Perfume N°5 v N°9: Chanel won an unfair competition case in China

In 2019, after spotting a perfume product in China’s market highly similar to its classic N°5 perfume, Chanel took a ‘notarization-throughout purchase’ online and located the alleged infringing product shown below on the right. The side-by-side comparison captures several common features. The obvious difference lies in the text: whilst Chanel has ‘N°5, CHANEL’, the alleged infringing product uses ‘N°9, FLOWER OF STORY’ (hereinafter ‘the N°9 perfume’). 

Chanel sued both the producer of the N°9 perfume, Yiwu Story of Love Cosmetics Co., Ltd. (‘SLC’), and SLC’s distributor, Xi’an Wushengwu E-Commerce Co., Ltd. (‘WSW’), in the Intermediate People’s Court of Shaanxi Province for committing unfair competition acts on Chanel’s N°5 perfume’s trade dress: its outer black-and-white-coloured packaging (box).

First instance 

[Case reference: Civil Judgment No. 26 [2020], First, Civil, IP, 01, Shaanxi Intermediate People’s Court of Shaanxi Province. The ruling is accessible here (in Chinese), retrieved from China Judgments Online]

The plaintiff’s claim was mainly based on Article 6(1) of the Anti-Unfair Competition Law of China (2019 Amendment): 

Article 6 A business shall not commit the following acts of confusion to mislead a person into believing that a commodity is one of another person or has a particular connection with another person: 

(1) Using without permission a label identical or similar to the name, packaging or decoration, among others, of another person’s commodity with certain influence. (emphasis added) 

The trial court, combined with evidence furnished by Chanel, found that the N°5 perfume and its packaging box were indeed ‘with certain influence’ and had reached the distinctive level to distinguish the source of the commodity among the relevant public in China. 

Then, the trial court adopted the approach provided by Article 4(3) of the Interpretation of the Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition (‘the SPC Interpretation’) to evaluate the identity or similarity between the products and packages involved by ‘referring to the principles and methods for judging identical or similar trade marks’. 

Per that, the trial court found the trade dresses and packaging boxes at issue were similar, particularly for a public whose native language is not alphabet-based. The likelihood of misidentification by the relevant public was affirmed. 

Concerning the trade dress and packaging, the defendants’ acts amounting to unfair competition must stop. The trial court ordered SLC to compensate the economic losses and the reasonable expenses Chanel had paid for stopping the infringements, a total of CNY 600,000 (≈EUR 83,108). 

Considering that WSW, as a distributor, was selling the N°9 perfume under a legitimate license from SLC and removed the alleged infringing goods online immediately after receiving notification from the plaintiff – and that WSW had only sold two bottles of the N°9 perfume (bought by the plaintiff) – the trial Court exempted WSW from paying damage liability. 

Second instance 

[Case reference: Civil Judgment No. 319 [2021], Final, Civil, Shaanxi of the High People's Court of Shaanxi Province. The ruling is accessible here, in Chinese, retrieved from China Judgments Online]

In 2021, SLC appealed to the Shaanxi Provincial Higher People’s Court with mainly the following two claims:

(1) Neither the N°5 perfume’s trade dress nor its packaging would be distinctive enough to identify the source of the product. 

The Court at second instance upheld SLC’s argument on the outer packing box:
The main identification part of the (Chanel’s) packaging and decoration is the arrangement of the black frame on a white background and its text content. According to the evidence provided by SLC, the outer packaging boxes of Gucci, Serge Lutens’s and other brand perfumes are all rectangular carton boxes, indicating that the design of the black frame on a white background is a common decoration for perfume packaging. As for the way of arranging up and down and placing the text in the center, it is also the usual way of general packaging. 
As to the trade dress of the perfume bottle, SLC argued that consumers identify the product upon the particular lettering ‘N°5’ and ‘CHANEL’ instead of the plain bottle. Yet, the overall combination of the ‘bottle + texts’, which constitutes a three-dimensional sign, had no distinctiveness as source identification. To support that, SLC cited the once high-profile J’adore Dior trade mark case in China (IPKat post here) in which the three-dimensional mark at issue, also a perfume bottle, was not granted trade mark registration at that time. SLC also referred to another ruling in April 2020 issued by the Higher People’s Court of Beijing (case reference: Administrative Judgment No. 18 [2020], Final, Administrative Division, Beijing) that rejected Chanel’s three-dimensional trade mark application No. 27067168, as shown below: 

(A question this Kat holds about the J’adore Dior three-dimensional mark case in 2018 still stands: It is hard to tell whether the disputed application carries specific letters as displayed by Dior in the court. It seems that it also has the lettering of ‘J’adore’, if so, then it is not a ‘plain bottle’; if not, then they are not of the ‘identical’ cross-references as claimed by Dior.) 

Back to the present case – the court drew a line between the two subject matters and between the independent laws governing their thresholds of protection: 
The plaintiff’s claim in this case is to protect the overall design of the packaging and decoration used by Chanel perfume, which consists of graphics, colours, shapes, sizes, fonts and other elements, by way of stopping the act of unfair competition. 

The overall trade dress is different from the three-dimensional trade mark, and the legal protection requirements for the two are different. Therefore, the judgement on the registrability of the three-dimensional trade mark is independent of the present case. As to the cited administrative ruling, it was not directly related to this case and thus shall not affect the handling of this case. 
(2) No confusion about the products’ sources would subsist since significant differences lay in the consumer groups from both sides and their purchasing attention level. 

The packaging submitted by SLC showed that its registered trade mark ‘花の物语’ was clearly printed in packaging ‘for avoiding confusion’, and the N°5 perfume has the price of ‘61 times of the N°9 perfume’, which could hardly lead to confusion among the respective consumers of the two products. 

The court pointed out that a price gap was not a criterion determining confusion, for ‘the confusion had occurred already before the actual purchase took place’. As to the confusion and misidentification stated in the Anti-Unfair Competition Law, in addition to the examples provided by Article 4(1) of the SPC Interpretation, i.e. the misunderstanding in terms of having commercial affiliation or licensing relation, the court also added examples of ‘commercial titling and advertising endorsement’. 

Whist it may somehow still be believable that the N°5 perfume and the N°9 perfume could not be misidentified, Article 4(2) of the SPC Interpretation, on which the court stood, was a death blow: 
The use of identical or visually basically undifferentiated commodity names, packaging and decorations on the same commodity shall be deemed as ‘sufficiently to cause confusion (with other’s well-known commodity)’. 
In view of the above, the court dismissed the appeal requests and upheld the corresponding parts of the original ruling, with an additional remark on copycats: 
Especially for perfumes as luxury goods, the bottle itself is a commercial sign to distinguish the source of the goods. Some copycat products are very similar in packaging to luxury packaging through deliberate imitation to attract consumers. However, its production costs are low, and profits are high, and there are hazards such as disrupting the market order and damaging the image of large brands, and this behaviour should be regulated. 

This case demonstrates how the unfair-competition law catches and regulates an area not easily reachable by trade mark law: the look-alike or complete copycat (towards others’ commodity with certain influence) on trade dresses and with deliberately no trade mark of the infringed attached. 

The rulings of this case contain some interesting and valuable points. The extra remarks added by the Shaanxi Provincial Higher People’s Court make for a straightforward standpoint, which echoes the very little room, if any, that the law in China has left for such copycats. 

Perfume N°5 v N°9: Chanel won an unfair competition case in China Perfume N°5 v N°9: Chanel won an unfair competition case in China Reviewed by Tian Lu on Friday, January 14, 2022 Rating: 5

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