Court awards maximum in battle with firm using HK 'shadow company'

Renowned as a carmaker, BMW prevailed a legal battle in another sector in late 2009 - for its upmarket clothes brand.

The court found that "BMW", "BMW & Device", and the Chinese characters "Baoma" are all well-known trademarks. It was a rare case of the Chinese judicial system recognizing three trademarks at one time.

"By confirming their well-known trademark status, we hope to give such famous brands wider and stronger judicial protection," Presiding Judge Sun Yuanqing told China Daily.

After securing such status, a registered trademark has protection beyond the field where it gained its fame.

Though much more famous as a car brand, BMW expanded into garment making in 2001 when launched its BMW Lifestyle line in cooperation with Hong Kong company Ports.

The clothes marked with the auto icon's familiar white-and-blue concentric circles are usually sold alongside its cars in BMW showrooms.

The dispute began when clothes with a similar logo made by Shenzhen Century Baoma Apparel Co Ltd were found on sale in a Changsha shopping mall.

The Shenzhen company had franchised nearly 300 stores nationwide by 2007, notching nearly 100 million yuan in annual sales.

BMW then sued the Shenzhen and Changsha companies along with an accountant involved for 50 million yuan for trademark infringement and unfair competition.

Shenzhen Century Baoma claimed that sale of MBWL clothes were authorized by a Hong Kong company that holds the trademark MBWL.

The court found that the Shenzhen company changed the MBWL design and made it more like the BMW logo.

The court ordered the defendants to stop selling the infringing products and using trade names containing BMW and Chinese characters Baoma in commercial activities.

Due to "distorted use and bad-faith registration", the trademark MBWL is now subject of a cancellation proceeding, according to the court ruling.

BMW was awarded 500,000 yuan, the maximum under the current legal system when profits made by infringers are not known.

As Century Baoma also sells other brands, there was difficulty in the calculation and collecting evidence.

Award of "the highest statutory monetary compensation showed our determination to crack down on infringements and to support brands", Judge Sun said.

A revision of the Trademark Law, still under discussion, is expected to raise the figure to 1 million yuan.

The case draws attention to another issue - "shadow companies" founded to serve as a tool for another company, said Ma Qiang, attorney for BMW.

A growing number of infringers take advantage of loose registration procedures abroad and set up a shadow company that has a name similar to famous brands, Ma said.

The overseas shadow company then franchises a firm on the mainland - actually the real maker of the infringing products - which in turn does illegal business under franchise.

"In this way, infringers sought to fool domestic consumers and potential franchisees with an 'imported' brand," the attorney said

"At the same time, legal maneuvering in other jurisdictions by overseas companies increases plaintiff legal costs," he said.

Though the Companies Ordinance of Hong Kong has regulations to deal with a trademark swindle, brand holders have to file a lawsuit in Hong Kong to stop infringements, according to Wswire.com.

China Daily

(China Daily 03/31/2010 page17)