Professional Interpretation

Abstract: Different from normal trademark confusion, trademark reverse confusion refers to the condition that posterior trademark user has rendered the trademark a high reputation through frequent and wide use so that relevant consumers can easily mistake the goods/service of the prior trademark owner as the posterior’s. The main function of trademark is to distinguish the origins of goods and service. In modern China with the development of economy, the items of goods and service are too numerous to enumerate, so, a well-known, stable and effective trademark is helpful to make a company’s goods/service distinguish from other goods/service in the market. To protect the Intellectual Property of enterprises and protect enterprises’ trademarks to maximum degree, in accordance with legislation and judicial practice, Beijing Docvit Law Firm Dispute Resolution Team hereby conducts a legal research on trademark reverse confusion and summarizes relevant typical cases to present to readers.

Ⅰ. The Definition of Trademark Reverse Confusion

Chinese present law only regulates normal trademark confusion, but different from normal trademark confusion, there has not been any regulations about trademark reverse confusion in Chinese legislation, while it takes place sometimes in judicial practice. In accordance with Article 57 of Trademark Law, normal trademark confusion in traditional way is common in judicial practice, which refers to the situation that prior trademark enjoys great popularity and the trademark register enjoys high reputation, while, the trademark infringer use similar trademark in the same class or sub-class without the register’s allowance which leads to the confusion of relevant consumers. Nevertheless, on the contrary, trademark reverse confusion refers to that the trademark infringer has a wide popularity and a high reputation, but the infringer uses the prior register’s trademark in the same class or sub-class without the prior register’s allowance, and has rendered the trademark a high reputation through frequent and wide use so that relevant consumers easily mistake the goods/service of the prior trademark owner as the posterior infringer’s or mistake that there is something connective between them. In a word, normal confusion means a kind of trademark infringements that small companies take advantage of the reputation of huge enterprises which has already taken up a large part of market; on the contrary, trademark reverse confusion infringement refers to that huge enterprises infringe small companies’ trademark right which leads to confusion of relevant consumers, so that the connections between prior trademark register and its trademark is cut apart.

Thus it can be seen that when it comes to trademark reverse confusion infringement, posterior infringer covers the prior register’s market reputation, which may make the prior register’s trademark lose their trademark characteristics so that the designated trademark can easily lose its market value which lead to damage of prior register’s trademark right.  

Ⅱ. The Origins of Trademark Reverse Confusion

The earliest person who brings up trademark reverse confusion is American Chief Justice Holmes, he indicated: “usually, trademark infringement cases indicate that defendant counterfeits complainant’s goods/services; on the contrary, it is also guilty that the action which easily makes consumers mistake that complainant’s goods/services come from the defendant. However, the second situation is extremely delicate, and its damage result is fairly covert.” Thus it can be seen that Holmes insists that it not only needs clarifying confusion truth, but also needs clarifying confusion direction in dealing with trademark infringement cases, and the confusion direction is also necessary to be stipulated by law.

The earliest case about trademark reverse confusion in judicial practice is 1977 American Goodyear Tire Legal Precedent. The Complainant Big O Tire Dealers, Inc. is a tire purchaser. In the autumn of 1973, it set out to produce tires and used “Big O Big Foot 60” & “Big O Big Foot 70” trademark on its tires. The defendant The Goodyear Tire & Rubber Company is the biggest tire producer in the US and all over the world, which started using “Bigfoot” trademark on snowmobile tracks at the end of 1973. Even though Goodyear found that the complainant already used the similar trademark before, Goodyear used the disputed trademark without the allowance of the defendant and made a good deal of propaganda. In this case, the court of justice affirmed that the defendant Goodyear constituted unfair competition that resulted from using disputed trademark improperly, which leads to the confusion of relevant consumers about the origins of goods/services, and adjudicated that the defendant shall be liable for infringement compensation and punitive damage award. Since American trademark regulations follow “priority of use” principle, the Goodyear court judgment has its solid theory foundation. Goodyear case is the first time that the vulnerable Party’s interests are protected in accordance with the trademark reverse confusion theory in the US, which established the judgment foundation of trademark cases in case law system.

Ⅲ. Legal Characteristics of Trademark 

Reverse Confusion

As an exotic product, trademark reverse confusion remains blank in Chinese legislation of which the trademark system mainly focuses on “priority of registration”, but it happens in judicial practice, so, American reverse confusion’s theory & practice is well worth studying and researching. This paper currently summarizes up several legal characteristics of reverse confusion in accordance with American reverse confusion theory and Chinese judicial practice cases in order to bring convenience to readers’ study on trademark infringements.

01. It constitutes similarity on trademarks in the same class between defendant and complainant

This point is similar to normal trademark infringement. In accordance with Article 57 of Trademark Law, “using a trademark that is identical with a registered trademark in connection with the same goods without the authorization of the owner of the registered trademark” and “using a trademark that is similar to a registered trademark in connection with the same goods, or that is identical with or similar to a registered trademark in connection with the same or similar goods, without the authorization of the owner of the registered trademark, which may cause public confusion” both belong to the situation of trademark infringement because these articles refer to the possibility of trademark confusion, which shall easily lead to the confusion of relevant consumers.

