lan jianjun and hangzhou suremoov automotive technology … · 2017. 6. 21. · automobile...

Copyright 2016 by Stanford University

Guiding Cases in PerspectiveTM

指导性案例透视TM

LAN Jianjun and

Hangzhou Suremoov Automotive Technology Company Limited

v.

Tianjin Xiaomuzhi Automobile Maintenance and Repair Services Co., Ltd. et al.,

A Trademark Infringement and Unfair Competition Dispute

Guiding Case No. 30

(Discussed and Passed by the Adjudication Committee of the Supreme People’s Court

Released on June 26, 2014)

CHINA GUIDING CASES PROJECT

Guiding Case No. 30 Highlighted Edition

April 30, 2016*

* The citation of this piece is:《兰建军、杭州小拇指汽车维修科技股份有限公司诉天津市小拇指汽车维

修服务有限公司等侵害商标权及不正当竞争纠纷案》(LAN Jianjun and Hangzhou Suremoov Automotive

Technology Company Limited v. Tianjin Xiaomuzhi Automobile Maintenance and Repair Services Co., Ltd. et al., A

Trademark Infringement and Unfair Competition Dispute), STANFORD LAW SCHOOL CHINA GUIDING CASES

PROJECT, Guiding Cases in PerspectiveTM

, Guiding Case No. 30 Highlighted Edition, Apr. 30, 2016,

http://cgc.law.stanford.edu/guiding-cases/guiding-case-30/. The parts highlighted below are essentially the same as

the relevant parts in the original second-instance judgment of Guiding Case No. 30. Parts highlighted in yellow

and red cover contents included in the “Basic Facts of the Case” and the “Reasons for the Adjudication” sections of

Guiding Case No. 30, respectively. The English version of this Guiding Case was published by the China Guiding

Cases Project on October 20, 2014 and is also available at the abovementioned hyperlink.

Guiding Cases in PerspectiveTM

is a unique serial publication of the China Guiding Cases Project that

identifies the original judgments selected by the Supreme People’s Court, examines their transformation into

Guiding Cases, and explores the treatment of the Guiding Cases in subsequent cases.

Highlighted Edition


2

Keywords

Civil Trademark Infringement Unfair Competition

Competitive Relationship

Main Points of the Adjudication

1. Whether or not a business operator has [carried out] an act that exceeds [its] legal

business scope and violates administrative licensing laws and regulations does not affect

its exercise, in accordance with law, of [its] civil rights to stop trademark infringement

and unfair competition.

2. The [coverage of] the anti-unfair competition law1 is not limited to business operators

having direct competitive relationships [amongst themselves] nor requires them to engage

in the same industry. Where the business operators have indirect competitive

relationships and the party [carrying out] the act [in question] violates the provisions of

the anti-unfair competition law and adversely affects the legal rights and interests of the

other business operators, [the act] should also be determined to be an act of unfair

competition.

Related Legal Rule(s)

Article 2 of the Anti-Unfair Competition Law of the People’s Republic of China

Basic Facts of the Case

Plaintiffs LAN Jianjun (兰建军) and Hangzhou Suremoov Automotive Technology

Company Limited (杭州小拇指汽车维修科技股份有限公司)2 (hereinafter referred to as

“Hangzhou Xiaomuzhi Company”) claimed: [they] enjoyed the exclusive right to use the

registered trademark “Xiaomuzhi” in accordance with law. In the course of engaging in

1 Translators’ note: the term “反不正当竞争法” (“anti-unfair competition law”) as used several times in this

Guiding Case likely refers to 《中华人民共和国反不正当竞争法》 (Anti-Unfair Competition Law of the

People’s Republic of China), adopted on Sept. 2, 1993 and effective as of Dec. 1, 1993, available at

http://www.gov.cn/banshi/2005-08/31/content_68766.htm. 2 Translators’ note: the name “杭州小拇指汽车维修科技股份有限公司” is translated here as “Hangzhou

Suremoov Automotive Technology Company Limited” in accordance with the translation used on the company’s

trademark record available at http://tmsearch.uspto.gov/bin/showfield?f=doc&state=4807:x56hit.5.1. The

company’s Chinese trademark is “小拇指” (“Xiaomuzhi”) and its English trademark is “Sure Moov”, the

pronunciation of which is similar to “Xiaomuzhi”.

Highlighted Edition


3

automobile maintenance and repair, as well as recruiting franchisees through [their] websites,

Tianjin Xiaomuzhi Automobile Maintenance and Repair Services Co., Ltd. (天津市小拇指汽车

维修服务有限公司) (hereinafter referred to as “Tianjin Xiaomuzhi Company”) and Tianjin

Huashang Auto Parts Import Company (天津市华商汽车进口配件公司) (hereinafter referred to

as “Tianjin Huashang Company”) used a logo with the “little finger figure”3 multiple times.

