The Supreme Court delivered a final decision regarding the trademark ownership and infringement dispute between Heilongjiang Chuanfeng Co and Russia Balizam concerning the Barizam trademarks. The Court overturned the previous rulings from the lower courts, affirming that the Barizam series trademarks registered in China rightfully belong to Russia Barizamm Company, and has ordered the transfer of these trademarks accordingly. This case, arising from a dispute between Chinese and foreign partners, centers on determining trademark ownership following the dissolution of their cooperation. It provides valuable guidance for many joint ventures and cooperative enterprises in China. Notably, this marks the Supreme Court first ruling requiring the transfer of trademarks to its legitimate owner in response to malicious trademark squatting.
Judgement
Initial Cooperation and Market Entry
Heilongjiang Chuanfeng Co., Ltd., an import-export company specializing in border trade, discovered the popular Russian alcoholic brand Balizam, produced by Balizam Open Joint Stock Company of Ussuriysk (Balizam Russia), during a late 1990s economic and trade inspection in Russia. Recognizing the brand strong reputation among Russian consumers, Chuanfeng Co. aimed to introduce Balizam products to the Chinese market.
Following extensive negotiations, the two parties signed a cooperation agreement in early 2003, granting Chuanfeng Co. exclusive distribution rights for Balizam-branded alcoholic beverages in China. In May 2003, they further established a joint venture in China to produce Balizam products, with Balizam Russia contributing production equipment, technology, and raw materials.
The Tiger Head variant of Balizam was subsequently launched in China, with Chuanfeng Co. investing significant resources in marketing and channel development, resulting in strong consumer recognition and steady sales growth. Over time, Chuanfeng Co. invested more than RMB 50 million in brand promotion and distribution, eventually facing supply shortages due to rising demand.
Breakdown of Cooperative Relationship
In 2004, to support market expansion, Chuanfeng Co. applied to register the Tiger Head geometric logo as a trademark in China. Balizam Russia issued an official bilingual authorization letter permitting Chuanfeng Co. to register and use its trademarks in China. Chuanfeng Co. also applied to register the Chinese and Russian Balizam wordmarks alongside the logo. Subsequent business transactions were conducted under Chuanfeng Co. name.
However, following Balizam Russia corporate restructuring from a state-owned enterprise to a publicly traded joint-stock company, it sought to terminate the partnership. Chuanfeng Co. rejected this unilateral termination, leading to a dispute and Balizam Russia halting product shipments.
Trademark Ownership Dispute
Balizam Russia challenged Chuanfeng Co. trademark registrations by filing oppositions with the China Trademark Office, all of which were rejected. When Balizam Russia extended its international trademark registration to China under the Madrid Protocol, Chuanfeng Co. opposed it, resulting in revocation of the extension. Balizam Russia subsequent trademark applications were also opposed or invalidated by Chuanfeng Co.
To protect its intellectual property, Chuanfeng Co. registered its trademarks with customs authorities, preventing unauthorized imports of Balizam products. It also successfully litigated against unauthorized domestic sales of products bearing its registered trademarks.
Court Proceedings
In 2013, Balizam Russia filed a lawsuit seeking to invalidate the authorization letter, transfer trademark rights to itself, and declare Chuanfeng Co. trademark use and related actions as infringement. Balizam Russia argued that an annulment agreement invalidated the authorization letter and that discrepancies between the Chinese and Russian versions meant the Russian version should prevail.
The Harbin Intermediate Court dismissed all claims, a decision upheld by the Heilongjiang High Court in 2017. The High Court found the annulment agreement irrelevant to the authorization letter validity and confirmed that both language versions consistently authorized Chuanfeng Co. to register the trademarks in China. While Balizam Russia owned the trademarks in Russia, Chuanfeng Co. lawfully registered them in China with proper authorization.
Supreme Court Retrial
The Supreme Court (SPC), in its 2020 judgment (Zui Gao Fa Min Zai No. 24), focused on the validity of the Chinese-language authorization letter.
Authorization Letter as a Unilateral Act
The SPC clarified that the authorization letter constituted a unilateral civil juristic act by Balizam Russia, not a bilateral contract. Such an act establishes, modifies, or terminates legal relationships through one party declaration of intent and takes effect upon that declaration, regardless of the other party acceptance. Even if jointly signed, the document unilateral nature remains.
Validity Confirmation
The SPC noted:
- The letter bore only Balizam Russia signature and seal, underscoring its unilateral character.
- Its title and content clearly indicated a unilateral grant of rights to Chuanfeng Co. to register trademarks in China.
- The authorization effectiveness depended solely on Balizam Russia intent.
While Balizam Russia could modify or revoke the authorization, it was required to notify Chuanfeng Co. accordingly. The SPC overturned lower court misclassification of the letter as a bilateral contract and upheld Balizam Russia position on its unilateral nature.
Final Decision
The SPC reversed the previous judgments, ruling that all Balizam trademark applications and registrations in China belong to Balizam Russia.
Summary
This case highlights key principles regarding trademark ownership following the dissolution of a Sino-foreign partnership:
- Authorization Letters as Unilateral Acts: Authorization letters are unilateral civil juristic acts, not bilateral contracts.
- Effectiveness of Authorization: Such authorizations take effect upon the authorizer declaration without needing the grantee consent.
- Trademark Rights Determination: Trademark rights are determined by the terms of authorization rather than the status of the partnership.
The ruling provides important guidance for resolving trademark disputes in Sino-foreign joint ventures, emphasizing the importance of clear authorization terms and the unilateral nature of such acts. This case serves as a crucial reference for businesses navigating intellectual property issues in cross-border partnerships.
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