02. The Advantage of Infringers’ market status

This point is the most important point in justify trademark reverse confusion. The nature of trademark protection can be divided into two small points: 1) protection of trademark symbol and 2) protection of enterprises’ reputation. Protection of trademark symbol is easy to understand: the value of trademark is added from none to more by being used; on the contrary, patent is born valuable, while, in this way, trademark’s value is not born with——if a trademark has not been used, it consists of no value. To some extent, the ultimate aim of using trademarks is to protect enterprises’ reputation, and trademarks are known by relevant consumers by being registered and used on designated goods/services. Since then, trademark is connected with designated goods/service and obtains its value——relevant consumers will think about designated goods upon they see the trademark. In this way, if designated goods are popular with relevant consumers, the enterprise will accumulate more and more reputation so that as a symbol of enterprise, trademark can achieve the aim of protecting enterprise’s reputation. While in the situation of reverse confusion, large enterprise uses the disputed mark in a good deal of propaganda so that the defendant’s enterprise is more popular with relevant consumers because of its advantageous market status. As a result, the connections between the prior register and its trademark are isolated even more.

03. The Subjective Malice is Not Necessary

In the case of normal trademark confusion, the infringers usually possess subjective malice, while, in reverse confusion cases, trademark infringers do not all possess subjective malice. In this way, subjective malice is not a necessary factor in judging whether constituting reverse confusion or not. For example, famous “Blue Storm” case bring up the definition of reverse confusion to the public, and its verdict indicates that it is more important to check the market status between defendant and complainant and the chance of confusion rather than subjective malice of the trademark infringers.

The complainant Lanye Wine Industry Inc. register “Blue Storm” trademark in 2002, and the defendant Shanghai Pepsi Inc. used “Blue Storm” as a slogan to carry out marketing activities widely in China for Cola products in 2005. Thus, in December in 2005, Lanye Industry sued Shanghai Pepsi to the court. In May, 2007, Zhejiang High Court made a sentence of second instance, which adjudicated that Shanghai Pepsi infringed the trademark exclusive right of the complainant and ordered Pepsi to stop using “Blue Storm” slogan and to compensate 3000 thousand for the damages of Lanye Industry. In this case, the defendant Pepsi asserted that “Blue Storm” was a descriptive term: as a subject of sales activity, “Blue Storm” was from Pepsi’s own creativity and had nothing to do with the complainant’s “Blue Storm” trademark, and Pepsi did not known about the complainant’s same trademark before, so, the defendant asserted that Pepsi had no infringement malice or subjective default. Nevertheless, Zhejiang High Court still adjudicated against the defendant Pepsi, in this way, subjective malice is not the essential point in judging the case of trademark reverse infringement. By all means, in judicial practice, the court needs to consider all the influential factors synthetically in accordance with every single case’s situation.

04. Reverse Confusion Has Caused Damage Results

Because reverse confusion belongs to infringement, its constituted factors are consistent with normal infringement——demanding damage results.

For example, in the case of Evergrande Spring, people may think that Evergrande Spring enjoys high reputation, so that it using “Hengda” trademark can promote the sales of Hengda Gaoxin’s goods, which is not the truth somehow. Generally speaking, sellers are quite familiar with goods, so, when seeing the goods of Hengda Gaoxin, it is probably that sellers may recognize that even though “Hengda” trademark is used on the goods, the goods is obviously not from Hengda Group. In this way, sellers can highly doubt whether Hengda Gaoxin infringes Hengda Group’s trademark exclusive right, which may do harm to the reputation of Hengda Gaoxin and lead to the falling of its selling profits. In fact, Hengda Gaoxin also proved that the situations above had happened before. In this way, damage result is also a negative influence of reverse confusion.

Ⅳ. Legal Advice to Enterprises’ Trademark Systems

01. Improve Management Level of Trademarks

The most essential function of trademarks is to recognize goods, so, trademark is able to represent the image and market reputation of an enterprise. In this way, trademark owners shall improve the management level of trademarks. This Law Firm advises that enterprises shall establish a well-run intellectual property management system and supervise each stage of trademark’s designing, applying and using.

Firstly, at the trademark designing stage, enterprise needs to conduct prior due diligence to check if there is any conflict in the same class or subclass. Considering the importance of trademark, this Law Firm advises that enterprise shall not apply same or similar trademarks and consider the class of goods/service, the title of enterprise, relevant consumers, the significance of trademark, etc. when designing, and choose the most proper trademark through multiple choices.

What’s more, at the stage of trademark application, it is essential to select proper class and subclass, and registers can set up the system of joint and defensive trademarks when necessary.

Last but not least, it is essential to observe the stability of trademark ownership, and supervise trademark system strictly and strength the management of trademark in case that trademark is transferred or infringed.

02. Exercise Authority Actively To Strike Infringement

The significant point of research on reverse confusion is that even though large enterprises’ market reputation is higher than small companies, small companies shall not lose its prior exclusive trademark right while large enterprises shall not infringe others’ trademark.

In regard to the procedure, companies have two kinds of resolutions to protect their own trademarks: (1). Prosecution way: the infringed shall file an opposition/non-use cancellation to CTMO or file invalidation to TRAB. (2). Enforcement way: the infringed shall file an appeal to the court or crack down on counterfeits.

Ⅴ. Conclusion

As a new type of trademark infringement, trademark reverse infringement still remains some obstacles in judicial practice. Currently there is still standard judicial accordance, so that the Chief Judge is entitled to hold right of discretion to a higher extent. Clarifying the recognition standard of reverse confusion, making up judging factors, completing relevant solutions and increasing credibility of judicial judgments are essential solutions to protect small companies and stimulate the economy, by all means, it is also the necessary path and essential point to establish the trademark legal regulation system in China.