There were also instances where [they] used [the word] “Xiaomuzhi” alone or for emphasis.

[These acts] infringed upon [Hangzhou Xiaomuzhi Company’s] exclusive right to use its

registered trademarks. At the same time, Tianjin Xiaomuzhi Company used, without

authorization, the enterprise name first [used by] Hangzhou Xiaomuzhi Company, resulting in

unfair competition with Hangzhou Xiaomuzhi Company. Therefore, [the plaintiffs] sued and

requested [that the court] order Tianjin Xiaomuzhi Company to immediately stop using the

“Xiaomuzhi” shop name [when] conducting [its] business and order Tianjin Xiaomuzhi

Company and Tianjin Huashang Company to stop [their] acts of trademark infringement and

unfair competition, publicly apologize, jointly and severally pay [the plaintiffs] compensation for

[their] economic losses in the amount of RMB 630,000 and reasonable expenses in the amount of

RMB 24,379.4, and bear the litigation costs of the case.

Defendants Tianjin Xiaomuzhi Company and Tianjin Huashang Company defended their

positions, claiming: 1. the business scope of Hangzhou Xiaomuzhi Company did not include

[any] licensed business items4 nor [, in its general business items,] the automobile maintenance

and repair category. Moreover, [Hangzhou Xiaomuzhi Company] had neither received a

license for motor vehicle maintenance and repair nor [met] the “Two Stores, One Year”

franchising condition.5 [Hangzhou Xiaomuzhi Company’s business] was a type of illegal

business exceeding [its] business scope, [and] therefore its rights should not be protected. 2.

The use of the logo with “Xiaomuzhi” by Tianjin Xiaomuzhi Company and Tianjin Huashang

Company had legal origins and did not constitute trademark infringement. 3. Hangzhou

Xiaomuzhi Company did not engage in the automobile maintenance and repair industry. The

3 Translators’ note: “Xiaomuzhi (“小拇指”) translates literally to “little finger”.

4 Translators’ note: the business scope of an enterprise usually covers two categories, namely, “licensed

business items” (“许可经营项目”) and “general business items” (“一般经营项目”). Licensed business items

require approval from relevant authorities in accordance with laws, administrative regulations, and State Council

decisions before the enterprise can apply for their registration. In contrast, general business items do not require

such approval; an enterprise can directly apply for registration of these items. See 《企业经营范围登记管理规

定》 (Provisions on the Administration of Registration of the Business Scope of Enterprises), promulgated by the

State Administration for Industry & Commerce on June 14, 2004 and effective as of July 1, 2004, available at

http://gsyj.saic.gov.cn/djfg/gz/200911/t20091110_72337.html, Articles 4 and 5. 5 Translators’ note: “两店一年” (“Two Stores, One Year”) refers to the condition stated in Article 7 of the

Regulation on the Administration of Business Franchises. This provision requires a franchiser to have at least two

direct outlets and have operated the business for more than a year. The rationale is to ensure that a franchiser’s

business model is mature and has a certain likelihood of success and, therefore, a franchisee’s risk of loss is reduced.

See 《商业特许经营管理条例》 (Regulations on the Administration of Business Franchises), promulgated by the

State Council on Feb. 6, 2007 and effective as of May 1, 2007, available at http://www.gov.cn/zwgk/2007-

02/14/content_527207.htm, Article 7.

Highlighted Edition


4

parties6

were not in a commercially competitive relationship. [Hangzhou Xiaomuzhi

Company] could not prove itself to be a well-known enterprise, and its alleged right to an

enterprise name lacked legal basis. [The acts of] Tianjin Xiaomuzhi Company and Tianjin

Huashang Company did not constitute unfair competition [and they] therefore requested that [the

court] reject the plaintiff’s litigation claims.

The court handled the case and ascertained: Hangzhou Xiaomuzhi Company was

established on October 22, 2004 and [its] legal representative was LAN Jianjun. Its business

scope was:

licensed business items:

none;

general business items:

service;

technology development of automobile glass repair, technology

development of automobile paint quick repair;

wholesale, retail;

auto parts;

including the business scope of subordinate branches;

all other legal items that do not require application for approval [from

relevant authorities]

(the above-mentioned business scope does not include prohibited,

restricted, or licensed business items as provided in state laws and

regulations).

Where [the operation of any of] the above-mentioned [business items] involves

[China’s] licensing system, [the business must] be operated with a license.

[Hangzhou Xiaomuzhi Company’s] subsidiary was Hangzhou Xiaomuzhi Company Xiaoshan

Branch. This branch was established on November 8, 2005, [with] the business scope:

“automobile paint, glass installation”. The Road Transportation Business License obtained by

6 Translators’ note: the term “双方” (literally, “both parties” or “both sides”), translated here as “[t]he

parties”, likely refers to the two sides involved in the litigation, namely, the plaintiff, Hangzhou Xiaomuzhi

Company, and the defendants, Tianjin Xiaomuzhi Company and Tianjin Huashang Company.

