Fendi Wins at Shanghai High People’s Court in Outlet Reseller Case

Borsam IP
China IP Law Update———————————

On March 4, 2021, the Shanghai High People’s Court announced a ruling in favor of the Italian fashion brand Fendi Co., Ltd., which was established in 1925 and later acquired by LVMH Group.  Fendi had sued Pioneer Capital Outlets (Kunshan) Commercial Development Co., Ltd. (首创奥特莱斯(昆山)商业开发有限公司) and Shanghai Yilang International Trade Co., Ltd. (上海益朗国际贸易有限公司) for trademark infringement and unfair competition over the use of the Fendi name on storefronts and marketing material. Despite only reselling authentic Fendi products, the Court found the two defendants infringed Fendi’s service mark G1130243, which constituted unfair competition. The Court awarded 350,000 RMB (~$53,760) and Yilang closed the shops in question.

Fendi Signs at the outlet.
In September 2015, Kunshan Capital Outlets, operated by Pioneer Capital Outlets, opened its doors. Kunshan Capital Outlets leased 9 stores to Yilang Company, which began selling well-known high-end products such as “FENDI” and “LOEWE”. 

In October 2015 and January 2016, an agent of the Fendi Company went to Kunshan First Outlet Mall twice and bought a “FENDI” wallet in the “FENDI” store operated by Yilang Company. In March 2016, the agent logged into the WeChat public account of the mall again. It was found that the “FENDI” trademark was used in the signs, discount information boards, product packaging, sales receipts, shopping bags, etc. of the “FENDI” store; the “FENDI” trademark was also used on the store floor signs, brochures, and WeChat public accounts.  The WeChat official account covered brands such as “FENDI” in the “Brand Collection” column, and published an article entitled  declaring that “the noble Italian brand Fendi has finally come to Kunshan” and so on.

On appeal, the Court pointed out that the use of the “FENDI” trademark on the storefront tells consumers that the operator of the store involved is Fendi or has an associated relationship with Fendi, which caused confusion and misunderstanding, and does not belong to fair use based on good faith purposes, which is protected by Fendi’s service mark in class 35 for business management.

As for whether it constitutes unfair competition, the court of second instance held that, based on the evidence provided by Fendi, it is sufficient to prove that Fendi has a certain market reputation, is known to the relevant public and the  company name is protected. Yilang Company used the name on the shop storefront, and it has caused confusion and misunderstanding by the relevant public, which constituted unfair competition in the unauthorized use of the company name.

The court of second instance also made it clear that Pioneer Capital Outlets, as the store manager, knew that apart from selling “FENDI” products, Yilang had no other authorized relationship with Fendi, but it did not stop Yilang’s infringement. It also used the signs involved in the case on maps and other places, and published articles involved in the case, which constituted assistance in infringement.

Regarding the amount of compensation, the court of second instance held that the above actions of Yilang Company constituted trademark infringement as well as unfair competition. In this case, Fendi had no evidence to prove its losses, nor could it prove Yilang’s profit. Therefore, considering the reputation of the logo involved in the case, Yilang’s subjective fault, the nature, period, and consequences of the infringement, the court determined that Yilang Company should compensate Fendi Company 350,000 RMB, and Pioneer Capital Outlets shall bear joint and several liability for compensation.

Yilang Company was dissatisfied, believing that the second-instance judgment would destroy the parallel import industry in China, filed for a retrial.

During the retrial, the Shanghai High People’s Court stated, “Yilang’s product sales services are related to class 35. Yilang’s use of the “FENDI” trademark alone on the storefront is enough to cause the relevant public to misunderstand that it has an associated relationship with Fendi; although the company has set up distinguishing signs on bridges, shopping bags, shop windows, etc., it is not sufficient eliminate the above confusion, so the two are similar services. The use of the “FENDI” trademark by Yilang Company on the storefront is trademark infringement per the Trademark Law.” This also constituted an act of unfair competition.

According to an interview after the ruling, the trial judge, Zhu Jiaping, stated re parallel imports, “‘parallel importers’ such as Yilang Company are reminded that although China’s law does not expressly prohibit “parallel import” behavior, merchants must take reasonable measures when using product trademarks to illustrate or describe their own products. In order to avoid the consequences of infringement , it also reminds outlets and other mall managers that once they discover infringement in shops, they must promptly stop and take corresponding measures to prevent infringements.”

Source: China IP Law Update