Parallel Imports under Chinese Trademark Law - the Ballantine's Decision


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The recently issued court decision involving Ballantine's whiskey and its implications for parallel imports in China.

Background

Parallel imports refers to the unauthorized import of genuine products into a country. In China, parallel imports of patented goods have been legitimized by Article 69 of Patent Law, but there is no explicit provision covering parallel imports of under the Chinese trademark law. Although China does not have a clearly articulated position on the legality of parallel imports
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involving trademark issues, in practice, the Chinese courts have generally held that selling of such goods in China does not constitute trademark infringement, except in some special cases. China seems to follow the “international exhaustion of trademark rights” standard, which means that once trademarked goods have been sold overseas, a brand owner’s exclusive rights to those goods in China have been exhausted, and a reseller’s use of that trademark in China does not constitute trademark infringement.

Generally, parallel imports do not constitute infringement in principle, but if importers conduct improper behavior leading to the trademark recognition and function loss and bringing damage to the goodwill of trademark owner, then parallel imports will be also deemed to infringement. For example, altering the appearance of a product or packaging, leading to the destruction of trademark recognition function and goodwill of trademark owner, will mean that the actions of importing and selling of the goods could be seen as contravening the Chinese trademark law in this area.

Case Study

Allied Domecq Spirits & Wine Limited and Pernod Ricard (China) Trading Co., Ltd. Vs. Changsha Yuhua Bai Jia De Liquor Firm

Case Title: Allied Domecq Spirits & Wine Limited and Pernod Ricard (China) Trading Co., Ltd. Vs. Changsha Yuhua Bai Jia De Liquor Firm

Court: Changsha Intermediate Court

Date of Decision: 22 January 2017

Area of Law: Trademark Law, Food Safety Law, Anti-Unfair Competition Law

Significance of Decision: The removal for a product identification code by a distributor led to the court concluding that consumer confusion as to the origin of the products at issue was likely, such that trademark infringement was concluded.
Appealed: No

History

The Plaintiff, Allied Domecq Spirits & Wine Limited (“Allied Domecq”) is the owner of Trademark Registration No. 7766497 for the BALLANTINE’S trademark and Registration No. 3230516百龄坛 mark (Ballantine’s in Chinese) under Class 33 for various beverages goods. Pernod Ricard (China) Trading Co., Ltd. (“Pernod Ricard”), is the exclusive authorized importer and distributor of Allied Domecq in China. The defendant, Changsha Yuhua Bai Jia De Liquor Firm (“Changsha Yuhua”) is a retailer of Allied Domecq which sold parallel imported whisky produced by Allied Domecq without Allied Domecq’s permission. Registration No. 3230516百龄坛 mark was used by the Chinese label on parallel imported whisky sold by Changsha Yuhua, and the production date, production lot, product place of sale and sales information were removed prior to sale.

The Plaintiff Allied Domecq and Pernod Ricard considered that Changsha Yuhua’s behavior had infringed their trademark rights and constituted unfair competition, such that they initiated a lawsuit against Changsha Yuhua in the Changsha Intermediate Court on 24 August, 2016.

Decision

After the hearing and due consideration, the court held that Article 97 and Article 67 of the Food Safety Law did not require the operator to translate a foreign trademark of the imported goods into Chinese. Therefore, the use of Chinese label containing the mark “Ballantine’s in Chinese” on the same product by Changsha Yuhua without the permission of the trademark holder, went against the will of trademark holder and objectively damaged the rights and interests of the trademark holder. The Defendant’s behavior had violated Article 57(7) of the Trademark Law “causing prejudice to another party’s exclusive rights to use its registered trademark”, so the Defendant’s behavior was considered to have constituted trademark infringement.

The state of the law in this area is somewhat clearer as the court, in this case, has followed a trend of finding infringement when labeling is tampered with, even though the goods themselves are genuine. It is hoped that in the future, this decision and others is codified in the Trademark Law and/or Supreme Court Interpretations.

ABOUT THE AUTHOR: Sarah Xuan
Sarah Xuan is an Associate in the MMLC Group.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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