Highlighted Edition


5

the branch on August 1, 2008 clearly stated [its] business scope to be: “maintenance and repair

(type-II motor vehicle maintenance and repair: small vehicle maintenance and repair)”.

On January 14, 2011, Hangzhou Xiaomuzhi Company obtained the No. 6573882

“Xiaomuzhi” word registered trademark, [with] approved service item (Type 35): operation and

management of chain stores (industry and commerce management assistance); business

management of franchises; business management consultation; advertising (terminated). That

trademark was [still] within its validity period. On April 14, 2011, LAN Jianjun granted

Hangzhou Xiaomuzhi Company an exclusive license to his No. 6573881 “Xiaomuzhi” word

registered trademark.

Hangzhou Xiaomuzhi Company had received the “China’s 120 Strong Franchises and

Chains” Certificate awarded by the China Chain Store & Franchise Association7 multiple times.

In 2009, Hangzhou Xiaomuzhi Company’s [service name] “Xiaomuzhi Automobile Maintenance

and Repair Services” was determined by the Zhejiang Bureau of Quality and Technical

Supervision8 to be a well-known service brand in Zhejiang.

Tianjin Xiaomuzhi Company was established on October 16, 2008, with TIAN Junshan

as [its] legal representative. Its business scope was: “Repair of small passenger vehicles,

assembly repairs, vehicle maintenance, small repairs, maintenance and rescue, specialized

repairs. (The operation periods of the licensed business items are subject to the licenses.)”

The Tianjin Business License for Motor Vehicle Maintenance and Repair that [Tianjin

Xiaomuzhi] Company obtained on July 28, 2010 clearly stated [its business] category to be

“type-II (automobile maintenance and repair)”, with the business items as “repair of small

passenger vehicles, assembly repairs, vehicle maintenance, small repairs, maintenance and

rescue, specialized maintenance and repair”. [The license] was valid from July 28, 2010 to July

27, 2012.

Tianjin Huashang Company was established on November 23, 1992, with a legal

representative the same as that of Tianjin Xiaomuzhi Company, namely, TIAN Junshan. Its

business scope was:

Auto parts, glass, grease, tires, automotive equipment; automobile body cleaning

and maintenance, electrical system maintenance and repair, painting; express

delivery agency, consignment, information consultation; ordinary cargo. (Where

[the carrying out of activities falling under any of] the above-mentioned business

scope involves [the granting or issuance of] industry licenses, [the business must]

7 Translators’ note: the name “中国连锁经营协会” is translated here as “China Chain Store & Franchise

Association” in accordance with the translation used on the association’s website, at

http://www.ccfa.org.cn/portal/cn/index.jsp. 8 Translators’ note: the name “浙江省质量技术监督局” is translated here as “Zhejiang Bureau of Quality

and Technical Supervision” in accordance with the translation used on the bureau’s website, at

http://www.zjbts.gov.cn/.

Highlighted Edition


6

be operated as per such license requirements and within their validity period, and

where the state has special franchise provisions [governing the business scope],

[the business must] be handled in accordance with such provisions.)

The Tianjin Business License for Motor Vehicle Maintenance and Repair that Tianjin Huashang

Company obtained [listed] the following as business items: “repair of small passenger vehicles,

assembly repairs, vehicle maintenance, small repairs, maintenance and rescue, specialized

repairs”. The [business] category [was listed] as “type-II (automobile maintenance and

repair)”. [The license] was within the validity period.

In the course of engaging in automobile maintenance and repair, as well as recruiting

franchisees through [their] websites, Tianjin Xiaomuzhi Company and Tianjin Huashang

Company used a logo with the “little finger figure” multiple times. There were also instances

where [they] used “Xiaomuzhi” alone or for emphasis.

On June 30, 2008, Tianjin Huashang Company and Hangzhou Xiaomuzhi Company

signed the Franchise Chain Contract, licensing Tianjin Huashang Company to operate

“Xiaomuzhi” branded automobile maintenance and repair chain stores in Tianjin. The contract

period was from June 30, 2008 to June 29, 2011. Clause 3, Item (4) of the Contract stipulated:

Franchise stores established by Party B (Tianjin Huashang Company) should use

the names approved in writing by Party A (Hangzhou Xiaomuzhi Company) to

carry out [their] business activities.

Limited use of the business name (choose below [whichever] applies):9

(�) Without Party A’s written consent, Party B must not, in any situation

or at any time, use in any form or register as an enterprise name

“Xiaomuzhi”, “Xiaomuzhi Micro Repair”, or related logos; without Party

A’s written consent, [Party B] must not add any prefix or suffix to

“Xiaomuzhi” or “Xiaomuzhi Micro Repair” as a revision or supplement;

Party B must not register domain names that include “Xiaomuzhi”,

“Xiaomuzhi Micro Repair”, or related or similar terms, [and] this

restriction [on the registration of domain names] shall [similarly] be

imposed on Party B’s branches.

