By Evelyn Li
Beijing Municipality First Intermediate People’s Court ruled against Hermes International on its appeal for an earlier 2011 decision made by the Trademark Appeal Board of State Administration for Industry and Commerce of PRC (the “Board”) on an issue of a trademark cancellation dispute. A clothing manufacturing company in Guangdong province, China, applied for the trademark “ai ma shi (爱馬仕)” with the Chinese Trademark Office in 1995. After passing the Board’s preliminary review and being publicly announced through the official trademark Gazette in 2002, the manufacturing company, Dafeng Garment Factory (“Dafeng”), gained trademark rights to use the mark “ai ma shi (爱馬仕)” in China mainland. “Ai ma shi” is what the Chinese call Hermes in Mandarin. Although there are several different ways for spelling out “ai ma shi” in Chinese characters, all of them look extremely similar and all of them pronounce the same way.
According to the record in the Chinese Trademark Office and the Board, Hermes had asked the trademark office and the Board separately in 1997 and 2001 to cancel the trademark registration of Dafeng’s “ai ma shi”, but was denied both times. In 2009, Hermes asked the Board to cancel the disputed mark “ai ma shi” used by Dafeng on ties and clothing, saying Hermes’s Chinese name enjoyed a high reputation around the world including mainland China, but this argument was again rejected by the Board. Hermes had not lost its hope at that point.
After learning the Board’s ruling, Hermes sued the board in Beijing Municipality First Intermediate People’s Court asking for a reversal of the Board’s decision in 2012. And this time, Hermes was let down again. The Beijing court did not agree with Hermes on its arguments and accordingly affirmed the Board’s decision, allowing Dafeng to continue the use of trademark on “ai ma shi.”
Admittedly, Chinese courts sometimes share a reputation of favoritism towards national businesses, and Hermes’s foreign identity most likely did not help it in the case. However, if we read the Chinese trademark law carefully, the failure to convince the Beijing court in this case was most likely a result of Hermes’s ineffectiveness on proof of being a “well-known” mark to the related public in mainland China. Court records showed that most of the evidence presented by Hermes was media reports fifteen years ago from Hong Kong. Those reports are not enough to prove the “well-known” requirement of a mark under Article 13 of the Trademark Law in China. Besides, Hermes also failed to provide evidence showing the disputed trademark was acquired by Dafeng illegally. Consequently, the court ruled against the French luxury brand. Hermes lost the battle for taking backing its Chinese name for the third time.
It has always been somewhat ambiguous for foreign companies, even the ones with registered marks in mainland China, to figure out what the standard is when Chinese courts rule on the issue of “well-known” marks. Statutes from the Chinese Trademark Law Article 14 listed out five factors that shall be considered in determining whether a mark is well-known: (1) the degree of knowledge of the relative public; (2) the duration of use; (3) the duration of time, degree and geographical range of any publicity of the mark; (4) any record of the mark being protected as a well-known mark; (5) other factors which make the mark well-known. Courts in most cases consider all the factors together as a basis for their rulings. Nevertheless, results of different cases show that courts have not followed a consistent pattern—a considerable amount of judges’ discretion is often involved in the outcomes of cases. Interestingly, in this case, the Beijing court’s ruling hardly showed much of a judge’s discretion on weighing of those aforementioned factors. It seemed relatively clear that Hermes had not quite satisfied the burden of proof that it had become famous in mainland China before Dafeng’s registration of “ai ma shi,” which probably requires showings of sales records, market promotions and other related evidence from mainland China before 1997. It is not clear whether Hermes only had related evidence before 1997 from Hong Kong area, or it was not very well prepared to meet the requirements of being a “well-known” mark before 1997 in mainland China for this particular lawsuit.
After the courts’ decision, Hermes and “ai ma shi” will exist together in the mainland market. Hermes will probably have to reconsider its promotion strategy in order to make sure consumers in China are not confused when they speak of Hermes’s Chinese name. (Remember “ai ma shi” is what the Chinese call Hermes in mandarin.) Or Hermes could try to buy the name from Dafeng. But after observing a series of trademark cases concerning similar issues, specifically Ipad v. Proview and Michael Jordan v. Qiao dan (both mentioned in our previous blog articles), Dafeng will probably not be very easy-going in any negotiations for a fair price on its mark.
An interesting question to ask is why such a big brand like Hermes, who registered its mark with the Chinese mainland government in the year 1977 would lose for the third time in this thirty- year long battle against a relatively small clothing manufacturing company in China. It is possible that Hermes neglected the importance of obtaining a Chinese name/Chinese transliteration of its mark when it first registered in 1977. However, Dafeng only applied for registration of the mark “ai ma shi” in 1995. Hermes did use an almost identical Chinese transliteration in Hong Kong before 1995 for many years, but it never registered that transliteration with the trademark office of mainland China. Some are wondering if it is too late for Hermes to get angry at acts of Dafeng in 1997 when it eventually realized the importance of getting back the Chinese name.
A lesson to be learned from this case for companies who is planning to enter the market of mainland China, is that they need to think ahead of time a catchy translations in Chinese for their products in order to avoid similar trademark problems later. Chinese customers are often more comfortable accepting foreign products that bear “friendly” names in Chinese. (e.g. Coke’s Chinese name is “ke ko ke le”, which not only sounds like Coca-Cola but also means ‘tasty and feel happy’ in Chinese.)
If a company’s mark is already enjoying fame internationally, that company should always be very careful in choosing its Chinese name because someone in China might have already registered a transliteration for that company’s mark and might have already been using that transliteration for a while. Consultation with attorneys well-versed in Chinese trademark law is well-advised.