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  • Dec 22, 2014
  • Updated: 8:24am
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LAW

Winemaker Penfolds in legal battle with 'trademark squatters' over right to use its Chinese name

PUBLISHED : Monday, 14 July, 2014, 4:03pm
UPDATED : Tuesday, 15 July, 2014, 4:24am
 

Australian winemaker Treasury Wine Estates, owner of the popular Penfolds brand, is facing a legal challenge in China in the latest of a series of high-profile trademark disputes involving big international brands. 

A Treasury Wine Estates spokesman said it won a Chinese court case granting it the right to use Penfolds' adopted Chinese name Ben Fu, or “chasing prosperity", for its wines, even though others had already registered the trademark there.

But a company spokesman said the trademark holder had appealed the verdict and that Treasury would continue legal procedures to assert trademark rights over its chosen Chinese name.

“This appeal is still pending and it will take time for the Chinese legal system to process this matter,” Roger Sharp, Treasury’s director of corporate affairs, wrote in an e-mail.

Sharp confirmed a report in the Australian Financial Review on Monday regarding legal procedures in China between Penfolds and a Li Daozhi.

Li, the founder of Wenzhou, Zhejiang-based wine distributor Panati Wine, gained prominence for taking on French winemaker Castel Frères in a similar case.

Also known as Daniel Li, he is a Spanish citizen of Chinese origin, legal records show. Another person holding Penfolds trademark rights is Li Shen, also residing in Spain.

The two men hold different rights for the Australian winemaker’s chosen Chinese name for much of the coming decade, according to China Trademark Office filings.

Li Shen holds the rights for rice wine, whiskeys, grape wine and other alcoholic beverages other than beer sold under the name Ben Fu. His rights, awarded in March, are set to expire in a decade. Li Daozhi holds the rights to the name used for restaurants, bars and guesthouses, the records show.

Treasury Wine Estate registered its rights only for the English version of the Penfolds brand name, the Chinese records show. In its lawsuit, Treasury is trying to prove it is the rightful owner of the Chinese version of the name.

The two Lis are not the only ones holding rights to the trademark in China. The two Chinese characters Ben Fu appear in more than 70 registered trademarks, records show. A few of them, however, make explicit use of the Penfolds brand name and logo.

At least four companies use the Australian vinery’s exact logo to sell marketing services, beverages, and bedding products such as pillows and blankets. Others have failed: A Guangzhou-based company attempted to register Chateau Penfolds, and a man in Fujian attempted to reserve the rights to the name “Penfolds Castle”.

The first person to file a trademark application with the China Trademark Office is usually granted the registration rights, Lindsey Zahn, a lawyer who specialises in wine trade law, wrote in an article about the controversy last year in the Cornell International Law Journal. China’s new trademark law, which had effect from May 1, could improve trademark protection for brands not yet registered in China, she noted.

Li Daozhi already won a similar legal battle against Castel Frères, a French winemaker, forcing the company to rename Cavesmaitre, one of its brands, from “Kasite” to “Kasidaile” in China.

Li's company registered “Kasite” in 2000, a year after Castel had started selling wine in China. Li then reportedly offered the name to Castel for 1 million euros (HK$7 million) in 2003, but Castel turned down the offer. In 2005, Castel sued Li’s company, arguing that Li had not used the name for three years, but lost the case. Li then sued Castel for damages.

A court in Zhejiang province awarded Li 33.73 million yuan last year, but the Supreme People’s Court, China’s highest court, overturned the verdict in February this year and ordered a retrial, which is still pending.

It is unclear when both of the Lis’ cases will be heard again in Chinese courts. Li and his lawyer, Wang Guoqiang, did not respond to several requests for comment on Monday.

Treasury declined to say how much wine it sold in China. Sales in Asia are expanding fast, with revenue increasing 27.5 per cent last year compared with 2012, according to most recent annual report.

Other types of foreign companies have also been confronted with similar trademark disputes within China. Apple Computers and the US car maker Tesla are facing similar lawsuits by Chinese companies.

For You Yunting, a Shanghai-based trademark lawyer with DeBund Law Office, Penfolds stands a good chance of winning its case. "Even though the involved trademark is valid, Penfolds’ phased victory indicated that it is [has] sufficient [evidence] to prove the registrar to be a malicious trademark squatter," said You. 

Zhang Weijun, an expert of trademark law at Tongji University in Shanghai, said foreign companies such as the winemaker or Apple had only themselves to blame for their legal headaches in China.

“Foreign companies accuse Chinese companies of squatting, but then fail to reflect on their trademark strategy or legal mistakes in the Chinese market,” he said. “Even if someone is cybersquatting, the best way [to avoid legal procedures] is to change the name.”

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