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Analysis on Reverse Confusion of Trademark from the Trademark Infringement Case of New Balance
Yan WANG
Trademark Attorney
Trademark Department
Linda Liu & Partners
Guangzhou Intermediate People’s Court (hereinafter referred to as Guangzhou Intermediate Court) made the first instance judgment on April 24, 2015 on the trademark infringement dispute of New Balance, a renowned sports brand from the United States, ruling that New Balance Trading (China) Co., Ltd. (hereinafter referred to as New Balance China), the general agency of New Balance in China, constituted infringement to others’ exclusive right to use the trademark “新百伦”, and shall cease the infringing act and pay a compensation as high as 99,800,000 yuan to the trademark owner. This was the case with the highest amount of compensation for infringement made by the Guangzhou Intermediate Court, and the malicious act of “reverse confusion” was determined constituting infringement to others’ exclusive right to use the registered trademark according to the law, which drew wide attention from the public.
As we know, “New Balance” was founded in Boston of the United States, the city of Marathon, in 1906. “New Balance” was a world famous sport brand and was praised as one of the “four best running shoes” of the world. It entered Chinese market in 1989 and the products were sold through agencies. It used the Chinese name “纽巴伦” at the beginning, which was preemptively registered by its agency, and changed the name to “新百伦” afterwards. In 2006, New Balance China was established for the marketing of the series products of “New Balance” sneakers in China, and it widely used the logo of “新百伦” on its products and relevant advertisements. The series of sneakers were much raved in China, took a significant market share and had large number of consumers.
In fact, the trademark “新百伦” No. 4100879 was filed for registration by Chinese merchant Zhou Lelun as early as on June 4, 2004, designating “clothing, footwear, sweaters, etc.” in Class 25. After the preliminary publication of the trademark, New Balance Athletic Shoe, Inc. (hereinafter referred to as New Balance Company), the owner of the trademark “New Balance”, filed an opposition, claiming that “新百伦” was the imitation of “New Balance” and should not be approved. The Trademark office did not support the ground of the opposition and decided the opposition was untenable on July 18, 2011. The trademark “New Balance” was approved of registration on January 7, 2008.
In July of 2011, Zhou Lelun brought an infringement lawsuit against New balance China, claiming that he enjoyed prior right over the trademark “新百伦”, and New Balance China’s selling of the sneakers bearing the trademark “新百伦” constituted trademark infringement. Zhou Lelun claimed that he had registered the trademark “百伦” in China in 1996 (it was learnt that the applicant of this trademark was not Zhou Lelun; Zhou Lelun obtained the trademark No.865609through assignment), and later registered the involved trademark “新百伦” of this case; both trademarks were used on the men’s shoes manufactured by the enterprise he founded, and he had counters in a number of large-scale shopping malls.
New Balance China argued that it used “新百伦” as the Chinese name of “New Balance” instead of prominently using it as the trade name on commodities; in addition, it used the trademark earlier than Zhou Lelun, hence their use was in good faith; and such use did not cause confusion or misunderstanding of relevant customers, therefore the use did not constitute trademark infringement.
Finally, Guangzhou Intermediate Court made the first instance judgment, ruling that New Balance China constituted trademark infringement, and shall stop the infringing act and compensate Zhou Lelun 50% of its total profit, i.e., 99,800,000 yuan. Currently, there is still no news that the defendant New Balance China appeals the case.
Like the previous “blue storm” case and “crown prince” case, this is another typical case of “reverse confusion”. “Reverse confusion” is a term relative to “direct confusion”. Direct confusion, the traditional confusion of trademark, refers to that one uses other’s registered trademark on the identical or similar goods, causing consumers to mistakenly believe that the goods were from the same prior trademark registrant. However, in reverse confusion, even though the later user of the trademark uses a trademark that is identical with or similar to other’s registered trademark, yet consumers would not mistakenly believe that the goods he provided are relevant to the prior trademark owner; on the contrary, the use of the trademark by the later user causes the consumers to mistakenly believe that the goods provided by the prior trademark owner come from the later trademark user or that there is certain relationship between the prior trademark owner and the later trademark user. That is to say, reverse confusion refers to confusion of the prior registered trademark as the later used trademark. Why does such circumstance occur?
The reason is that in the reverse confusion, the later trademark user is usually a large enterprise with high popularity and influence. The prior trademark registrant, on the contrary, is usually less influential and cannot gain extremely high popularity for his trademark in a short time through extensive marketing and large-scale advertising, but the later user, which has certain influence in the market and rather stable consumers itself, can gain high popularity for the trademark it uses in a rather short time, which cause consumers to misunderstand that the goods bearing the trademark come from the user instead of from the genuine trademark owner. Therefore, when reverse confusion occurs, the prior trademark owner often is forced to an unfavorable position that he could not use his registered trademark in a normal way, which does not only make him unable to expand his market, but also is on the edge of losing the existing market. In another word, under such circumstances, the registered trademark loses its basic function of identifying the source, and the trademark registrant is much restrained in seeking building up market reputation and brand image.
