[Guest post] Decathlon successful in protecting its store layout in China

The IPKat has received and is pleased to host the following guest contribution by former InternKat James Kwong (Norton Rose Fulbright) on a recent Chinese decision concerning protectability of a store layout under the law of unfair competition. Here’s what James writes:

Decathlon successful in protecting its store layout in China

by James Kwong

Decathlon (Shanghai) Sports Products Co., Ltd (“Decathlon”) has recently won a dispute in China against a Chinese outdoor sports company and its related Beijing company for using an identical or similar store layout, packaging and decoration. This was reported in 京法网事, which is the official Weibo account of the Beijing Courts.

The Beijing Shijingshan People’s Court in China awarded Decathlon around RMB 294 million (approx USD 43.4 million) in damages for economic losses and reasonable expenses. The two defendants were also ordered to publish a statement on “China Intellectual Property News” for four consecutive weeks to eliminate the impact on Decathlon caused by the acts of unfair competition committed.

This is an interesting decision among brand owners because China has been considered for a long time a jurisdiction where the fight against various types of IP infringements, such as trade mark squatters and imitators, has proved challenging. Recalling news from years ago (see e.g. here), there were sayings that staff working at a fake Apple store in China were convinced that they were working for Apple. This seems to show that the country is now really pushing the boundaries in order to become an intellectual property rights powerhouse. Decathlon’s victory is perhaps a glimmer of hope for foreign brand owners.

Is the store layout protectable under unfair competition?

Back to the decision: Decathlon alleged that the two defendants operated stores with similar layouts to that of Decathlon’s. This would easily cause confusion among consumers and result in significant damage to Decathlon’s rights and legitimate interests. As a result, the acts of the two defendants would amount to unfair competition.

In China, one would have to rely on the law of unfair competition for establishing rights for use of an unregistered trade mark. The Shijingshan People’s Court stated that the following requirements have to be fulfilled to establish protection over “decoration” under the law of unfair competition:

1. The decoration should have a unique style, i.e., a certain degree of distinctiveness.

2. There have been prior continuous use and advertising of the decoration by the operator so that the decoration is known among consumers with a certain degree of market awareness or (as the Chinese saying goes) “influence”.

3. Due to the distinctiveness and market awareness of the decoration, a connection is formed between the decoration and the operator.

Decathlon sought to establish protection of the “overall style and decoration of its stores” and the overall visual effect formed by 22 individual store layout decoration elements (which could be categorised into 7 categories). According to photos of the stores as well as comments from users online, it is evident that the decoration of Decathlon’s stores as a whole gives a very striking, minimalist, industrial feel which is distinctive. Further, the decoration of Decathlon’s stores has been widely and continuously used. It is therefore well-aware by consumers and thus has a certain degree of market awareness. As the decoration of Decathlon’s stores is distinctive and influential, consumers can form a connection between that decoration and Decathlon.

Was there in fact unfair competition?

The Court stated that the goods sold by both parties mainly related to outdoor sports products, and it was obvious that there is a competitive relationship between the two.

The key issue was therefore whether the decoration of the respective stores were similar. Decathlon provided comparison tables with detailed descriptions and pictures of the stores operated by the defendants:

• It was noted that many of the photos (certified by notary or time stamped) were taken by ordinary consumers when they were visiting or spending money within the stores which were then uploaded onto third-party platforms. The photos used by Decathlon for comparison were therefore authentic and credible.

• Decathlon compared the overall style and specific elements of the its stores and the defendants’ stores. Even if each of the defendants’ store did not have the same decorative elements, so long as the overall style and a certain number of details are similar, the Court took the view that Decathlon’s method of comparison was accurate and credible.

• As a matter of fact, the comparison tables showed that the overall style, detailed features of specific decorative elements, the main colours used and their combination, graphical layout, and even the placement and arrangement of various posters and price tags were all similar to a high degree.

Even though many consumers know that they were entering the defendants’ stores (and not Decathlon’s) and the defendant’s brand is quite well-known, they would still feel that “the style is similar to Decathlon”, or “think they have gone to Decathlon because the style is really similar”, or the defendants “learnt from Decathlon”. All this served to demonstrate the degree of similarity.

Although the brands under the stores and the entrance were neither identical nor similar, this feeling of “déjà vu” could still lead to consumer confusion and undue perception of some sort of connection between the parties. As both defendants jointly carried out the act involved in the case, both shall bear civil liabilities for stopping the infringement, eliminating the impact, and compensation for Decathlon’s loss.

In response to the defendants’ arguments, the Court emphasised that the law of unfair competition protects innovation yet does not prohibit operators from learning (or even going as far as imitating) each other. There is a reasonable boundary to this however (e.g., direct copying of decoration and packaging that already has a certain degree of distinctiveness and market awareness), crossing which would constitute unfair competition.

The case is currently under appeal.

Relevance of the decision

Decathlon’s win should be an interesting decision for some as the protection of store layout is an issue which brand owners with concept stores would consider as part of their strategy. In addition to protecting a store layout by way of copyright (see IPKat post here), brand owners could also see protection in other ways, e.g. through unfair competition in the context of China or passing off in common law jurisdictions. Some brand owners would go as far as trying to secure trade mark registrations for their store layouts (e.g. the tech giant Apple (see IPKat post here)).