant connection to pharmaceuticals, which are protected under the Class 5 registrations of Huatuo Sinopharm. As a result, the Court found it unnecessary to assess the well-known status of the disputed trademark in this case.
2. Whether the actions of Beijing Yuetai, Cangzhou Qianwei, Guangdong Huatuo Health, and Guangdong Huatuo Pharm have violated the trademark rights of Huatuo Sinopharm.
The packaging of the products in question, sold by Beijing Yuetai, prominently featured the “HTGYR Hua Tuo National Medicine” logo. Additionally, Beijing Yuetai utilized the term “Hua Tuo National Medicine” for promotional purposes on its JD online store. Under the context of Chinese Trademark Law, the use of the “Hua Tuo National Medicine” logo is considered a trademark use that indicates the source of the goods. Cangzhou Qianwei, which was authorized by Guangdong Huatuo Health to produce these products, also permitted Beijing Yuetai to sell them. Furthermore, the packaging identified Guangdong Huatuo Health and Guangdong Huatuo Pharm as the distributors.
The Huatuo trademarks have achieved a notable level of recognition due to the marketing efforts and usage by Huatuo Sinopharm. If the allegedly infringing marks and Huatuo Sinopharm's trademarks are found on the same or closely related products, it is likely that the public, exercising reasonable care, could be confused or misled about the origin of the products or might assume a licensing agreement or affiliation between the parties involved. Consequently, the Court has concluded that Cangzhou Qianwei's manufacturing of the allegedly infringing products, along with the actions of Guangdong Huatuo Health and Guangdong Huatuo Pharm in selling them, constitutes an infringement of the registered trademark rights held by Huatuo Sinopharm.
3. Whether Guangdong Huatuo Health and Guangdong Huatuo Pharm were permitted to continue using "Huatuo" as their trade names in their business operations.
In this instance, Huatuo Sinopharm contended that both Guangdong Huatuo Health and Guangdong Huatuo Pharm should cease using "Huatuo Sinopharm" as their trade names. The Court determined that the assessment of whether the use of "Huatuo" by these companies constituted unfair competition hinged on two key factors:
The extent to which the trade name "Huatuo" has achieved a certain level of recognition within the industry.
Whether the unauthorized use of "Huatuo" by Guangdong Huatuo Health and Guangdong Huatuo Pharm as their trade names has led to confusion or misconceptions among the public.
Firstly, the evidence presented by Huatuo Sinopharm demonstrated that the "Huatuo" trade name has garnered significant recognition in the relevant industry due to years of promotion and usage, qualifying it as a trade name with notable influence as outlined in Article 6, Paragraph 2 of the Anti-Unfair Competition Law.
Secondly, it was established that Huatuo Sinopharm and its subsidiaries no longer held any shares in either Guangdong Huatuo Health or Guangdong Huatuo Pharm, thereby lacking the legal grounds to use "Huatuo" in their trade names. The authorization for Guangdong Huatuo Pharm to use "Huatuo" as its trade name stemmed from the Investment Agreement for the Establishment of Huatuo Sinopharm Chain Co., Ltd., which was annulled by a shareholders' resolution in 2016. Furthermore, Huatuo Sinopharm did not grant permission for Guangdong Huatuo Pharm to continue using "Huatuo" as a trade name. In 2018, Guangdong Huatuo Pharm even issued a statement on its official website acknowledging that it had breached the agreement by establishing Guangdong Huatuo Health without authorization and by using both "Huatuo" and "Huatuo Sinopharm" as trademarks and trade names without permission.
Additionally, it is important to note that Huatuo Sinopharm's business activities included the production and sale of traditional Chinese medicine, while Guangdong Huatuo Pharm was also involved in the wholesale and retail of traditional Chinese medicine and pharmaceuticals. Given the established recognition of Huatuo Sinopharm, the public could easily be misled into believing there was a connection between Huatuo Sinopharm and Guangdong Huatuo Pharm, potentially resulting in confusion and harm to the trade name rights of Huatuo Sinopharm.
In conclusion, the use of "Huatuo" as a trade name by Guangdong Huatuo Pharm and Guangdong Huatuo Health was deemed to constitute acts of unfair competition as defined in Article 6, Paragraph 2 of the Anti-Unfair Competition Law.