On December 16, 2010, Tianjin Huashang Company and Hangzhou Xiaomuzhi Company had a

dispute over the performance of the Franchise Chain Contract. The Hangzhou Arbitration

Commission [issued] an arbitral award terminating the contract.

9 Translators’ note: the contract likely provided for the selection of one (or possibly more) provision(s) from

a set of provisions here, but the original text only quotes one provision, apparently the one selected.

Highlighted Edition


7

[The Court] also ascertained that Hangzhou Xiaomuzhi Company obtained [its] business

franchise record from the Ministry of Commerce on April 8, 2008. Tianjin Huashang Company

had alerted the Ministry of Commerce’s administrative department to the problem of Hangzhou

Xiaomuzhi Company carrying out franchise activities in violation of regulations, and [thus

contended that Hangzhou Xiaomuzhi Company’s business franchise] record should be revoked.

With respect to this, the Department of Commerce of Zhejiang Province’s10

Letter Concerning

the Reported Situations Relating to Franchising of Hangzhou Suremoov Automotive Technology

Company Limited stated:

1. When Hangzhou Xiaomuzhi Company filed to obtain [its] franchise record, it had

already met the “Two Stores, One Year” condition. [The company] complied

with [the requirements stated in] Article 7 of the Regulation on the Administration

of Business Franchises and [thus, it] can be put on the record.

2. Hangzhou Xiaomuzhi Company is primarily responsible for the management of

the “Xiaomuzhi” brand, [does] not engage directly in the motor vehicle

maintenance and repair business, and also holds its own business resources,

including trademarks, patents, and business models. [Thus, the company] can

conduct franchising business.

3. [After] an inquiry [was made] with the person in charge at the Zhejiang Road

Transportation Administrative Bureau, [it was found that each of] Hangzhou

Xiaomuzhi Company’s subordinate direct outlets has a Road Transportation

Business License, with a business scope listing “type-III motor vehicle

maintenance and repair” or “type-II motor vehicle maintenance and repair” [and

thus each outlet] has the qualification to engage in motor vehicle maintenance and

repair [business].

4. Hangzhou Xiaomuzhi Company’s licensing [activity] and [engagement in] motor

vehicle maintenance and repair business are not within the authorized scope of

[the company’s] franchising [business].

Results of the Adjudication

On September 17, 2012, the No. 2 Intermediate People’s Court of Tianjin Municipality

rendered the (2012) Er Zhong Min San Zhi Chu Zi No. 47 Civil Judgment:

1. [The court orders] Tianjin Xiaomuzhi Automobile Maintenance and Repair Services Co.,

Ltd. to immediately stop acts that infringe upon the No. 6573881 and No. 6573882

10

Translators’ note: the name “浙江省商务厅” is translated here as “Department of Commerce of Zhejiang

Province” in accordance with the translation used on the department’s website, at http://www.zcom.gov.cn/.

Highlighted Edition


8

“Xiaomuzhi” word registered trademarks starting from the day the judgment comes into

effect. [This] means that Tianjin Xiaomuzhi Automobile Maintenance and Repair

Services Co., Ltd. [must] immediately stop using the logo with the “little finger figure”

on its website (www.tjxiaomuzhi.net) and in its publicity materials, discount experience

coupons, and business places (including branch institutions), and [must] stop using the

“Xiaomuzhi” word alone.

2. [The court orders] Tianjin Huashang Auto Parts Import Company to immediately stop

acts that infringe upon the No. 6573881 and No. 6573882 “Xiaomuzhi” word registered

trademarks starting from the day the judgment comes into effect. [This] means that

Tianjin Huashang Auto Parts Import Company [must] immediately stop using the logo

with the “little finger figure” on its website (www.tjxiaomuzhi.com).


Ltd. and Tianjin Huashang Auto Parts Import Company to, within ten days of the

judgment’s coming into effect, jointly and severally pay LAN Jianjun and Hangzhou

Suremoov Automotive Technology Company Limited compensation in the amount of

RMB 50,000 for [their] economic losses and for expenses [incurred] in protecting their

rights.

4. [The court] rejects other litigation claims [made by] LAN Jianjun and Hangzhou

Suremoov Automotive Technology Company Limited.

After the judgment was pronounced, LAN Jianjun, Hangzhou Xiaomuzhi Company, Tianjin

Xiaomuzhi Company, and Tianjin Huashang Company all appealed. On February 19, 2013, the

Higher People’s Court of Tianjin Municipality rendered the (2012) Jin Gao Min San Zhong Zi

No. 0046 Civil Judgment:

1. [The court] upholds Items 1, 2, and 3 of the No. 2 Intermediate People’s Court of Tianjin

Municipality’s (2012) Er Zhong Min San Zhi Chu Zi No. 47 Civil Judgment and the parts

[of the judgment concerning] the overdue performance of obligations.

