Expert Advice

Penfolds raises a glass in China

B2B Editor10 February 2017

In a landmark ruling from the Beijing High People’s Court, Treasury Wine Estates (“TWE”), the owner of the ‘Penfolds’ wine brand, has successfully challenged the registration of the lucrative ‘Ben Fu’ trade mark which had been registered by well-known ‘trade mark squatter’, Li Daozhi, in China. TWE had failed to register the trade mark, a Chinese transliteration of the Penfolds name, prior to the trade mark squatter’s registration, despite having developed a strong reputation in China over 20 years.

The protection of intellectual property rights within China has historically proven to be a significant challenge for foreign companies. In particular, China utilises a ‘first to file’ trade mark registration system which affords trade mark rights to those who are first to file a trade mark. Foreign companies are often at the mercy of trade mark squatters who are able to claim priority by registering the trade mark of a foreign company before that company enters the Chinese market. Generally, the trade mark squatter will attempt to sell the rights to these registered trade marks to the foreign company at substantial cost. As a consequence, it is not uncommon for foreign companies to rebrand their products, or leave the market entirely.

TWE have been embroiled in litigation for over five years in an attempt to cancel the Ben Fu trade mark, and be recognised as the owner of the trade mark. The Beijing High People’s Court ended the dispute, in TWE’s favour, cancelling the trade mark on the basis that the registered holder failed to show genuine use of the trade mark for wine or related activities and allowing TWE to claim control, and make use of the Ben Fu name across China.

The ruling in Penfolds’ case is a rare success for trade mark litigation by a foreign company in China. In 2013, French wine merchant, Castel, was unsuccessful in a similar trade mark case against the same trade mark squatter. Castel was found to have infringed the trade mark which had been registered first by Pastel Wine (which is owned by Li Daozhi) and was ordered to pay damages to the trade mark squatter.

The Penfolds case shows a shift in the attitude of Chinese courts and provides some interesting legal considerations. It also confirms that from a commercial and practical perspective, if you are considering expanding operations internationally, it is critical that you consider your intellectual property strategy (IP) early. Such strategies should consider the application of relevant international conventions which may affect the priority date of your application(s). As the Penfolds case highlights, an effective IP strategy should also consider the effect of translations and transliterations in relevant markets.

The team at Moulis Legal have assisted Australian companies in applying for, securing and prosecuting international trade marks (including in China). Our team includes specialist trade mark lawyers and lawyers with Chinese law degrees. We understand trade mark law and Chinese law.

Contact Shaun Creighton on 02 6163 1000 or
[email protected] to discuss how we can assist with your trade mark and legal requirements.

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