Two Chinese copycat fashion brands lose trademark battles but war is far from over

  • Recent court victories for Ermenegildo Zegna and Dunhill against Chinese copycat stores spark hope for intellectual property rights in the country
  • But doubts persist as to how significant these wins will prove to be
PUBLISHED : Monday, 26 November, 2018, 10:03pm
UPDATED : Tuesday, 27 November, 2018, 10:52am

From Gucci’s counterfeit-mocking “Guccy” line to Vetements’ “Official Fake” raincoat, some luxury brands have been known to turn China’s notoriety for intellectual property infringement into cheeky creative opportunities.

But outside the cutting-room floor, brand owners are winning major legal battles, causing industry observers to wonder: could China’s IP reputation be changing for the better?

When two luxury menswear brands, Ermenegildo Zegna and Alfred Dunhill, recently emerged victorious from years-long trademark disputes with copycat Chinese brands, it brought a collective sigh of relief and a fresh dose of optimism about Chinese attitudes towards intellectual property rights (IPR).

The decisions were announced just weeks after Chinese government sources told the Post it would not change its IP protection laws because of pressure from the United States, with whom it is currently engaged in a trade war in which IPR is a key point of contention.

Ermenegildo Zegna’s five-year case centred on a Chinese menswear brand that used the trademark “Yves Zegnoa”. The CEO of the Italian fashion house, Gildo Zegna, commented on the favourable ruling.

Alfred Dunhill awarded 10 million yuan in trademark case against Chinese firm

“[It was] significant, not only because it supports our intellectual property rights in China in consideration of the high fame and reputation our trademarks gained, but principally because it confirms the recent positive efforts of the Chinese courts in protecting the fair competition in view of a local market ruled in the interest of all local and international players present in the Chinese territory,” he said.

Headlines described Alfred Dunhill’s win against Chinese menswear group Danhuoli, which used a similar elongated logo to that of the British luxury brand, as “groundbreaking” and “a landmark victory”. The court of Guangdong province awarded Dunhill 10 million yuan (US$1.4 million) in damages.

A spokesman for IP consultancy Rouse, which helped Dunhill in the case, said this was “significantly larger than the average ruling in trademark infringement cases in China”.

William Weightman, a Fulbright fellow formerly based in China whose research included IP law, says the court ruling is part of an important positive trend in China’s enforcement of IPR.

“The data shows that in many cities, overall plaintiff win rates exceed 80 per cent and foreign firms even win slightly more cases than domestic parties,” he said.

Dan Harris and Matthew Dresden of the popular China Law Blog are more cautious in their reaction to these triumphs.

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Dresden wrote of the Dunhill verdict that while it is understandable that the winning party would feel “vindicated”, it is by no means a “landmark decision”.

“A landmark verdict is one that signals a change in the way cases are being decided,” Dresden wrote. “But this decision is no landmark, or if it is, it is too early to tell. Nor does this decision show that China is really serious about enforcing IP rights, because this decision is still the exception, not the rule. Check back in a year and let me know if every other decision since this one followed the same logic and came out in favour of the trademark owner.”

Last year, footwear manufacturer New Balance was also awarded 10 million yuan for a trademark dispute. According to the company, it was the largest amount a foreign brand had been awarded in an IP case at the time.

The verdict followed soon after a number of legal revisions the Chinese government made for IPR decision-making, according to The Fashion Law blog.

Weightman says that overall the government has shown serious resolve to improve its IP system “by expanding admissible evidence in IP trials, increasing damage awards for infringement, increasing the unity of court rulings, and bolstering judicial professionalism”.

While Chinese policymakers have been focusing more on improving IP protection measures, Harris from the China Law Blog, who is also a founding member of law firm Harris Bricken, told the Post he believes trademark dispute rulings have already been fairly consistent.

“China courts have for at least five years been quite good at ruling fairly on trademark disputes involving private companies,” he says. “I don’t think that they’ve improved on this over the last five years.”

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Dresden wrote that gaining the support of Chinese courts in its IP infringement case hinged on Dunhill’s preparation for the various possibilities inherent within China’s trademark landscape.

While different from that of the US, China does still have minimum standards in place to guide decision-making.

One of the reasons that Dunhill found success where other companies might not is that they had registered their trademark in China first.

This helps protect foreign companies against “trademark squatting”, which is when a Chinese company registers a foreign brand’s trademark in China before the foreign brand does.

Too many people read about how China is terrible at protecting patents involving high-level technology and they just assume that means China is terrible at protecting all IP
Dan Harris

This “first to file” system is what forced Phillip Lim to adjust its trademark for the China market back in 2013, and Burberry to have to fight for its iconic check pattern the same year. Hermès faced a similar problem in 2012 when it lost an infringement case against a company that registered its Chinese name for itself in 1995.

But this is something a lot of brand owners are not aware of: their trademark registration in other countries means very little from a Chinese legal standpoint.

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They need to register it again in China if they think they might sell in the Chinese market. “Fashion brands are notoriously bad at doing what is necessary to protect their IP in China,” Harris says.

Brands can boost their IP strategy by, for example, registering multiple trademarks of Chinese translations of their brand name or defining characteristics of their brand, such as a pattern. They can also foster relationships with retailers to improve their chances of getting counterfeit products dealt with.

Yizan He, CEO of licensee firm Alfilo Brands, writes in Entrepreneur magazine that China’s reputation for poor IP protection “shouldn’t deter ambitious businesses from taking steps to enter the market – providing they do their research, get support in place on the ground and understand the culture of how Chinese consumerism is changing”.

Harris notes there are still plenty of misconceptions that need clearing up regarding Chinese trademark laws.

“Too many people read about how China is terrible at protecting patents involving high-level technology and they just assume that means China is terrible at protecting all IP,” he says. “What I’ve noticed most in the last few years is how often Chinese companies just copy the consumer product itself without copying the trademark. They do this because very few products have any IP protection beyond the trademark.”

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In other words, there’s no guarantee that opportunists will not find other ways to copy a brand or its products, given that China is the world’s fashion manufacturing hub. But getting a trademark can be the first line of defence.

“Securing a China trademark for your brand will not guarantee you protection from counterfeits that use your brand, but it should reduce the number of counterfeits and give you the power to stop the counterfeits you see,” Harris says. “Without a China trademark you have no basis for doing anything.”