A few weeks ago, On Reserve documented the story of Château Listran and the winery’s inevitable trademark defeat in the Chinese market by way of brand squatters. This week, we bring you a very similar story detailing the grievances of China’s trademark laws and impact on true brand owners who pursue trademark registration in China.
In August, a Chinese wine distributor won trademark rights against an established French wine company, Castel Frères, during a trademark dispute dating back to 2005. See Castel Loses Trademark Infringement Case in China. Castel is a leading French wine producer and the top brand of imported wines in China. See Largest Trademark Lawsuit in China’s Wine Industry Won Against French Castel. In 2000, the Shanghai-based distributor, Panati Wine Co., Ltd., registered the trademark “Kasite” in China. Id. “Kasite” is the more famous Chinese translation of the French name “Castel.” In 2003, Panati offered to sell its trademark rights to Castel, who rejected Panati’s asking price of 1 million Euro. Id. Castel’s wine was present in the Chinese market since 1999, but the company did not file for trademark with the China Trademark Office (“CTMO”). As a result of China’s trademark laws, Panati successfully obtained the trademark rights to “Kasite” because Castel did not previously file for trademark ownership.
Castel filed an opposition to Panati’s trademark, but Panati established use of the trademark and could thus ascertain ownership of the mark. Subsequently, Panati sued Castel for its illegitimate use of the mark over previous years in the Chinese market. Id. The Intermediate People’s Court of Wenzhou decided in favor of Panati and instructed that Castel compensate Panati in the amount of $33.73 million RMB. See Largest Trademark Lawsuit in China’s Wine Industry Won Against French Castel; Castel Loses Trademark Infringement Case in China. “After the original verdict, both plaintiff and defendant submitted appeals, and the case was brought to Zhejiang Provincial Higher Court, which upheld the previous verdict, and ordering an extra published apology from Castel.” Castel Loses Trademark Infringement Case in China.
This week, Decanter reported that Castel is pursuing said case to China’s Supreme Court in Beijing and will essentially “do whatever it takes” to receive a favorable outcome. See Castel Takes Trademark Battle to China’s Supreme Court. Castel’s application for a hearing has been accepted and the wine company alleges that the lower court’s decision is full of “‘blatant errors and lacks objectivity’” and the company has no choice but to appeal. Id. (quoting Castel).
Should the Supreme Court of China rule in favor of Castel, its ruling would mark a significant change in China’s trademark processes, let alone create a more amicable environment for foreign wine companies seeking to expand to the Chinese market (and register their marks). Currently, China follows a “first-to-file” rule with respect to obtaining the rights to a trademark. This means that the first person to file a trademark application with the CTMO is usually granted the rights to register the trademark, irrespective of whether the true brand owner previously used the mark in commerce within China (compare to the U.S., where the standard is “first to use” in commerce). This method is highly contentious and likely to cause trademark battles such as those evidenced above with Castel and Panati.