2. [The court] revokes Item 4 of the No. 2 Intermediate People’s Court of Tianjin

Municipality’s (2012) Er Zhong Min San Zhi Chu Zi No. 47 Civil Judgment.


Ltd. to immediately stop using the “Xiaomuzhi” shop name in its enterprise name starting

from the day the judgment comes into effect.


Ltd. to, within ten days of the [second-instance] judgment’s coming into effect, pay

Hangzhou Suremoov Automotive Technology Company Limited compensation in the

amount of RMB 30,000 for [its] economic losses.

Highlighted Edition


9

5. [The court] rejects the other claims of appeal [made by] LAN Jianjun and Hangzhou

Suremoov Automotive Technology Company Limited.

6. [The court] rejects the claims of appeal [made by] Tianjin Xiaomuzhi Automobile

Maintenance and Repair Services Co., Ltd. and Tianjin Huashang Auto Parts Import

Company.

Reasons for the Adjudication

In the effective judgment, the court opined:11

the main issues of the dispute in this case

were whether defendants Tianjin Xiaomuzhi Company’s and Tianjin Huashang Company’s

allegedly infringing acts [actually] infringed upon plaintiffs LAN Jianjun’s and Hangzhou

Xiaomuzhi Company’s exclusive rights to use the registered trademarks, and whether [Tianjin

Xiaomuzhi Company’s acts] constituted unfair competition with Hangzhou Xiaomuzhi

Company.

1. On [the issue of] whether the defendants infringed upon LAN Jianjun’s and Hangzhou

Xiaomuzhi Company’s exclusive rights to use the registered trademarks

In the course of engaging in automobile maintenance and repair, as well as recruiting

franchisees through [their] websites, Tianjin Xiaomuzhi Company and Tianjin Huashang

Company used a logo with the “little finger figure” multiple times. There were also instances

where [they] used “Xiaomuzhi” alone or for emphasis. For the relevant public12

who paid

general attention to [these acts], [these acts] were enough to confuse them about the source of the

service or [cause them to] mistakenly conclude that there was a specific connection between

Tianjin Xiaomuzhi Company and Hangzhou Xiaomuzhi Company. The main body of the logo

11

Translators’ note: the Chinese text does not specify which court opined. Given the context, this should be

the Higher People’s Court of Tianjin Municipality.

12 Translators’ note: the term “相关公众” (“relevant public”) used here is only used in Articles 13 and 14 of

《中华人民共和国商标法》 (Trademark Law of the People's Republic of China), adopted on August 23, 1982,

effective as of Mar. 1, 1983, amended on Feb. 22, 1993, Oct. 27, 2001, and Aug. 30, 2013, available at

http://www.gov.cn/jrzg/2013-08/30/content_2478110.htm. Both Articles 13 and 14 refer to “驰名商标” (“famous

trademarks”). It is interesting that the term “相关公众” (“relevant public”) is used in a case that has no explicit

reference to famous trademarks.

The Supreme People’s Court defines the term “相关公众” (“relevant public”) as “与商标所标识的某类商

品或者服务有关的消费者和与前述商品或者服务的营销有密切关系的其他经营者” (“the consumers who are

related to a certain type of commodity or service that the trademark identifies, as well as other business operators

who are closely connected with the marketing of the aforementioned commodity or service”). 《最高人民法院关

于审理商标民事纠纷案件适用法律若干问题的解释》 (Interpretation of the Supreme People’s Court on Several

Issues Concerning the Application of Laws in the Handling of Trademark Civil Disputes), adopted by the

Adjudication Committee of the Supreme People’s Court on Oct. 12, 2002 and effective as of Oct. 16, 2002,

available at http://www.court.gov.cn/zscq/sfjs/201004/t20100413_4048.html, Article 8.

Highlighted Edition


10

with the “little finger figure” and the “Xiaomuzhi” word, [which is] the most recognizable part,

are the same as those of the registered trademarks at issue in this case. In addition, considering

Tianjin Xiaomuzhi Company’s acts of using “Xiaomuzhi” [as if it were its] trademark in its

places of business, website, and advertising materials, [the court] should determine that the logo

[used by Tianjin Xiaomuzhi Company and Tianjin Huashang Company] and the “Xiaomuzhi”

word registered trademarks at issue in this case were similar.

Therefore, because Tianjin Xiaomuzhi Company and Tianjin Huashang Company,

without authorization, used the “little finger figure” and “Xiaomuzhi” word alone in service

items identical to those approved in the No. 6573881 “Xiaomuzhi” word registered trademark,

whose rights were enjoyed by LAN Jianjun and Hangzhou Xiaomuzhi Company, [and these acts]

were enough to result in confusion and misidentification [of the companies] among the relevant

public, [they were] infringing acts under Article 52, Item (1) of the Trademark Law of the

People’s Republic of China (hereinafter referred to as the “Trademark Law”).