In this case, Guangzhou Intermediate Court held that the defendant New Balance China could easily learn the information of the prior trademark owned by the plaintiff Zhou Lelun, and the documented evidence indicated that its related enterprise New Balance Company had filed an opposition against the plaintiff’s trademark “新百伦”, which indicated that it had known the situation of the plaintiff’s trademark. Where the defendant was aware of the trademark, it still used “新百伦” widely in sales and advertisements, instead of using the word as trade name. Such behavior could hardly be deemed as rightful and the act was against honesty, thus shall not be determined as use in good faith. The act of the defendant made consumers to mistakenly believe that the goods provided by the plaintiff come from New Balance Company or have specific connection with “New Balance”, thus led to confusion and misunderstanding among the consumers, which also separated the specific connection between the plaintiff, as the trademark owner, and his registered trademark, and damaged the legitimate rights of the plaintiff. Accordingly, Guangzhou Intermediate Court made a judgment that the infringement was established, and the defendant New Balance China shall assume the liability for infringement.
After the third amendment of the Chinese Trademark Law, the concept of confusion is brought into trademark infringement, but the direction of confusion is not explicitly stipulated. Confusion, in general meaning, mainly refers to direct confusion, and the vast majority of trademark infringement cases belongs to traditional direct confusion, i.e., the confusion caused due to later use of other’s registered trademark. And usually, the later user in the direct confusion always has intention to free-ride the famous brand of others. On the contrary, in reverse confusion, the later user does not intend to make consumers to mistakenly believe that his goods have connection with the prior trademark owner; instead, he expects to use the mark as his own. In reverse confusion, should the bad faith of the later user be considered as one element?
As we know, in traditional direct confusion, bad faith of the infringer is not a necessary condition. That is to say, even if the user uses the trademark in good faith, if the used trademark is identical with or similar to the other’s registered trademark, which is likely to cause confusion, the infringement is still established. Based on the above theory, the writer believes that in reverse confusion, bad faith should not be taken as an element for establishment of infringement either. Although in this kind of cases, the later trademark user usually has bad faith, i.e., he intends to establish market recognition through wide us, separate the connection between the prior trademark owner and the registered trademark, and thus takes the trademark as his own. This case belongs to such circumstances. In this case, Guangzhou Intermediate held that “新百伦” was not the transliteration or free translation of “New Balance”; the free translation should be “新平衡” in Chinese, and New Balance Company called its related company “New Balance Athletic Shoe，Inc.” as “新平衡运动鞋公司” in Chinese. And the prior name of its products was “纽巴伦”. Thus, “新百伦” was not the only transliteration of “New Balance”. Therefore, the use of “新百伦” byNew Balance Company should be deemed as having bad faith. However, in practice, it is possible the later user has no idea of the prior registered trademark when he using the mark; under such circumstance, if bad faith is considered as one of the elements, there would be circumstance that confusion is caused but no infringement is established, which is obviously unfair to the prior trademark owner. One of the purposes for prohibiting reverse confusion is to protect the prior trademark rights of small enterprises and maintain a fair and equal environment of competition. Of course, the writer believes that bad faith should be a necessary element when to determine infringement liability and damages.
As mentioned above, in the reverse confusion, the later trademark user is always a large-scale enterprise with high influence. Before having a brand marketed or using a new trademark, such enterprise should consciously investigate whether it is possible to cause infringement. In a information and network society as nowadays, it could be easily found out whether or not a trademark has been registered by others through a simple search. And such enterprise has the ability to do the investigation. The large enterprise should consciously avoid using a trademark similar to other’s registered trademark, not to mention insisting on using and advertising the trademark widely when they are aware of the trademark, attempting to taking other’s trademark as their own. Otherwise, they may well pay a high price.
We may learn from this case that an enterprise should have a comprehensive trademark strategy, not only put efforts on obtaining and enforcing rights, but also pay enough attention to avoid infringement risk. For the trademark it intends to use, it should conduct a search first and register as early as possible before using the trademark. The foreign enterprises especially, a should have a corresponding Chinese trademark for the foreign mark before entering the Chinese market, and make a full search to confirm whether or not the Chinese trademark has been registered or used. Once it is found that others has already registered or used an identical or similar trademark, the enterprise should further confirm whether or not such prior right can be eliminated. If such prior right is difficult to be eliminated, the enterprise should try the most to change the Chinese trademark so as to avoid infringement risk.