[With respect to] Tianjin Xiaomuzhi Company’s and Tianjin Huashang Company’s

business acts of recruiting franchisees through their websites, according to Article 12 of the

Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of

Laws in the Handling of Trademark Civil Disputes,13

[the court could] determine that [Tianjin

Xiaomuzhi Company and Tianjin Huashang Company] had used a similar trademark in services

that were akin to the service items approved in the No. 6573882 “Xiaomuzhi” word registered

trademark, whose rights were enjoyed by LAN Jianjun and Hangzhou Xiaomuzhi Company, and

that [the use] was without the rightholders’ authorization. [These acts] also constituted

infringing acts under Article 52, Item (1) of the Trademark Law.

2. [On the issue of] whether the defendants’ [acts] constituted unfair competition with

Hangzhou Xiaomuzhi Company

This issue raised two key questions: first, whether the business operator [carried out] acts

that exceeded [its] legal business scope and violated administrative licensing laws and

regulations, and whether its civil rights and interests could be protected by law; and second, how

to determine [what constitutes] a competitive relationship regulated by the anti-unfair

competition law.

(1) [On the issue of] whether the business operator [carried] acts that exceeded [its]

legal business scope and whether its civil rights and interests could be protected

by law

One main reason that Tianjin Xiaomuzhi Company and Tianjin Huashang Company

claimed that their acts did not constitute unfair competition was that Hangzhou Xiaomuzhi

Company had not obtained, in accordance with law, relevant licenses for motor vehicle

13

Translators’ note: see supra note 12, second paragraph.

Highlighted Edition


11

maintenance and repair, [and, thus, it had] exceeded [its] legal business scope by engaging in the

franchise business and failed to comply with statutory requirements. [These] were illegal

business acts and [therefore] the civil rights and interests claimed by Hangzhou Xiaomuzhi

Company should not be protected by law. Thus, in this case, [the court] had to [first] clarify

whether the actsHangzhou Xiaomuzhi Company’s exceeding of [its] legal business scope and

violation of administrative licensing laws and regulationsalleged by Tianjin Xiaomuzhi

Company and Tianjin Huashang Company [actually] occurred and[, if so,] whether [Hangzhou

Xiaomuzhi Company’s] corresponding civil rights and interests could be protected by law.

First, regarding [a business operator’s] act of exceeding [its] legal business scope and

violating relevant administrative licensing laws and regulations, corresponding administrative

departments should determine [whether there was indeed such an act] in accordance with law.

The party claiming that the opposing party has operated a business in violation of law should on

its own accord bear the corresponding burden of proof. In this case, regarding whether

Hangzhou Xiaomuzhi Company illegally engaged in motor vehicle maintenance and repair

business and franchising business, [the court] could not draw affirmative conclusions from the

available evidence and facts. Running automobile maintenance and repair is a type of business

item licensed to [a business operator] in accordance with law. Hangzhou Xiaomuzhi Company

did not engage in automobile maintenance and repair business. What it actually engaged in was

authorizing others to use its trademarks in vehicle cleaning, upkeep, maintenance, repair, etc.

services, or allowing, through business franchising methods, its direct outlets or franchisees to

use in their business activities the “Xiaomuzhi” brand, patented technologies, etc. [The

carrying out of the above-mentioned activities] was not premised upon [Hangzhou Xiaomuzhi

Company’s] obtaining an administrative license to operate a motor vehicle maintenance and

repair business.

In addition, Hangzhou Xiaomuzhi Company had already obtained [its] business franchise

record from the Ministry of Commerce. When Hangzhou Xiaomuzhi Company filed to obtain

a business franchise record, it had already met the “Two Stores, One Year” condition. It was

primarily responsible for the management of the “Xiaomuzhi” brand [and] did not directly

engage in the motor vehicle maintenance and repair business. [It] also held its own business

resources, including trademarks, patents, and business models, and was able to conduct

franchising business. Therefore, in this case, based on the available evidence, [the court] could

not determine that Hangzhou Xiaomuzhi Company [carried out] acts of engaging in motor

vehicle maintenance and repair or franchising business that violated administrative licensing

laws and regulations.

Secondly, even if relevant acts exceed [a business operator’s] legal business scope and

violate administrative licensing laws and regulations, [these acts] should be investigated and

handled in accordance with law by the administrative department in charge. [The violations] do

not necessarily affect the eligibility of the relevant subject whose civil rights and interests are

infringed upon to initiate civil litigation, nor can [the violations] be used as a defense by the

alleged infringer [to claim] that its acts do not constitute infringement. In this case, even if

Highlighted Edition


12

Hangzhou Xiaomuzhi Company exceeded [its] legal business scope and violated administrative

licensing laws and regulations, [this issue] was within the purview of administrative liability.

This act did not affect [Hangzhou Xiaomuzhi Company’s] exercise, in accordance with law, of

its civil rights to stop acts of trademark infringement and unfair competition, nor did it affect the

People’s Court’s protection of [Hangzhou Xiaomuzhi Company’s] civil rights and interests in

accordance with law. The alleged infringer claimed that its acts did not constitute infringement

on the grounds that the business operator exceeded [its] legal business scope and violated

administrative licensing laws and regulations. The People’s Court did not support this claim.

(2) On [the issue of] how to determine [what constitutes] a competitive relationship

regulated by the Anti-Unfair Competition Law

Whether there exists a competitive relationship between business operators is the key to

determining [whether an act] constitutes unfair competition. Article 2 of the Anti-Unfair

Competition Law of the People’s Republic of China (hereinafter referred to as the “Anti-Unfair

Competition Law”) provides:

Business operators should, in market transactions, follow the principles of

voluntariness, equality, fairness, honesty, and credibility, and observe generally

recognized business ethics. Unfair competition as defined under this Law refers

to a business operator’s act that violates the provisions of this Law, adversely

affects the legal rights and interests of other business operators, and disrupts the

socio-economic order. Business operators as defined under this Law are [those]

legal persons, other economic organizations, and individuals who engage in the

commodity business or for-profit services (“commodity” as referred to hereinafter

includes “services”).

It is thus clear that the [coverage of] the Anti-Unfair Competition Law is not limited to

business operators having direct or specific competitive relationships [amongst themselves] nor

requires them to engage in the same industry. The acts of unfair competition regulated by the

Anti-Unfair Competition Law refer to acts that adversely affect the legal rights and interests of

other business operators and disrupt the socio-economic order. By looking at who is directly

adversely affected, [one can see that] what is adversely affected are the market interests of other

business operators. Therefore, where the business operators have indirect competitive

relationships and the party [carrying out] the act [in question] violates the provisions of the Anti-

Unfair Competition Law and adversely affects the legal rights and interests of the other business

operators, [the act] should also be determined to be an act of unfair competition.

In this case, Tianjin Xiaomuzhi Company and Tianjin Huashang Company, which

allegedly [carried out acts of] unfair competition, both engaged in the automobile maintenance

and repair business. According to the ascertained facts, Hangzhou Xiaomuzhi Company did

not have the qualifications to engage in motor vehicle maintenance and repair, nor did it actually

engage in the business of automobile maintenance and repair. However, from the technology

development activities (including automobile glass repair and automobile paint quick repair) that

Highlighted Edition


13

[Hangzhou Xiaomuzhi Company] engaged in, as well as the vehicle maintenance, repair, etc.

included in the approved service items [identified in] the registered trademarks that [Hangzhou

Xiaomuzhi Company] was authorized to use, [the court] could determine that Hangzhou

Xiaomuzhi Company, through the licensing of its own operational resources, including [its]

enterprise logos, registered trademarks, patents, and proprietary technologies, to its direct outlets

or franchisees, made [these outlets and franchisees] the operators of the “Xiaomuzhi” brand and

used the method of business franchising to engage in business activities related to automobile

maintenance and repair. Therefore, Hangzhou Xiaomuzhi Company was a relevant business

operator in the automobile maintenance and repair market, and it had an indirect competitive

relationship with Tianjin Xiaomuzhi Company and Tianjin Huashang Company.

Article 5, Item (3) of the Anti-Unfair Competition Law prohibits a business operator from

using, without authorization, other [operators’] enterprise names, causing others to mistakenly

believe that [the business operator’s commodities] are [those of] the other [operators] and,

thereby, adversely affecting [its] competitors. Based on the determination that there was an

indirect competitive relationship between the plaintiff and the defendants, [the court] should, [for

the purpose of] confirming whether Tianjin Xiaomuzhi Company’s registration of the

“Xiaomuzhi” shop name constituted unfair competition by using, without authorization,

another’s enterprise name, comprehensively consider the following factors:

1. Whether Hangzhou Xiaomuzhi Company’s enterprise shop name had a

certain [degree of] market visibility.

According to the available evidence of this case, since its establishment in

October 2004, Hangzhou Xiaomuzhi Company had used “Xiaomuzhi” in its enterprise

name as [its] shop name and had engaged in the automobile maintenance and repair

industry by the method of business franchising. Moreover, [it] created a “Xiaomuzhi”

automobile micro-repair system specifically for the restoration of minor automobile

damage [caused by] small scratches and collisions. By 2011, Hangzhou Xiaomuzhi

Company already had more than 400 franchise stores across the country. Although [the

word] “Xiaomuzhi” itself existed in [popular] vocabulary, “Xiaomuzhi” [as applied to]

automobile maintenance and repair, through its continued use and publicity by

[Hangzhou Xiaomuzhi Company’s] direct outlets and franchisees in the area of

automobile maintenance and repair, had already had the effect of identifying the subject

of the business operation and distinguishing [this service] from other services in relevant

markets. When Tianjin Xiaomuzhi Company was established in October 2008,

Hangzhou Xiaomuzhi Company’s “Xiaomuzhi” shop name and related services had

already obtained a certain [degree of] market visibility among the relevant public.

2. Whether Tianjin Xiaomuzhi Company registered and used the

“Xiaomuzhi” shop name in subjective bad faith.

Business operators should, in market competition, follow the principles of honesty

and credibility, observe generally recognized business ethics, and respect the fruits of

others’ labor in the market. When registering enterprise names, [business operators]

Highlighted Edition


14

should bear the responsibility to avoid using a shop name that has already been used by a

company in the same industry.

In this case, on June 30, 2008, Tianjin Huashang Company, the franchisee, signed

the Franchise Chain Contract with Hangzhou Xiaomuzhi Company, the franchisor of the

“Xiaomuzhi” brand. [Tianjin Huashang Company’s] legal representative TIAN Junshan

signed the contract on behalf of the company and was aware of the relevant contents of

the contract. Tianjin Xiaomuzhi Company claimed that it had no relationship with

Tianjin Huashang Company and that they were two mutually independent legal persons.

Nevertheless, TIAN Junshan was the legal representative of both companies. Also, the

publicity information and related contact information displayed on the Tianjin Huashang

Company website all pointed directly to Tianjin Xiaomuzhi Company. Furthermore,

Tianjin Huashang Company used its registered place of business as the place of business

of Tianjin Xiaomuzhi Company’s headquarters in Tianjin.

Thus, it should be determined that when it was established, Tianjin Xiaomuzhi

Company, as a business operator in the relevant automobile maintenance and repair

market, should be aware of Hangzhou Xiaomuzhi Company, as well as its operational

resources and [business] development trends. Tianjin Xiaomuzhi Company, however,

still used “Xiaomuzhi” as [its] enterprise shop name, the core [part] of an enterprise name

for distinguishing different market subjects. [Tianjin Xiaomuzhi Company] also could

not provide a reasonable basis for using “Xiaomuzhi” as [its] shop name. Subjectively,

it obviously had the intent to “hitchhike” and piggyback on others’ goodwill.

3. Whether Tianjin Xiaomuzhi Company’s use of the “Xiaomuzhi” shop

name was sufficient to create market confusion.

According to the ascertained facts, on the website that it developed and in other

publicity materials, Tianjin Xiaomuzhi Company used special typeface to state, for

emphasis, words [such as] “[w]hat to do if there are minor car scratches or collisions?

Come to Tianjin Xiaomuzhi” and “Tianjin Xiaomuzhi’s Specialties”. Its discount

experience coupons also clearly stated, “[s]mall scratches on automobiles, come to

Tianjin Xiaomuzhi”. The targets of the services [Tianjin Xiaomuzhi Company offered]

had much overlap with the consumer group served by the “Xiaomuzhi” automobile

micro-repair system operated by Hangzhou Xiaomuzhi Company. Also, since 2010,

Hangzhou Xiaomuzhi Company’s franchise stores in the Tianjin area had also been

gradually established and [thus] overlap between the service locations of [Hangzhou

Xiaomuzhi Company and Tianjin Xiaomuzhi Company] had emerged. Therefore,

Tianjin Xiaomuzhi Company’s registration and use of “Xiaomuzhi” as its shop name

necessarily caused the relevant public to mistakenly believe that the two parties shared a

certain kind of origin or connection. In addition, Tianjin Xiaomuzhi Company carried

out publicity activities that used, alone or for emphasis, words such as [“]‘Xiaomuzhi’

automobile maintenance and repair[”] and “Tianjin Xiaomuzhi”. This was enough to

cause confusion and misidentification among the relevant public about market subjects

Highlighted Edition


15

and the source of services and was likely to cause chaos in the competition order [of the

market].

To summarize the above analysis, Tianjin Xiaomuzhi Company’s registration and use of

the enterprise name [“Xiaomuzhi”] was a per se violation of the principle of honesty and

credibility and was [thus] of an improper nature. Also, regardless of whether [the enterprise

name “Xiaomuzhi”] was used for emphasis, as [Tianjin Xiaomuzhi Company’s use of the

“Xiaomuzhi” enterprise name] could hardly avoid creating market confusion, [this act in itself]

constituted unfair competition. [Tianjin Xiaomuzhi Company] should bear civil liability [in

this case] by ceasing its use of the “Xiaomuzhi” shop name and paying corresponding

compensation for economic losses.

lan jianjun and hangzhou suremoov automotive technology … · 2017. 6. 21. · automobile...

Documents